Leverages of Hul Essay

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Project Report on Leverage Analysis of HUL By Sanjay Pichikala – 122 Pratik Rathod – 129 Aaditya Saraf – 133 Karan shah – 137 Darshit Vakharia – 163 Aditya Sheth – 171 Company Introduction Consolidated Income statement of HUL Income statement | | All amounts in Rs. Crores | | March,2015 | March,2014 | Net Sales | 31972 | 29233 | Less : Variable Cost | 24614 | 22709 | Contribution | 7358 | 6524 | Less: Fixed Cost | 2264 | 2072 | EBIT | 5094 | 4452 | Less : Interest | 17.7 | 40.68 | EBT | 5076.3 | 4411.32 | Less: Tax | 1944 | 1259 | EAT | 3132.3 | 3152.32 | Less : Pref Dividend | 0 | 0 | Earnings for Shareholders | 3132.3 | 3152.32 | Number of Shares | 216.35 | 216.27 | EPS | 14.478 | 14.576 | | | | Leverages | | | | Operating Leverage | 1.444 | 1.465 | Financial Leverage | 1.003 | 1.009 | Combined Leverage | 1.449 | 1.479 | | | | Calculation of Leverages and its interpretation 1) Operating Leverage - Operating leverage is a measure of how revenue growth translates into growth in operating income. It is a measure of leverage, and of how risky, or volatile, a company's operating income is. Operating Leverage = Contribution EBIT At the financial year end 2015 the operating leverage of HUL stood at 1.444 indicating that the Contribution was 1.444 times that of the EBIT i.e. if sales changes by 10 % EBIT shall change by 14.44 %. HUL has high operating leverage. A high operating leverage means that a firm is making few sales but with high margins. 2) Financial Leverage - Financial leverage is the degree to which a company uses fixed-income securities such as debt and preferred equity. The more debt financing a company uses, the higher its financial leverage. Financial Leverage = EBIT

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