Financial Management Code: MB0045 Marks(140) Section-A Time (3 hrs) 1Mark * 40= 40 Marks 1. The modern approach in financial management aims at procurement of least cost funds and its effective utilisation for. a. Maximisation of shareholder's wealth b. Maximisation of profit c. Maximisation of sales d. Procurement of funds 2. The dividend decision is taken by the. a. Treasurer b. Controller c. Finance Manager d. Chief Financial officer 3. refers to the ratio of capital employed to the sales generated. a. Working capital b. Fixed capital c. Operating capital d. Share capital 4. of a firm refers to the composition of its long-term funds and its capital structure. a. Capitalisation b. Over-capitalisation c. Under-capitalisation d. Market capitalisation 5. In the expression r = { ( 1 + (i/m)m}) - 1, what does " i " denote? a. Nominal rate of interest b. Effective rate of interest c. Frequency of compounding per year Number of years 6. Which among the following is the major factor that affects capital structure? a. Solvency b. Profitability 1
c. Leverage d. Flexibility 7. is widely used in the field of investment banking as ready beckoners. a. Annuity table b. Reference table c. Sinking fund factor d. Compound technique 8.. Which among the following bonds will never mature? a. Redeemable bonds b. Irredeemable bonds c. Zero coupon bonds d. Convertible bonds 9. is defined as the opportunity cost in terms of dividends forgone by withholding from the equity shareholders. a. Cost of debenture b. Cost of preference capital c. Cost of term loans d. Cost of retained earnings 10. The is the minimum rate of return of a company which it must earn to meet the expenses of the various categories of investors. a. Capital gain b. Cost of capital c. Capital budgeting d. Capital market 11. The refers to the degree to which a firm has built-in fixed costs due to its particular or unique production process. a. Combined leverage b. Financial leverage c. Operating leverage d. Capital structure 12. Which among the following costs are incurred irrespective of the income and value of sales? a. Discretionary costs b. Semi-variable costs c. Variable costs d. Fixed costs 13. In approach, the capital structure decision is relevant to the valuation of the firm. a. Net operating income b. Net income c. Traditional d. Miller and Modigliani 2
14. is considered as the given rate of interest. a. Transaction cost b. Agency cost c. Implicit cost d. Explicit cost 15. Which of the following is the first step involved in the evaluation of any investment proposal? a. Examination of the risk profile b. Estimation of cash flow c. Commitment of funds on long-term basis d. Formulation of the decision criteria 16. cannot be recovered after they have been incurred. a. Opportunity cost b. Capital cost c. Sunk cost d. Financing cost 17. Which among the following risk is defined as the measure of the unpredictability of a given stock value? a. Portfolio risk b. Stand-alone risk c. Corporate risk d. Market risk\ 18. in capital budgeting may be defined as the variation of actual cash flows from the expected cash flows. a. Internal rate of return b. Net present value c. Risk d. Profitability index 19. is defined as the capital rationing that cannot be violated under any circumstances. a. External capital rationing b. Hard capital rationing c. Soft capital rationing d. Internal capital rationing 20. approach to capital rationing tries to achieve maximum NPV subject to many constraints. a. Goal programming b. Integer programming c. Linear programming d. Mathematical programming 3
21. Which among the following is the key component of current assets? a. Bill payable b. Inventory c. Sundry creditors d. Temporary bank overdrafts 22. refers to the amount invested in various components of current assets. a. Temporary working capital b. Net working capital c. Gross working capital d. Permanent working capital 23. refers to a firm holding some cash to meet its routine expenses that are incurred in the ordinary course of business. a. Speculative motive b. Transaction motive c. Precautionary motive d. Compensating motive 24. refers to the credit extended by the supplier of goods and services in the normal course of business transactions. a. Instalment credit b. Open credit c. Trade credit d. Revolving credit 25. motive is for making available inventories to facilitate smooth production and sales. a. Speculative b. Transaction 4
