Journal of Commerce and Accounting Research

Open Access Open Access  Restricted Access Subscription Access
Open Access Open Access Open Access  Restricted Access Restricted Access Subscription Access

Business and Financial Risk: a Study on Fmgc Companies in India


Affiliations
1 Rabindra Mahavidyalaya, Hooghly., India
     

   Subscribe/Renew Journal


The paper is an attempt to analyse the Business Risk and Financial Risk and its effect on profitability of well known FMCG companies (HUL, Nirma, Dabur and Marico) in India. The secondary data for analysis is retrieved from Capitaline database for ten years period from 1995-96 to 2005-06. The study aims to measure Business risk with the help of FTTR and DOL and Financial Risk with the help of DFL and DER and total risk with the help of DOL and DFL. The study also explores effects of profitability i.e. Profit before interest and tax margin (PBITM), Return on capital employed (ROCE) and Return on Net-Worth (RONW) to the firm's performance. The study measure the relationship between the Business Risk and Financial Risk by using Pearson's simple correlation technique and to test such coefficients by 't' test. The study of the interrelation between the business risk associated with all the companies and their operating earning capability does not confirm to the generally accepted rule that higher the degree of business risk greater the profitability.

Keywords

Business Risk, Financial Risk, FMCG Companies, Degree of Operating Leverage, Degree of Financial Leverage
Subscription Login to verify subscription
User
Notifications
Font Size


  • Barges, A. (1963). The Effect of Capital Structure on Cost of Capital (pp.17). New Jersey: Prentice-Hall.

  • Brigham, E. F. & Houston, J.F. (2003). Fundamentals of Financial Management (pp. 480-492). Thomson South Western.

  • Chakraborty, S. K. (1981). Financial Management and Control-Text and Cases (pp.112-115). New Delhi: Macmillian India Ltd.

  • Chandra, P. Financial Management-Theory and Practice. New Delhi: Tata McGraw Hill.

  • Gitman, L. J. (1976). Principles of Managerial Finance (pp.84). United States: Harper & Row.

  • Joy, O. M. (1977). Introduction to Financial Management (pp. 225-250). Homewood, Illinois: Richard D. Irwin, Inc.

  • Keown, A. J. (1986). Basic Financial Management (pp. 474-476). New Delhi: Prentice-Hall of India Pvt. Ltd.

  • Khan, M. Y. & Jain, P. K. Financial Management: Text and Problem, New Delhi: Tata McGraw-Hill Publishing Company Ltd.

  • Kishore, R. M. (2001). Financial Management-With Problems & Solutions. New Delhi: Taxman’s Allied Services.

  • Kothary, C. R. (1985). Research Methodology: Methods and Techniques. New Delhi: New Age International (P) Limited, Publisher.

  • Pandey, I. M. (2005). Financial Management (pp. 289-303). New Delhi: Vikas Publishing House Pvt. Ltd.

  • Schal, L. D. & Haley, C. W. (1983). Introduction to Financial Management (pp. 451-458). New Delhi: Tata McGraw-Hill Publishing Co. Ltd.

  • Solomon, E. & Pringle, J. J. (1978). An Introduction to Financial Management (pp.441). New Delhi: Prentice-Hall of India Pvt. Ltd. B. Articles

  • Ferri, M. G. & Jones, W. H. (1979). Determinants of Financial Structure : A New Methodological Approach. The Journal of Finance, 34(3), pp. 631-644.

  • Ghosh, S. K. & Maji, S. G. (2006). Impact of Operating Leverage on Profitability: An Empirical Study on Selected Indian Industries. The Management Accountant Journal, ICWAI, pp. 660-667.

  • Ghosh, T. P. (1997). Managing Corporate Risk: An Accounting Approach. Research Bulletin, ICWAI, 14, pp. 9-16.

  • Lev, B. (1974). On the Association between Operating Leverage and Risk. Journal of Financial and Quantitative Analysis, 9(4), pp. 627-641.

  • Mallick, A. & Mallick, U. (1985). Risk Analysis and Measurement from Published Financial Statements-A Case Study. Research Bulletin, ICWAI, 4(1), pp. 45-48.

  • Sur, D. (2006). Analysis of Business and Financial Risks: A Study of Hindalco Industries Limited. ICFAI Reader, 9(12), pp. 53-59.

  • Sur, D. (2007). Analyzing Business and Financial Risk of NTPC Ltd. in the Pre and Post Liberalization Periods: A Comparative Study. The ICWAI Journal of Applied Finance.


Abstract Views: 530

PDF Views: 0




  • Business and Financial Risk: a Study on Fmgc Companies in India

Abstract Views: 530  |  PDF Views: 0

Authors

Somnath Das
Rabindra Mahavidyalaya, Hooghly., India

Abstract


The paper is an attempt to analyse the Business Risk and Financial Risk and its effect on profitability of well known FMCG companies (HUL, Nirma, Dabur and Marico) in India. The secondary data for analysis is retrieved from Capitaline database for ten years period from 1995-96 to 2005-06. The study aims to measure Business risk with the help of FTTR and DOL and Financial Risk with the help of DFL and DER and total risk with the help of DOL and DFL. The study also explores effects of profitability i.e. Profit before interest and tax margin (PBITM), Return on capital employed (ROCE) and Return on Net-Worth (RONW) to the firm's performance. The study measure the relationship between the Business Risk and Financial Risk by using Pearson's simple correlation technique and to test such coefficients by 't' test. The study of the interrelation between the business risk associated with all the companies and their operating earning capability does not confirm to the generally accepted rule that higher the degree of business risk greater the profitability.

Keywords


Business Risk, Financial Risk, FMCG Companies, Degree of Operating Leverage, Degree of Financial Leverage

References