The document is a project report submitted for a B.Com degree. It includes an introduction, acknowledgements, supervisor's certificate, student declaration, index, and the beginning of several chapters. The introduction provides background on the analysis of Nestle India and Engro Foods, the objectives of analyzing their financial ratios, and the methodology used. It will analyze annual reports, financial statements, and calculate various financial ratios to evaluate the financial position and performance of the two companies.

1. PROJECT REPORT
Submitted for the Degree of B.Com. Honours in Accounting & Finance
Under the <University Name>
ON
“FINANCIAL RATIO ANALYSIS
OF
NESTLE INDIA & ENGRO FOODS”
SubmittedBy
Supervised by
Name : ****************
Registration No. : *******************
College Roll No. : *******************
C.U. Roll No.: *******************
College : *********************
Name : ************************
College: *************************
Month & Year of Submission : ******************

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♦ ACKNOWLEDGEMENTS ♦
At the outset I would like to register my deep sense of gratitude to <Principle
Name>, Principal, <College Name> and < Supervisor’s Name>, Department of
commerce, <College Name> for valuable guidance and constant inspiration.
I would also like to covey my deep sense of gratitude and regards to my
guide, < Supervisor’s Name> , Department of Commerce, <College Name> for his
valuable guidance and continuous inspiration without which the project work
would not have been completed.
And at last but not in the least I would like to extend my thanks to my
friends of B.Com. class who always extend their moral support to complete my
project.
<YourName>
< YourSign >

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Annexure-I
Supervisor’s Certificate
This is certify that <Your Name> a student of B.Com.Part – III (Hons.)
in Accounting & Finance Group of <College Name>, under the
University of Calcutta has worked under my supervision and guidance
for his project work and prepared a project report with the title
“FINANCIAL RATIOS ANALYSIS OF NESTLÉ INDIA &
ENGRO FOODS.”
The project report, which he is submitting, is his genuine and
original work to the best of my knowledge,
Signature : < Supervisor’s Sign >
Name : < Supervisor’s Name >
Date:

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Annexure-II
Student’s Declaration
I hereby declare that the project work with “FINANCIAL RATIOS
ANALYSIS OF NESTLÉ INDIA & ENGRO FOODS”. Submitted
by me for the partial fulfillment of degree of B.Com.Honours in
accounting & finance under the university of Calcutta is my original
work and has not been submitted earlier to any other
university/institution for the fulfillment of the requirement for any
courseof study.
I also declare that no chapter of this manuscript in whole or in part has
been incorporated in this report from any earlier work done by others
or by me. However extracts of any literature which has been used for
this report has been duly acknowledger providing details of such
literature in the reference.
Date : Signature: < Your Sign >
Name: < Your Nam e>
Registration no: ****************
Roll no : < College Roll No >

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INDEX
CHAPTER CONTENTS PAGE NO.
A. INTRODUCTION 6 - 10
 BACKGROUND 7
 OBJECTIVES 8
 METHODOLOGY 8
 LIMITATIONS OF STUDY 10
B. CONCEPTUAL FRAMEWORK 11 - 18
 ORIGIN 12
 CONCEPT 13
 VISION 13
 MISSION 14
 OBJECTIVES 14
 SWOT ANALYSIS 16
C. PRESENTATIONOF DATA, ANALYSIS & FINDINGS 19 - 35
 COMPANY PROFILE 20
 FINDINGS 31
D. CONCLUSION & RECOMNEDATIONS 36 - 38
 CONCLUSION 37
 RECOMNDATIONS 37
 REFERENCES 38