c. Precautionary d. Compensating 26. Costs incurred for maintaining the inventory in warehouses are called. a. Ordering costs b. Material costs c. Carrying costs d. Shortage costs 27. Which among the following cost incurred by the firm when the customer fails to pay back the amount on the expiry of credit period? a. Administration cost b. Delinquency cost c. Capital cost d. Default cost 28. are assets accounts representing amount due to the firm from sale of goods/services in the ordinary course of business. a. Cash equivalents b. Trade payables c. Receivables d. Current assets 29. Which among the following model explains that a firm s dividend policy is irrelevant and has no effect on the share prices of the firm? a. Walter b. Miller and Modigliani c. Gordon d. Dividend relevance 30. is a method to increase the number of outstanding shares by proportionately reducing the face value of a share. a. Inventory valuation 5
b. Stock valuation c. Share split d. Stock split 31. The refers to setting off or balancing two transactions which are entered into investment programmes, simultaneously. a. Arbitrage process b. Database transaction c. Balance sheet d. Market capitalisation 32. Which among the following term is referred to the criteria for extending credit to customers? a. Credit limit b. Credit balance c. Credit analysis d. Credit standards 33. In which among the following methods of pricing inventories, the pricing is based on the materials that have been purchased recently? a. Standard price b. Weighted average c. Last in, first out d. First in, first out 34. is the ratio of the present value of cash inflow to initial cash outlay. a. Net present value b. Profitability index c. Internal rate of return d. Future value 35. In the formula Ke = Rf + β (Rm Rf), what does Ke denotes? a. Risk free rate of return b. Rate of return on share 6
c. Beta of security d. Rate of return on market portfolio 36. The is the portion of earnings per share that is given to shareholders in the form of cash dividend. a. Profit ratio b. Rate of return c. Payout ratio d. Working capital ratio 37. In the hierarchy of the finance function of an organisation, the controller reports to the a. Chief financial officer b. Treasurer c. Financial manager d. Vice president of finance 38. Which among the following are the factors that affect financial plan? a. Establishing corporate objectives b. Creating flexible economic environment c. Matching the sources with utilisation d. Assigning responsibilities 39. refers to the periodic flows of equal amount. a. Present value b. Perpetuity c. Annuity d. Sinking fund 40. is a long-term debt instrument/fixed income (debt) instrument issued by government agencies or big corporate houses to raise large sums of money. a. Stock 7
b. Mutual fund c. Share d. Bond 41. will be calculated for a firm when it moves over from one level of sales (volume or value) to another. a. Degree of operating leverage b. Degree of financial leverage c. Financial leverage d. Operating leverage 42. Which among the following is the criticism of Miller and Modigliani (MM) preposition a. Floatation costs b. Transaction cost c. Implicit cost d. Explicit cost 43. Which of the following is the first step involved in the evaluation of any investment proposal? a. Examination of the risk profile b. Estimation of cash flow c. Commitment of funds on long-term basis d. Formulation of the decision criteria 44. in capital budgeting may be defined as the variation of actual cash flows from the expected cash flows. a. Internal rate of return b. Net present value c. Risk d. Profitability index 45. approach to capital rationing tries to achieve maximum NPV subject to many constraints. 8
a. Goal programming b. Integer programming c. Linear programming d. Mathematical programming 46. In which among the following dividends, equity shareholders are issued transferable promissory notes with shorter maturity periods, which may or may not bear interest? a. Stock dividend b. Bond dividend c. Cash dividend d. Scrip dividend 47. Which among the following purpose of holding inventory firms maintain higher levels of inventory to avoid the risks of lengthening the lead time in procurement? a. Sales b. To avail quantity discount c. To reduce risk for production stoppage d. To reduce ordering cost and time 48. and carry a fixed rate of interest and are to be paid off irrespective of the firm s revenues. a. Debentures, Dividends b. Debentures, Bonds c. Dividends, Bonds d. Dividends, Treasury notes 49. Mr.A requires Rs.1050 at the end of the first year. Given the rate of interest as 5%,find out how much Mr. A would invest today to earn this amount. a)1000 b)1050 9
