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NESTLE & UNILEVERFINANCIAL RATIOANALYSISFINANCIAL MANAGEMENT BY: M. HASEEB MIR SUBMITTED TO: MR. ZEESHAN GHAFOOR
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NESTLE RATIO ANALYSIS:In millions 2010 2009Current Asset 38997 39870Non Current Assets 72644 71091 110961Total Assets 111641 36083Current Liabilities 30146Non Current Liabilities 18897 21202Total Liabilities 49043 57285Equity 62598 53631 7734Inventory 7925 2734Cash 8057Net income 34233 10428Long term debt 18897 21202Working Capital 8851 3787Total Receivables 12083 12309Sales 109722 107618CGS (Cost of Goods Sold) (45849) (45208)Total Debt 49043 57285
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Short-term solvency , or liquidity ratios: 2010 2009Current ratio 1.29 1.10Quick ratio 1.03 0.89Cash ratio 0.27 0.07Net working ratio 0.07 0.03Long-term solvency, or financial leverage ratios:Total debt ratio 0.439 0.516Debt-equity ratio 0.78 1.068Equity multiplier 1.78 2.068Long term debt ratio 0.23 0.28Asset management or turnover ratios:Inventory turnover 5.785 5.845Days sales in inventory 63.04 days 62.39 daysReceivables turnover 9.08 8.74Days sales in receivables 40.19 days 41.76 daysNWC turnover 12.39 28.41Fixed asset turnover 1.51 1.51Total asset turnover 0.98 0.97Profitability ratios:Profit margin 31.19% 9.4%Return on asset 0.306 0.094Return on equity 0.546 0.194
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LIQUIDITY RATIOS: Tells the short term paying ability of the firm. ï‚· Current Ratio The rule of thumb for current ratio is 2:1that is varying with the different industries it depends on the nature of current assets and liabilities, company meets 2 times its current liabilities by its current assets. Formula = Current assets/ Current liabilities Current asset has ability to meet 1.29 times of their current liability in 2010 which is greater than 2009 which is 1.10, which is more than satisfactory. ï‚· Acid test / Quick Ratio The rule of thumb for quick ratio is 1:1.company meets its current liabilities with its most liquid assets. Formulae = Current Asset- Inventories/Current liabilities Quick ratio shows that after removing inventories from current asset, 1.03times ability to meet its current liabilities in 2010 while it was less in 2009 which is 0.8. ï‚· Cash Ratio Formulae = cash/current liabilities In 2010, only cash can meet 0.27times of its current liabilities but in 2009 it was less 0.07 times. ï‚· Net Working Capital to Total Assets Formulae = Current Assets â€“ Current Liabilities/Total assets An increasing trend from 2009 to 2010 of NWC to asset which is 0.03 & 0.07 respectively.Long Term Solvency, or financial leverage, ratios:Basic measure of the creditors claim is represented by debt ratio it states total liabilities as a percentage oftotal assets. ï‚· Total Debt Ratio Formulae = Total Assets-Total equity/Total AssetsDecreasing trend from 2009 to 2010 of total debtâ€™s portion from total asset which is, 0.516 times & 0.439 respectively.
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ï‚· Debt-equity ratio Formulae = Total Debt /Total Equity In 2009 debt-equity ratio was 1.068 times but reduced in 2010 which is 0.78 times. ï‚· Long-term debt ratio Formulae = long term debt/long term debt + total equity 5% reduction in Long term debts from capital structures in 2010 which is 23% in comparison with 2009â€™s 28%.Asset management or turnover ratios:How efficiently current assets are utilized by the company ï‚· Inventory Turnover Ratio Show the effectiveness of inventory management practices of the firm. Formulae = cost of goods sold/Total inventory ITR is 5.78 times in 2010 & 5.84 times in 2009 ï‚· Days sales in inventory Formulae = 365 days/inventory turnover 63.04 days are required to clear inventory of 2010 while 62.39 days were required for previous year of 2009. ï‚· Receivables Turnover Ratio Indicates quality of receivables and how successful the firm is in its collections. Formulae = Net Sales / A/R9.08 times sales are on credit in 2010 while a previous year reveals that 8.74 timeâ€™s sales were on credit. ï‚· Days sales in receivables Formulae = 365 days/receivables turnover 2010 required 40.19 days to collect money from debtors while 2009 required 41.76 days for collection. ï‚· Total Assets Turnover Indicates the overall effectiveness of the firm in utilizing its assets to generate sales Formulae = Income/ Total Assets
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9.8% sales are generated from total asset of 2010 while 9.7% sales were generated from total asset of 2009.Profitability ratios:A class of financial metrics that are used to assess a businesss ability to generate earnings as comparedto its expenses and other relevant costs incurred during a specific period of time. ï‚· Profit margin Formulae = net income/sales Profit margin is 31.19% in 2010 and very low 9.4% in 2009. ï‚· Return on assets Formulae = net income/total assets ROA is 30.6% in 2010 and again very low in 2009 which is 9.4%. ï‚· Return on equity Formulae = net income/total equity Increasing trend of ROE from 2009 to 2010, which is 19.4% & 54.6% respectively.