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A . INTRODUCTION

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 BACKGROUND
This is the project about financial statement analysis of two companies of the same
industry. In this regard the companies which were chosen to be analyzed are NESTLÉ
INDIA and ENGRO FOODS LIMITED. Both the companies are of food industry and are
dealing in food business for many years. The companies are well reputed in the market
and deal in a very wide range of food products.
As NESTLÉ, a very, well-known brand started its’ business life with only one product
and that was condensed milk for infants. And now it has captured everyone’s mind for its
tempting products; as chocolates, coffee, bottled water, powdered milk, flavored milk, tea
whitener and many more. The company has strong marketing strategies to come up with
in a competitive market. It has targeted all of its customers no matter they are of what
age. The company is standing in the market with share price of 4,844. How it standing in
the market with such price? How it satisfies its shareholder’s? Why don’t investor’s
invest in other companies?
The answer to all above question is clear after going through its financial reports. The
profit that the company earns and the balance it has kept between its assets and liabilities
is also easily understandable after going through its financial statements. The company is
running its business so well. And that is why it never loses its value.
ENGRO FOODS is also a very, well-reputed company which produces a wide range
of healthy food products. Is product line contains products such as milk, tea whitener,
cream, ice cream, juices, flavored milk and many others. ENGRO FOODS is the 1st
company which is using Bactofuge technology.
The company has not been in this business for as long as NESTLÉ is, but the way it
has grown up is appreciable. It has come up with innovative features in its products.
Through its financial statements it is analyzed that how efficiently it has increased its
share price from Rs. 17 to Rs. 25. It provides many incentives to it stockholder’s is also
growing its market share. The company has capability to pay it liabilities on time and to
keep its assets managed.
ENGRO FOODS not only provide incentives to its stockholder’s but also to its
employees. It offers its employees much outdoor training so that they can work in a
healthy environment and don’t get tired of their hectic routine. That is why it has many
loyal employees to work with.

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 OBJECTIVES
 The basic objective of studying the ratios of the Nestlé India and Engro Foods
Limited, to know the financial position of the company.
 To know the borrowings of the two companies as well as the liquidity position of
the Nestlé India and Engro Foods Limited.
 To study the current assets and current liabilities so as to know weather the
shareholders could invest in Nestlé India and Engro Foods Limited or not.
 To study the profits of the business and net sales of the business and to know the
stock reserve for sales of the business.
 To know the solvency of the business and the capacity to give interest to the long
term loan lenders (debenture holders) and dividend to the share holders.
 To study the balance of cash and credit in the organization.
 METHODOLOGY
 CLASSIFICATION OF RATIOS :-
To attain certain set of objective regarding study of ratio analysis, the researcher has
taken into consideration various ratios for analyzing the financial ratios of the Nestlé
India and Engro Foods Limited. The following are the ratios used:
 LIQUIDITY RATIOS :-
 Current Ratio.
 Quick Ratio.
 Net Working Capital Ratio.
 PROFITABILITYANALYSIS RATIOS :-
 Return On Assets Ratio.
 Return On Equity Ratio.
 Return On Investment Ratio.
 Net Profit Margin Ratio.
 Gross Profit Margin Ratio.
 Earnings Per Share Ratio.

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 ACTIVITYANALYSIS RATIOS :-
 Assets Turnover Ratio.
 Inventory Turnover Ratio.
 CAPITAL STRUCTURE ANALYSIS RATIOS :-
 Debt To Equity Ratio.
 Debt To Assets Ratio.
 Interest Coverage Ratio.
 CAPITAL MARKET ANALYSIS RATIOS :-
 Price Earnings Ratio.
 DATA COLLECTION:-
The data have been collected at the following two levels :-
 Primary Data: -
The Study of Ratio Analysis deals with various aspects related to financial Ratio
Analysis. It is a widely used tool to financial analysis.Researcher collected the primary
data through the following sources.
 Personal Discussion: In this source of data collection researcher has discussed with
account department managers and employees. The direct conversation with company
management is also giving primary information.
 Observation: The researcher has observed the actual work of the company related to
the financial statements and got major information about different policies of the
company.
 Secondary data:
The secondary data on the other hand are those which have already been
collected by someone else and which have already been analyzed through the statistical
process. This constituted the major part of the study.The various sources, which were
referred, are as follows:
(i) Published Annual Reports ; (ii) Internet ; (iii) Reference Books ; (iii) Periodicals ;
(iv) Journals ; (v) News Papers e.t.c.

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 LIMITATIONS OF THE STUDY
 The ratio analysis was made with the help of the secondary data collected from the
company.
 Researcher could not refer some of the financial documents as they were of confidential in
nature from the company point of view.
 Study is limited to only one year of the Nestlé India and Engro Foods Limited i.e. “2011-
2012”.
 Study is limited to Nestlé India and Engro Foods Limited only.