c)1500 d)900 50. Liquidity decisions deal with day-to-day financial operations that involve and. a. Explicit costs, Implicit costs b. Obtaining finance, Utilising funds c. Expansion, Payment of dividend d. Current assets, Current liabilities 2 Mark * 25= 50 Marks 51. Which among the following are the benefits of financial planning? 1. Ensures effective utilisation of funds 2. Helps in reducing operating capital of a firm 3. Lays the foundation for successful initiation of the working firm. 4. Helps promoters to estimate the amount of capital required for incorporation of company. b. Option 1 & 2 c. Option 1 & 3 d. Option 2 & 3 52. Identify which among the following comes under future value of single flow. 1. Doubling period 2. Increased frequency of compounding 3. Capital recovery factor 4. Uneven periodic sum a. Options 1 & 4 b. Options 1 & 2 c. Options 1 & 3 e. Options 2 & 3 53. Identify which of the statement are related to intrinsic value of a share. 1. It is calculated by dividing the net worth by the number of outstanding shares. 2. It is associated with the earnings and profitability of the company. 3. It is the economic value of a company considering its characteristics, nature of business, and investment environment. 4. It may include intangible assets at acquisition cost minus amortised value. a. Options 1 & 4 b. Options 2 & 3 c. Options 1 & 3 d. Options 2 & 4 10
54. Identify which of the following statements are related to cost of retained earnings. 1. It is the same as the cost of shareholder s expected return from the firm s ordinary shares. 2. Transaction costs are low and therefore can be ignored. 3. It is always less than the cost of new issue of ordinary shares due to absence of floating costs. 4. The floatation costs arise in the process of raising equity from the market. b. Option 2 & 3 c. Option 1 & 3 d. Option 2 & 4 55. Which among the following statements are related to financial leverage? 1. It occurs anytime a firm has fixed costs. 2. It takes place when a change in revenue produces a greater change in Earnings Before Interest and Taxes (EBIT). 3. It is a process of using debt capital to increase the rate of return on equity. 4. It refers to the mix of debt and equity in the of the firm. b. Option 1 & 2 c. Option 1 & 3 d. Option 3 & 4 56. Which among the following statements are related to capital structure? 1. It should be such that the company derives maximum benefits from it and is able to adjust it easily to changing conditions. 2. It is an indicator of the relative contribution of creditors and owners 3. It is usually planned keeping in view the interests of the ordinary shareholders. 4. It interferes in the system of balancing with arbitrage process. b. Option 1 & 2 c. Option 1 & 3 d. Option 3 & 4 57. Consider the below mentioned statements: 1. Operating costs are estimated by cost accountants and production engineers. 2. Capital outlays are estimated by engineering departments after examining all aspects of production process. State True or False: a. 1-True, 2-False b. 1-True, 2-True c. 1-False, 2-True d. 1-False 2-False 11
58. Identify which of the following statements are related to payback-period. 1. It ignores time value of money. 2. It is computed based on the returns on government securities. 3. It takes care of the risk element in future cash flows. 4. It is the most commonly used method of recognising risk associated with a capital budgeting proposal. b. Option 1 & 3 c. Option 2 & 3 d. Option 2 & 4 59. Which among the following are related to external capital rationing? 1. Deficiencies in market information. 2. It is used by a firm as a means of financial control. 3. Restriction may be imposed on divisional heads on the total amount that they can commit on new projects. 4. Rigidities that hamper the force flow of capital between firms. b. Option 1 & 2 c. Option 1 & 3 d. Option 3 & 4 60. Identify which of the following statements are related to gross working capital. 1. It is a qualitative concept. 2. It is termed as the quantitative aspect of working capital. 3. It helps in fixation of various areas of financial responsibility. 4. It is also known as fixed working capital. b. Option 1 & 3 c. Option 2 & 3 d. Option 2 & 4 61. Identify which of the following are related to the objectives of cash management. 1. Meeting payments schedule 2. Keeping other factors such as expansion, modernisation and diversification constant. 3. Minimising funds held in the form of cash balances 4. Showing the time and magnitude of expected cash inflows and outflows. b. Option 1 & 3 c. Option 2 & 3 d. Option 2 & 4 62. Identify which of the following statements are related to shortage costs. 1. Loss of customer goodwill 12