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UNILEVER RATIO ANALYSIS:In 000â€™s 2010 2009Current Asset 704,825.00 600,683.00Non Current Assets 83,922.00 374,153.00Total Assets 788,747.00 974,836.00Current Liabilities 646,896.00 680,683.00Non Current Liabilities 38,182.00 25,497.00Total Liabilities 685,078.00 706,180.00Equity 404,395.00 268,656.00Inventory 358,094.00 333,840.00Cash 80,436.00 40,696.00Gross Profit 1,534,884.00 1,254,367.00EBIT (Operating Income) 645,859.00 241,656.00Taxation (208,396.00) (64,864.00)Net Income (income for year) 437,463.00 176,792.00Working Capital 57,929.00 (80,000.00)Total Receivables 9,638.00 15,287.00Sales 4,040,887.00 3,376,511.00CGS (Cost of Goods Sold) (2,506,003.00) (2,122,144.00)Total Debt 685,078.00 706,180.00
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Liquidity Ratios 2010 2009Current Ratios 1.08954917 0.882470989Quick Ratio 0.535991875 0.392022425Cash Ratio 0.124341471 0.059787008Long term Solvency ratiosTotal Debt Ratio 0.49 0.72Debt to Equity Ratio 1.694081282 2.628565898Equity Multiplier 1.950437073 3.628565898Asset Utilization RatiosInventory Turnover -6.998170871 -6.35676971Days Sale in inventory -52.15648585 -57.41910068Receivables Turnover 419.2661341 220.8746647Days sale in Receivables 0.870568764 1.652520901Total Asset turnover 5.123172576 3.463670812Capital Intensity 0.195191551 0.288711039Profitability RatiosProfit Margin 0.108259152 0.052359373Return on asset 0.554630319 0.181355633Return on Equity 1.081771535 0.658060866
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LIQUIDITY RATIOS: Tells the short term paying ability of the firm. ï‚· Current Ratio The rule of thumb for current ratio is 2:1that is varying with the different industries it depends on the nature of current assets and liabilities, company meets 2 times its current liabilities by its current assets. Formula = Current assets/ Current liabilities Current asset has ability to meet 1.089 times of their current liability in 2010 which is greater than 2009 which is 0.882, which is more than satisfactory. ï‚· Acid test / Quick Ratio The rule of thumb for quick ratio is 1:1.company meets its current liabilities with its most liquid assets. Formulae = Current Asset- Inventories/Current liabilities Quick ratio shows that after removing inventories from current asset, 0.535 times ability to meet its current liabilities in 2010 while it was less in 2009 which is 0.392. ï‚· Cash Ratio Formulae = cash/current liabilities In 2010, only cash can meet 0.124times of its current liabilities but in 2009 it was less 0.059 times. ï‚· Net Working Capital to Total Assets Formulae = Current Assets â€“ Current Liabilities/Total assets An increasing trend from 2009 to 2010 of NWC to asset which is 0.181 & 0.073 respectively.Long Term Solvency, or financial leverage, ratios:Basic measure of the creditors claim is represented by debt ratio it states total liabilities as a percentage oftotal assets. ï‚· Total Debt Ratio Formulae = Total Assets-Total equity/Total Assets Decreasing trend from 2009 to 2010 of total debtâ€™s portion from total asset which is, 0.72 times & 0.49 respectively. ï‚· Debt-equity ratio Formulae = Total Debt /Total Equity
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In 2009 debt-equity ratio was 2.628 times but reduced in 2010 which is 1.694 times. ï‚· Equity Multiplier Total assets/Total equity In 2009 equity multiplier was 3.628 while in 2010 it was 1.950Asset management or turnover ratios:How efficiently current assets are utilized by the company ï‚· Inventory Turnover Ratio Show the effectiveness of inventory management practices of the firm. Formulae = cost of goods sold/Total inventory ITR is 6.998 times in 2010 & 6.356 times in 2009 ï‚· Days sales in inventory Formulae = 365 days/inventory turnover52.1 days are required to clear inventory of 2010 while 57.4 days were required for previous year of 2009. ï‚· Receivables Turnover Ratio Indicates quality of receivables and how successful the firm is in its collections. Formulae = Net Sales / A/R419.299 times sales are on credit in 2010 while a previous year reveals that 220.874 timeâ€™s sales were on credit. ï‚· Days sales in receivables Formulae = 365 days/receivables turnover 2010 required 0.87 days to collect money from debtors while 2009 required 1.67 days for collection. ï‚· Total Assets Turnover Indicates the overall effectiveness of the firm in utilizing its assets to generate sales Formulae = Income/ Total Assets 5.12% sales are generated from total asset of 2010 while 3.46% sales were generated from total asset of 2009.
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Profitability ratios:A class of financial metrics that are used to assess a businesss ability to generate earnings as comparedto its expenses and other relevant costs incurred during a specific period of time. ï‚· Profit margin Formulae = net income/sales Profit margin is 0.108 in 2010 and very low 0.0523 in 2009. ï‚· Return on assets Formulae = net income/total assets ROA is 0.554 in 2010 and again very low in 2009 which is 0.181. ï‚· Return on equity Formulae = net income/total equity Increasing trend of ROE from 2009 to 2010, which is 0.658 & 1.08 respectively.
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