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B. CONCEPTUAL FRAMEWORK

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 ORIGIN
 NESTLÉ INDIA :
Nestlé has been serving Indian consumers since 1988, when parentcompany, the
Switzerland-based Nestlé SA, first acquired a share in Milk PakLtd. Today Nestlé is fully
integrated in Indian life, and is recognized asthe producer of safe, nutritious and tasty
food, and leaders in developing anduplifting the communities in which they
operate.Nestlé India ensures that their products are made available toconsumers wherever
in the country they might be. Convenience is at theheart of the Nestlé philosophy, and
there aim is to bring products to people'sdoorsteps.
The following project is about Nestlé India and the necessary details about Nestlé
India are as follow:
Ticker: NESTLÉ
Country: INDIA
Exchanges: KAR
Major Industry: Food & Beverages
Sub Industry: Diversified Food
Sales of 2012: 64,824,364,000 (Year Ending Jan 2013)
Employees: 2,422
Currency: India Rupees
Market Capture: 210,875,565,600
Fiscal Year Ends: December
Shares Outstanding: 45,349,584
Share Type: Ordinary
Closely Held Shares: 35,545,078
 ENGRO FOODS :-
Engro Foods (Pvt.) Limited (EFL) has been established in 2005 as part of a
diversification process at the Engro Group. The plant located at Sukkhur on 23 acre land,
has the raw milk reception capability of 300,000 liters per day and UHT milk capacity of
200,000 liters per day. The plant has been established at a cost of Rs. 1 billion which
provides direct employment to 750 people.

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Engro Foods has entered the Food business through milk processing and sale with the
company’s vision to pursue growth opportunities based on country fundamentals and own
strength. It also positions the company to leverage its corporate social responsibility
initiatives and work closely with rural communities to promote integrated farming and
livestock development. This effort is expected to play a pivotal role in poverty alleviation
and improving livelihoods of the poor in the milk collection areas .
 CONCEPT
 NESTLÉ INDIA & ENGRO FOODS LIMITED :-
The report which is based on the financial analysis of NESTLE and ENGRO FOODS.
By going through all the financial statements it is known that overall NESTLE is working
so well if compared to ENGRO FOODS. But by going through the financial ratio analysis
the facts were that ENGRO is much more competitive than NESTLE.
As ENGRO FOODS is not in the market as long as NESTLE is. This is analyzed
through financial analysis that ENGRO is working so efficiently and effectively and is
coming up with new features and advanced technology that others are not using.
In the report history of both companies, SWOT analysis, financial statements,
financial ratios, financial ratio analysis, cash budget and finally the report is concluded
and recommendations are given at the end.
 VISION :-
 NESTLÉ INDIA :-
“Nestlé’s global vision is to be the recognized leading Nutrition, Health and Wellness
Company. Nestlé India subscribes fully to this vision of being the number one Nutrition,
Health, and Wellness Company in India. In particular, we envision to;
 Lead a dynamic, passionate and professional workforce – proud of our heritage and
positive about the future.

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 Meet the nutrition needs of consumers of all ages – from infancy to old age, from
nutrition to pleasure, through an innovative portfolio of branded food and beverage
products of the highest quality.
 Deliver shareholder value through profitable long-term growth, while continuing to
play a significant and responsible role in the Social, Economic, and Environmental
sectors of India.”
 ENGRO FOODS :-
“To be the Premier Indian Enterprise with a global reach, passionately pursuing value
creation for all stake holders”.
 MISSION :-
 NESTLÉ INDIA :-
“Nestlé is dedicated to providing the best foods to people throughout their day,
throughout their lives, throughout the world. With our uniqueexperience of
anticipating consumers’ needs and creating solutions, Nestlécontributes to your well-
being and enhances your quality of life.”
 ENGRO FOODS :-
“To help farmers maximize their farm produce by providing quality plantnutrients and
technical services upon which they can depend. To create wealth by building new
businesses based on company and country strengths inPetrochemicals, Information
Technology, Infrastructure and other Agriculturalsectors. In pursuing the mission we
shall at all-time be guided in our conductand decision making by our Core Values.”
 OBJECTIVES& GOALS :-
 NESTLÉ INDIA :-
The goals and objectives of Nestlé India are simple and well designed with the core
strategies to meet the demand of the consumers and to fulfill the needs of the customers.
Following are the main goals :-