2. Receiving, inspecting at the ware house 3. Extra costs associated with urgent replenishment purchases 4. Purchase ordering or set-up b. Option 1 & 3 c. Option 2 & 3 d. Option 2 & 4 63. Which among the following statements are related to credit policy of the firm? 1. Reduces the cost of credit administration 2. Brings down bad-debt losses 3. Trade-off between higher profits from increased sales 4. The incremental cost of having large investment in receivables b. Option 1 & 2 c. Option 1 & 3 d. Option 3 & 4 64. Which among the following statements are related to scrip dividend? 1. The reserves and surplus (retained earnings) are capitalised to give effect to bonus issue. 2. It has the effect of increasing number of outstanding shares of the firm. 3. Payment of dividend in this form is done only if the firm is suffering from weak liquidity position. 4. It is adopted if the firm has earned profits and it will take some time to convert its assets into cash. b. Option 1 & 2 c. Option 1 & 3 d. Option 3 & 4 65. Consider the below mentioned statements: 1. Internal rate of return is also known as benefit cash ratio. 2. Net present value recognises the time value of money. State True or False: a. 1-False, 2-False b. 1-True, 2-True c. 1-False, 2-True d. 1-True, 2-False 66. Which among the following approach establishes a relationship between the required rate of return of a security and its systematic risks? a. Capital asset pricing model b. Dividend forecast c. Earnings price ratio d. Realised yield 13
67. State whether the following statements are true or false. 1. Fixed capital is required for the purchase of raw materials and for meeting day-today expenditure. 2. Variable working capital requirements which fluctuate from season to season will have to be financed only by short-term sources. a. 1-False, 2-False b. 1-True, 2-True c. 1-False, 2-True d.1-true,2-false 68. Identify which of the following statements are related to the assumptions of net income approach. 1. The cost of debt is less than the cost of equity and remains constant 2. The operating profits/ebit are not expected to increase or decrease 3. The firm has only two sources of funds, debt and ordinary shares 4. Use of debt does not change the risk perception of investors b. Option 1 & 3 c. Option 2 & 3 d. Option 2 & 4 69. Which of the following technical aspects of the project are dealt by technical appraisal? 1. Selection of plant, equipment and scale of operation. 2. Decision on determination of plant capacity 3. Expected profitability 4. Risk dimensions of the project a. Options 1 & 4 b. Options 1 & 2 c. Options 3 & 4 d. Options 2 & 3 70. Consider the below mentioned statements: 1. The certainty equivalent coefficient is also known as the risk-adjustment factor. 2. The risk-adjustment factor varies directly with risk. State True or False: a. 1-False, 2-False b. 1-False, 2-True c. 1-True, 2-True d. 1-True, 2-False 71. Annual consumption of raw materials is 40,000 units. Cost per unit is Rs.16 along with a carrying cost of 15% per annum. The cost of placing an order is given as Rs.480. Find out the EOQ of the raw materials. a) 3000 units b)4000 units 14
c) 3500 units d) 1000 units 72. Match the following sets: Part A 1. Redeemable bonds 2. Irredeemable bonds 3. Zero coupon bonds 4. Yield to maturity Part B A. The discount rate equalling the present values of cash flow to the current market price. B. There is no intermediate payment between the date of issue and the maturity date. C. The maturity value does not exist. D. The bond with annual interest payments. a. 1D, 2C, 3B, 4A b. 1A, 2D, 3B, 4C c. 1D, 2A, 3B, 4C d. 1B, 2C, 3A, 4D 73. Consider the below mentioned statements: 1. The objective of cash management is best achieved by speeding up the working capital cycle, particularly the collection process and investing surplus cash in short term assets in most profitable avenues. 2. The necessity to hold cash will arise if there is a perfect co-ordination between the inflows and the outflows. 3. The amount of precautionary balance also depends on the firm s ability to raise additional money at a short notice. 15
