Profitability Analysis through Discriminant Analysis-A Study on FMCG Sector

In this study we give emphasis on FMCG sector. Seven popular FMCG companies have been selected for analysis. Profitability analysis of the selected companies with the help of Wilks' Lambda and multiple discriminant analysis is the main objective of this study. For this reason different financial ratios like Net Profit Margin, Total Assets Turnover Ratio, Operating Profit Margin, Earning per Share, Dividend Pay-out Ratio, Return on Capital Employed, Cash Profit Margin, Equity Multiplier and Current ratio are used. These companies are segregated into highly profitable and less profitable companies on the basis of Return on Net Worth. Among the nine ratios three ratios namely Dividend Pay-out ratio, Earning per share and Return on Capital Employed are the significant ratios due to their discriminatory power. Dividend pay-out ratio has the highest impact on profitability and it followed by Earning per share and Return on Capital employed.