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 To be, the best and quality providing brand among other brands in India.
 Tofulfillcustomers’needs and requirements.
 To capture it’s desired market share.
 To dwellinto the life of people and consumers.
 To boost upits sales.
 To create value for customer.
 To keep the loyalty of customer with Nestlé.
 To be the top nutrition company of India.
 To be the leading FMCG company around the world as well as in India.
 It aims to be the socially responsible and helping company in bad times.
 Nestlé aims to be proactive innovation and renovation culture, which is the key to
Nestlé’s success in the marketplace.
 Nestlé aims to have fully integrated systems with suppliers & retailers so that every
single market can be tapped & focused.
 ENGRO FOODS :-
The goals and objectives of Engro Foods are simple and well designed with the core
strategies to meet the demand of the consumers and to fulfill the needs of the customers.
Following are the main goals :-
 To possess leadership among other companies.
 To introduce innovative products.
 To capture diversified marked and international focus.
 To maintain quality and work for continuous improvement.
 Candid and open communications.
 External & Community Involvement
 To focus on individual growth and development.
 Enthusiastic pursuit of profit.
 To keep satisfied ethics and integrity.
 To promote safety, health and pure environment.
 To create opportunities of enjoyment and fun.
 To promote teamwork and partnership.

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 SWOT ANALYSIS :-
 NESTLÉ INDIA :-
 Strengths
Strength of Nestlé is the presence of its factories or operations in almost every country
in the world employing around 283000 people. The sales values have touched CHF 109.9
billion, with a net profit of CHF 18.0 billion. Nestle has recorded a financial growth even
in times of recession by promoting the sales of smaller and cheaper versions of products
in developing economies.
 Weaknesses
Nestlé do not have direct market outlets and this can be one of the weaknesses as it
can cause difference in profit made. There another weakness is not having enough raw
material production units; they depend on either local raw material producers or through
other trade channels.
 Opportunities
Nestlé’s weakness of not having a direct outlet can be converted as an opportunity by
introduction of new direct outlets. The acquisition of Cadburys for an example is an
opportunity since they are one of the main competitors for Nestlé. Setting up
theirpersonal farms and raw material production units is an opportunity as it would reduce
the cost for Nestlé.By acquisitions Nestlé can enter the new market, which is easy through
already existing companies. Nestlé has great opportunities in a society which is becoming
more and more health conscious
 Threats
Their weakness of not having enough raw material production units (which cause
them to depend on other producers) and their dependency on other producers can threaten
to reduce thequality of products they offer. The contamination of food products is a major
threat to Nestlé in the market. Intense competition in its market segments also possesses a
major challenge to Nestlé as its competitors are also trying to increasing their product
ranges which might make inroads into Nestlé's profit.
Another threat to Nestle can be the maturity of the markets which they are entering n.
For example, in France, DANONE has already established itself as a market leader in
case of yogurt before Nestle launched its LC-1 division in France and could not compete
against the well-establishedDANONE. The consumers frequently tend to change their
preference of brands, so change in consumer trends is a threat to Nestlé.

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 ENGRO FOODS :-
 Strengths
 Engro Foods is a well-established brand name; customers automatically have a brand
association.
 They can easily afford research and development costs in order to introduce new
products.
 They have strong supply chain (good PR with farmers provides world class supply
chain management).
 The increasing sale figures form years to years showing customer satisfaction upon
Engro Foods Limited products.
 Engro Foods involve in consumer and product research before and after launching a
product.
 Engro Foods is having strong relationship with global research partners like AC
Nielsen, JWT Asiatic.
 Company is not relying on third parties for sale and distribution and has its own sale
and distributing network.
 Engro Foods Limited only has the third-generation UHT milk plant in the country.
 Engro Foods Limited plant is the only plant in India that uses Bactofuge technology to
virtually eliminate bacteria and ensure premium quality and hygiene.
 Weaknesses
 One major weakness of Engro Foods in dairy products, which is that 85% of its milk
collection centers are in Punjab, while processing unit is in Sindh.
 Higher transportation cost.
 Dependency on TETRA PAK for the entire packing of its dairy products.
 Paying higher cost of packing of products results in higher overall products cost.
 The product range of Engro Foods narrows as compared to its competitors.