4. The firm may hold cash to benefit from a falling price scenario or getting a quantity discount when paid in cash or delay purchases of raw materials in anticipation of decline in prices. State True or False: a. Statements 1, 2 and 3 are true b. Statements 1, 2 and 4 are true c. Statements 2, 3 and 4 are true d. Statements 1, 3 and 4 are true 74. Arrange the following steps in order to calculate the weighted average cost of capital. 1. Determine the weight associated with each source. 2. Add these weighted costs to determine the weighted average cost of capital. 3. Calculate the cost of each specific source of fund, that of debt, equity, preference capital, and term loans. 4. Multiply the cost of each source by the appropriate weights. a. 3-1-4-2 b. 3-2-4-1 c. 4-2-1-3 d. 4-1-3-2 75. Assume that you have started a new company. You need extra working capital for changing production and sale level of the firm. You need investments to take care of variations in the business. Which among the following working capital is required for your business? a. Net working capital b. Temporary working capital c. Gross working capital d. Permanent working capital 16
Applied Theory Questions (Students need to answer all questions of this section) Sl. No. Questions 1. Mr. Harish, CFO of Prakash Packers Ltd. (PPL) discusses the capital structure with his Finance Manager Mr.Ravi. He assigns the responsibility of analysing the Weighted Average Cost of Capital. The below Table depicts the capital structure: Particulars Rs. (in Lakhs) Equity capital (Rs. 10 par value) 200 14% preference share capital Rs. 100 each 100 Retained earnings 100 12% debentures (Rs. 100 each) 300 11% term loan from ICICI bank 50 Total 750 The market price per equity share is Rs. 32. The company is expected to declare a dividend per share of Rs. 2 per share, and there will be a growth of 10% in the dividends for the next 5 years. The preference shares are redeemable at a premium of Rs. 5 per share after 8 years and are currently traded at Rs. 84 in the market. Debenture redemption will take place after 7 years at a premium of Rs. 5 per debenture and their current market price Rs. 90 per unit. The corporate tax rate is 40%. On behalf of Mr. Ravi, Finance Manager of the PPL, you are required to calculate the present Weighted Average Cost of Capital (WACC). Marks (10 Marks) 2. The decision regarding dividend payment is a very important one for the finance manager in any corporate house. It is more so because the decision needs to strike a proper balance between expansion of the company in one hand and immediate gratification of the shareholders on the other hand. In the light of these statements, you are required to explain the different types of dividend theories and the different types of dividend pay-outs that are prevalent in the corporate world. (10 Marks) Read the following case study thoroughly and answer the following questions: 3. As per the case, do you think that HUL has preferred the profit maximisation approach over the wealth maximisation approach? Justify your answer. 4 Critically comment on the trends of (a) capital structure and (b) Dividend Pay-out in HUL for last five years. (10 Marks) (10 Marks) 17
. Hindustan Unilever Limited Introduction: Hindustan Unilever Limited (HUL) is India's largest Fast Moving Consumer Goods Company with a heritage of over 75 years in India and touches the lives of two out of three Indians. With over 35 brands spanning 20 distinct categories such as soaps, detergents, shampoos, skin care, toothpastes, deodorants, cosmetics, tea, coffee, packaged foods, ice cream, and water purifiers, the Company is a part of the everyday life of millions of consumers across India. Its portfolio includes leading household brands such as Lux, Lifebuoy, Surf Excel, Rin, Wheel, Fair & Lovely, Pond s, Vaseline, Lakmé, Dove, Clinic Plus, Sunsilk, Pepsodent, Closeup, Axe, Brooke Bond, Bru, Knorr, Kissan, Kwality Wall s, and Pureit. The Company has over 16,000 employees and has an annual turnover of around Rs.19,401 crore (financial year 2010-2011). HUL is a subsidiary of Unilever, one of the world s leading suppliers of fast moving consumer goods with strong local roots in more than 100 countries across the globe with annual sales of about 44 billion in 2011. Unilever has about 52% shareholding in HUL. Unilever has a long history in sustainability and the use of marketing and market research to promote behaviour change. In November 2011, for the first time, it published its own model of effective behaviour