now we would look at financial statements of few listed companies
and see if we can calculate these ratios
let's start with Mcdonalds
since mcdonalds I have
10K is the annual report in US and since it is listed in US
the financial statements are prepared as per the US gaap
What would be US GAAP?
gap would be generally accepted accounting practices
every country will have its own set of rules to prepare financial statements
These financial statements that we see here are prepared as per the rules in US
in US
here this is data for 2013 this is a data 2012
this is a data for 2011
is this visible to everyone?
sales by company
operator restaurants revenue from franchisee restaurants we will look at the total revenue
year 2011 it was 27006
27567
28106
can we say there's an increase in revenue ?
but fractional, not very significant
the data is given in dollars in millions
27,000 million here now
these are there operating costs and expenses
company operated restaurant, franchisee, SGA
to be just saw that and total operating cost
so can we say that sales minus
operating cost will give us EBIT that means EBIT of MCdonalds
is how much?
8764 , so using this can you calculate operating profit margin?
so please find out what is the operating profit margin of McDonald's?
for 2013
8764
divided by 28106, these two numbers
8764, 28106
how much would that be
it
31-point so roughly about
let's say 31 percent so whatever is the sales
operating cost are about 69 percent of the sales
and therefore operating profit margin is 31 percent let's look at the same values
for 2018
so same 8605
divided by 27567
30 it's almost the same number
and for year before that 8530
divided by 27006 31.5
so again I will sale maybe 31 or 32% which means
the operating performance of McDonald's over the period of 3 years 2011-12 and 13
has been more or less
similar so we do not have the bifurcation of what is COGS and
what are the other expenses
We don't have that but on a totality basis it looks to be on the
similar lines then we have interest expese here
we have non operating expenses profit before Taxes
then Taxes and this is where we have the net income
do see this net income numbers
55 86 5465 5503
can you calculate net profit margin for McDonald's
this would be calculated as 5586
divided by 28106
19.87
5465 divided by 27567
82
and 5503
divided by 272006
20.37
so there is a really small fractionally degrees in your net profit margin
and maybe that's happening because we can see some small amount of increase in
interest cost
is it visible 493
then 517 and then 522
but it is not significant which means this appears to be more of a mature and
stable company
operating profit margin net profit margin and more predictable
over the period of time
let's look at a few more companies know so
one question is that 19.87
a good number or bad number yes
is that 19.87 good or bad
so the answer is depends it depends on
what are the profit margin of similar businesses in US
if you take Burger King
and if their KFC and if their profit margins at 35-40 percent
then we will say maybe McDonald's doesn't have the operating structure right
because similar industries who should generally produce
similar type a profit margins so now we will build comparative analysis on
few similar companies let's take a
Dabur India Limited let me find out the financial statements so this annual
report for 2012-13
financial statements fish 102 what would be difference between financial
statements standalone and consolidated consolidated means
inclusive of all the subsidiaries
to consolidated financial statement is available on
page 102 this is income statement all amount
in Rupees lacs except the share data
this is year 2012 this is year 2013
we started with revenues group is in lacks
so 2013 the revenue 627
062 these are cost of material consumed
Employee Benefit so now this is an Indian accounting standard balance sheet
so therefore format is slightly different
but roughly these four items
up to 2916
are component of your cogs which is a manufacturing cost
so what I want to do is take a total of these items
take negative item as negative and find out what is total cogs
which means 242 211
is it visible at the back 242 211
plus 59922% W
plus 59922 W
minus 3028 minus
87
plus 2916
301934
your total cogs is 301934
now using this we can calculate the gross profit for
Dabur company here so
Ideally we should be taking only this number but just
senses are first analysis let's take 627062
627062
minus 301934
325128 now using this gross profit
can you find out gross profit margin so find out
325128
divided by 627062
51 percent so next time you buy a
Dabur product and if you buying it for 100 rupees
you know that it has been manufactured roughly at about 49 rupees
and because 51 percent is the gross profit margin
now after this
if you would observe these expenses this is a part of your SGA
which is given as: Employee Benefit expense
and even these other expenses are part of SGA
so when we will reduce 47123
and 165575
then we will get a beta from that you will reduce depreciation
then you would get a bit from that you will reduce
interest and you'd see interest is really really less
and for such a large size of company its very small amount of interest
that means it even this company appears to be more on the conservative side
so when you reduce interest you will get earning
before Taxes and then you will make adjustments for taxes and some other
items
which is here and finally we get net profits so directly calculate net profit
now
76342
76342 as ratios to 627062
12.17 percent this is someone you knows just write down this number
since we'll be building comparative analysis gross profit margin Dabur
gross profit margin
Dabur 51 percent and net profit margin
12.17 percent
are we fine here
let us go on to
Godrej now or maybe Hindustan Unilever is a better comparison
so let's pick up Hindustan Unilever
let's search for consolidated financial statements page number 115
so these are your financial statements your total revenue
is 27536
and your cogs
would be made of these three components
this is data is given in rupees and crore which was actually is
substantially larger in size company so
let's take an addition of these numbers 10987
plus 3125
-26 total of these 3 will gives us cogs
14086
this is 14086 is the cogs
now sales minus cogs will give us a gross profit
27536
-14086
13450 and let us calculate gross profit margin
which is 13450 divided by 27536
forty-eight percent
48.8 so about forty-nine percent
so which means
from a manufacturing perspective Dabur was
fractionally better that than the Hindustan Unilever but the 2% isn't really here
significant difference all we fine with this
so it appears now it's very nave conclusion
but based on two companies that we analyse on an average in the FMCG
sector
manufacturing cost is about fifty percent sales in India
so next time you buy some FMCG product
let it be a detergent or bathing bar or shampoo
you'd know that if you're buying it at fifty rupees it must have been
manufactured at price of
25 now moving further
let us take the net profit margin
so you're total revenue is
27536 and your net profit
is 3828 how much is that
13.9% is the net profit margin
and how much was a net profit margin of Dabur
so
compared to Dabur HUL had slightly lesser gross profit margin
but it is got slightly higher net profit margin
and may be one reason that you can see is your finance cost just
25 that's almost negligible twenty-fifth crores
on such a big balance sheet should which means actually appears to be more