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 Opportunities
 India is the fourth largest milk producing country. So, it’s an opportunity for company
to grow in this sector.
 Engro Foods can increase awareness though different media, by showing ads thoseare
according to cultural requirements of India.
 By increasing the milk related products company can go globally.
 Engro can launch products like dry milk, cereal and Yogurts etc.
 Growing dissatisfaction with milkmen’s milk and increasing awareness about
healthand hygiene issues have led to increased processed milk consumption.
 Threats
 Engro Foods competitors Nestle and Haleeb are biggest threat.
 There are opportunities and doors for new players are open who can be the future
competitors.
 Consumer is aware now, there is need to maintain the quality of products. If
EngroFoods will not do so it loses its business in foods. There is threat from the
customer side.
 Consumer’s perceptions and price differentials can cause a threat for the company.
 Consumer’s preferences change with time and prices might create certain barriers
interms of the profit margins for ENGRO FOODS.

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C. PRESENTATION OF DATA, ANALYSIS &
FINDINGS

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 DATA ANALYSIS
 NESTLÉ INDIA :-
BALANCE SHEET FOR THE YEAR ENDED 31.03.2012
Assets: 2012(Rs)
Tangible fixed assets
Property, plant and equipment 16,230,528
Capital work in progress 5,370,561
Total tangible assets 21,601,089
Intangible assets 11,954
Long term loan and advances 161,982
Long term security deposits 9,817
Total intangible assets 183,753
Current assets
Stores and spares 1,278,416
Stock in trade 7,064,170
Trade debts 276,858
Current portion of long term loans and advances 30,914
Advances, deposits, prepayments and other receivables 4,042,634
Cash and bank balances 702,025
Total current assets 13,395,017
Total assets 35,179,859
Equity and Liabilities: 2012(Rs)
Owner’s Equity
Share capital and reserves
Authorized capital 75,000,000(2010:75,000,000) ordinary Shares of Rs 10 each 750,000
Issued, subscribed and paid up capital 453,496

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Share premium 249,527
General reserve 280,000
Accumulated profit 6,629,393
Total Owner’s Equity 7,612,416
Non-current liabilities
Long term finances 7,848,050
Deferred taxation 2,476,871
Retirement benefits 440,377
Liabilities against assets Subject to finance lease 13,690
Total non-current liabilities 10,778,988
Current liabilities
Current portion of non-current liabilities 41,587
Short term borrowings from associated company - unsecured ---
Short term borrowings –secured 4,950,000
Short term running finance under markup arrangements-secured 4,175,236
Customer security deposit Interest free 149,791
Trade and other payables 7,343,507
Interest and markup accrued 128,334
Total current liabilities 16,788,455
Total Equity and Liabilities 35,179,859

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INCOME STATEMENTFOR THE YEAR ENDED DECEMBER 31ST2012
2012(Rs)
Net sales 64,824,364
Cost of goods sold (48,099,046)
Gross profit 16,725,318
Distribution and selling expenses (6,862,113)
Administration expenses (1,405,298)
Operating profit 8,457,907
Finance cost (1,050,355)
Other operating expenses (1,064,233)
(2,114,588)
Other operating income 159,545
Profit before taxation 6,502,864
Taxation (1,834,507)
Profit after taxation 4,668,357
Earnings per share (Basic and dilute) 102.94

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 ENGRO FOODS :-
BALANCE SHEET FOR THE YEAR ENDED 31.03.2012
Assets 2012(Rs)
Non-Current Assets
Property,plant and equipment 9,615,426
Biological Assets 496,809
Intangible Assets 133,598
Long term advances, deposits and payments 24,212
Total non-current assets 10,270,045
Current Assets
Stores,sparesand loose tools 571,812
Stock in trade 2,637,816
Trade debts 87,121
Advances, deposits and prepayments 266,093
Other receivables 1,160,126
Taxes recoverable 1,443
Derivative financial instrument ---
Short term investments 1,294,000
Cash and bank balance 350,728
Total current assets 6,369,139
Total Assets 16,639,184
Equity and Liabilities 2012(Rs)
Owner’s equity
Share capital 7517,889
Share premium 722,182
Hedging reserve (18,178)
Accumulated loss (984,951)
Total Owner’s Equity 7,236,942
Non- Current Liabilities