change. History of the Company: In the summer of 1888, visitors to the Kolkata harbour noticed crates full of Sunlight soap bars, embossed with the words "Made in England by Lever Brothers". With it began an era of marketing branded Fast Moving Consumer Goods (FMCG). Soon after followed Lifebuoy in 1895, and other famous brands like Pears, Lux, and Vim. Vanaspati was launched in 1918 and the famous Dalda brand came to the market in 1937. In 1931, Unilever set up its first Indian subsidiary, Hindustan Vanaspati Manufacturing Company, followed by Lever Brothers India Limited (1933) and United Traders Limited (1935). These three companies merged to form HUL in November 1956; HUL offered 10% of its equity to the Indian public, being the first among the foreign subsidiaries to do so. Unilever now holds 52.10% equity in the company. The rest of the shareholding is distributed among about 360,675 individual shareholders and financial institutions. The erstwhile Brooke Bond's presence in India dates back to 1900. By 1903, the company had launched Red Label tea in the country. In 1912, Brooke Bond & Co. India Limited was formed. Brooke Bond joined the Unilever fold in 1984 through an international acquisition. The erstwhile Lipton's links with India were forged in 1898. Unilever acquired Lipton in 1972 and in 1977 Lipton Tea (India) Limited was incorporated. Pond's (India) Limited had been present in India since 1947. It joined the Unilever fold through an international acquisition of Chesebrough Pond's USA in 1986. Since the very early years, HUL has vigorously responded to the stimulus of economic growth. The growth process has been accompanied by judicious diversification, always in line with Indian opinions and aspirations. The liberalisation of the Indian economy, started in 1991, clearly marked an inflexion in HULs and the Group's growth curve. Removal of the regulatory framework allowed the company to explore every single product and opportunity segment, without any constraints on production capacity. Simultaneously, deregulation permitted alliances, acquisitions, and mergers. In one 18
of the most visible and talked about events of India's corporate history, the erstwhile Tata Oil Mills Company (TOMCO) merged with HUL, effective from April 1, 1993. In 1996, HUL and yet another Tata company, Lakme Limited, formed a 50:50 joint venture, Lakme Unilever Limited, to market Lakme's marketleading cosmetics and other appropriate products of both the companies. Subsequently in 1998, Lakme Limited sold its brands to HUL and divested its 50% stake in the joint venture to the company. HUL formed a 50:50 joint venture with the US-based Kimberly Clark Corporation in 1994. Kimberly-Clark Lever Ltd, which markets Huggies Diapers and Kotex Sanitary Pads. HUL has also set up a subsidiary in Nepal, Unilever Nepal Limited (UNL), and its factory represents the largest manufacturing investment in the Himalayan kingdom. The UNL factory manufactures HULs products like soaps, detergents, and personal products both for the domestic market and exports to India. The 1990s also witnessed a string of crucial mergers, acquisitions, and alliances on the Foods and Beverages front. In 1992, the erstwhile Brooke Bond acquired Kothari General Foods, with significant interests in Instant Coffee. In 1993, it acquired the Kissan business from the UB Group and the Dollops Ice cream business from Cadbury India. As a measure of backward integration, Tea Estates and Doom Dooma, two plantation companies of Unilever, were merged with Brooke Bond. Then in 1994, Brooke Bond India and Lipton India merged to form Brooke Bond Lipton India Limited (BBLIL), enabling greater focus and ensuring synergy in the traditional Beverages business. 1994 witnessed BBLIL launching the Wall's range of Frozen Desserts. By the end of the year, the company entered into a strategic alliance with the Kwality Ice cream Group families and in 1995 the Milk food 100% Ice cream marketing and distribution rights too were acquired. Finally, BBLIL merged with HUL, with effect from January 1, 1996. The internal restructuring culminated in the merger of Pond's (India) Limited (PIL) with HUL in 1998. The two companies had significant overlaps in personal products, speciality chemicals and exports businesses, besides a common distribution system since 1993 for personal products. The two also had a common management pool and a technology base. The amalgamation was done to ensure for the Group, benefits from