COST VOLUME PROFIT ANALYSIS OF NEPALESE MANUFACTURING INDUSTRY

Abstract

This study examines the CVP relationship and compare performance of four major companies namely Surya Nepal, Unilever, Bottlers Tarai and Bottlers Nepal. The main purpose is to login and compare some of the different financial ratios such as fixed cost ratio, sales ratio, margin of safety, net profit margin and operating profit. Using both financial ratio analysis and regression modeling, the research seeks to uncover unique patterns that correspond with one another and lead to financial outcomes. Based on the findings, there are vast differences on cost structures of these companies. While Unilever shows the lowest (suggesting more flexibility as a variable, cost-oriented business) Surya Nepal is only presenting highest fixed cost component ratio – which could portray some inflexibility to change in terms of costs. In terms of sales ratio, Surya Nepal also ranked first and a fairly high degree of revenue is consumed by particular expenses thus resulting its well earning capability denoted in the form of highest net profit margin among other competitors. Based on margin of safety analysis, Surya Nepal and Unilever are in essentially better positions while Bottlers Tarai and Bottlers Nepal show worse financial security. Bottlers Tarai and Bottlers Nepal have shown efficient expense management as their operating ratios are low which on the other hand, Unilever has high operating ratio simply couldn’t help ease in profit. The regression analysis accounts for considerable amount of variance in net profit margin, and is positively influenced by sales ratio, margin of safety and operating ratio. The study emphasizes that cost management, revenue allocation, and operational efficiency are constituents in the configuration of financial statements. The results provide useful leverage in planning, budgeting and profitability optimization in organizations. More sector or industry-specific studies and longitudinal research can be undertaken as future work to better understand how cost management helps in sustaining the business.