scale economies both in domestic and export markets and enable it to fund investments required for aggressively building new categories. In January 2000, in a historic step, the government decided to award 74 percent equity in Modern Foods to HUL, thereby beginning the divestment of government equity in public sector undertakings (PSU) to private sector partners. HULs entry into bread is a strategic extension of the company's wheat business. In 2002, HUL acquired the government's remaining stake in Modern Foods. In 2003, HUL acquired the cooked shrimp and pasteurised crabmeat business of the Amalgam Group of Companies, a leader in value added marine products exports. HUL launched a slew of new business initiatives in the early part of 2000s. Project Shakti was started in 2001. It is a rural initiative that targets small villages populated by less than 5000 individuals. It is a unique win-win initiative that catalyses rural affluence even as it benefits business. Currently, there are over 45,000 Shakti entrepreneurs covering over 100,000 villages across 15 states and reaching to over 3 million homes. In 2002, HUL made its foray into Ayurvedic health and beauty centre category with the Ayush product range and Ayush Therapy Centres. Hindustan Unilever Network, Direct to home business was launched in 2003 and this was followed by the launch of Pureit water purifier in 2004. 19
In 2007, the Company name was formally changed to Hindustan Unilever Limited after receiving the approval of share holders during the 74th AGM on 18 May, 2007. Brooke Bond and Surf Excel breached the Rs 1,000 crore sales mark the same year followed by Wheel which crossed the Rs.2, 000 crore sales milestone in 2008. On 17th October, 2008, HUL completed 75 years of corporate existence in India. Following are excerpts from the company s Annual Report 2010 2011: Financial Highlights: Net Sales: Rs. 19,401 crore Net Profit: Rs.2, 306 crore EPS (Basic): Rs.10.58 EVA: Rs.1, 750 crore Total expenditure: 1% 6% 6% 6% 5% Materials Advertising Costs Staff Costs 16% 60% Carriage and Freight Utilities, Rent, Repairs etc. Depreciation Financial Performance 10 year track record (Rs. Crores) P&L account 2001 2002 2003 2004 2005 2006 2007 2008-09 (15 months) 2009-10 2010-11 Gross Sales* Other Income 11,781.30 10,951.61 11,096.02 10,888.38 11,975.53 13,035.06 14,715.10 21,649.51 18,220.27 20,305.54 381.79 384.54 459.83 318.83 304.79 354.51 431.53 589.72 349.64 586.04 Interest (7.74) (9.18) (66.76) (129.98) (19.19) (10.73) (25.50) (25.32) (6.98) (0.24) Profit Before Taxation @ Profit After Taxation @ Earnings Per Share of Re. 1# Dividend Per Share of Re. 1# 1,943.37 2,197.12 2,244.95 1,505.32 1,604.47 1,861.68 2,146.33 3,025.12 2,707.07 2,730.18 1,540.95 1,731.32 1,804.34 1,199.28 1,354.51 1,539.67 1,743.12 2,500.71 2,102.68 2,153.25 7.46 8.04 8.05 5.44 6.40 8.41 8.73 11.46 10.10 10.58 5.00 5.16 5.50 5.00 5.00 6.00 9.00 7.50 6.50 6.50 * Sales before Excise Duty Charge @ Before Exceptional/Extraordinary items # Adjusted 20
for bonus Balance Sheet 2001 2002 2003 2004 2005 2006 2007 2008-09 (15 months) 2009-10 2010-11 Fixed Assets 1,320.06 1,322.34 1,369.47 1,517.56 1,483.53 1,511.01 1,708.14 2,078.84 2,436.07 2,468.24 Investments 1,635.93 2,364.74 2,574.93 2,229.56 2,014.20 2,413.93 1,440.80 332.62 1,264.08 1,260.68 Net Deferred Tax Net Current Assets 246.48 269.92 267.44 226.00 220.14 224.55 212.39 254.83 248.82 209.66 (75.04) (239.83) (368.81) (409.30) (1,355.31) (1,353.40) (1,833.57) (182.84) (1,365.45) (1,304.66) 3,127.43 3,717.17 3,843.03 3,563.82 2,362.56 2,796.09 1,527.76 2,483.45 2,583.52 2,633.92 Share Capital 220.12 220.12 220.12 220.12 220.12 220.68 217.74 217.99 218.17 215.95 Reserves & Surplus 2,823.57 3,438.75 1,918.60 1,872.59 2,085.50 2,502.81 1,221.49 1,843.52 2,365.35 2,417.97 Loan Funds 83.74 58.30 1,704.31 1,471.11 56.94 72.60 88.53 421.94 Others HUL Share Price on BSE (Rs. Per Share of Re. 1)* Market Capitali-sation (Rs. Crores) 3,127.43 3,717.17 3,843.03 3,563.82 2,362.56 2,796.09 1,527.76 2,483.45 2,583.52 2,633.92 223.65 181.75 204.70 143.50 197.25 216.55 213.90 237.50 238.70 284.60 49,231 40,008 45,059 31,587 43,419 47,788 46,575 51,770 52,077 61,459 * Based on year-end closing prices quoted in the Bombay Stock Exchange, adjusted for bonus shares. 50. refers to a firm holding some cash to meet its routine expenses that are incurred in the ordinary course of business. a. Speculative motive b. Transaction motive c. Precautionary motive d. Compensating motive... 21