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Long term finances 5,610,000
Obligation under finance lease 1,295
Deferred taxation 308,090
Deferred liabilities 1,870
Total non-current liabilities 5,921,255
Current Liabilities
Current portion of
-long term finance 465,000
-obligations under finance lease 3,884
Trade and other payables 2,343,506
Derivative financials instruments 27,966
Accruedinterest/ markup on
-long term finance 368,152
-short term finance 20,229
Short term finance 252,250
Total current liabilities 3,480,987
Total Equity and Liabilities 16,639,184

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INCOME STATEMENTFOR THE YEAR ENDED DECEMBER 31ST2012
2012(Rs)
Net sales 29,859,226
Cost of goods sold (23,230,445)
Gross profit 6,628,781
Less operating expenses
Distribution and marketing expenses (3,716,489)
Administrative expenses 504,722)
Other operating expenses (208,902)
Other operating income 213,133
Operating profit 2,411,801
Finance costs (1,049,141)
Profit before taxation 1,362,660
Taxation (471,687)
Profit for the year 890,973
Earnings per share (Basic and dilute) 1.18

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DATA TABLE
The other data of NESTLÉ and ENGRO FOODS used in financial ratios analysis is as
follow:
NESTLÉ ENGRO FOODS
Total Assets 35,179,859 16,639,184
Current Assets 13,395,017 6,369,139
Current Liabilities 16,788,455 3,480,987
Inventories 7,046,126.522 3,046,859.795
Net Income 4,524,771 890,973
Average Total Assets 10,873,970 14,549,624
Beginning Assets 8,352,923 12,460,064
Ending Assets 13,395,017 16,639,184
Average Stockholder’s
Equity
6,597,144.5 2,923,870.5
Beginning Equity 5,581,873 5,124,047
Ending Equity 7,612,416 7,236,942
Sales 64,824,364 29,859,226
Number of Common Stock 45,350.272 370,305.7377
Cost of Goods Sold 48,099,046 23,230,445
Total Stockholder’s Equity 7,612,416 7,236,942
EBIT 6,586,973 1,388,430
EBT 6,502,864 1,362,660
Interest Expenses 84,109 25,770
Market Price Per Shares 4,844 25
EPS 102.94 1.22
Inventory Turnover 9.2 8.9
EAT 4,668,357 890,973
Gross Profit 16,725,318 6,628,781
Total Liabilities 2756443 9,402,242
THE CALCULATIONS
Average Total Assets = (Beginning Assets + Ending Assets) ÷ 2
Average Stockholder’s Equity = (Beginning Equity + Ending Equity) ÷ 2
EBIT = EBT + Interest Expenses
NESTLÉ ENGRO FOODS
Average Total Assets = (8,352,923+13,395,017) ÷2 = (12,460,064+16,639,184)÷2
= 21747940 ÷ 2 = 29,099,248 ÷ 2
= 10,873,970 = 14,549,624
Average Stockholder’s
Equity
= (5,581,873+7,612,416) ÷ 2 = (5,124,047+7,236,942) ÷ 2
= 13,194,289 ÷ 2 = 5,847,741 ÷ 2
= 6,597,144.5 = 2,923,870.5
EBIT = 6,502,864+84,109 = 1,362,660+25,770
= 6,586,973 = 1,388,430

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 BALANCE SHEET ANALYSIS OF NESTLÉ INDIA & ENGRO FOODS
LIMITED :-
The asset side of balance sheet shows the size of the firm so by comparing balance
sheet of both companies we analyzed that the fixed asset of the nestle company is greater
than ENGRO foods which means that nestle has invested more in the fixed assets than
ENGRO foods whether by starting new project or by any other source. Due to high
investment in fixed assets long term loan and advances of nestle are also greater than
engro foods and total assets of nestle are also greater than engro foods which shows that
the size of nestle is greater than engro. Nestle has more cash and bank balance than engro
foods and has more reserves which shows that nestle hold more than dividing whereas
engro divides more than holding with it means nestle pays less dividend as compared to
engro foods.
 INCOME STATEMENT ANALYSIS OF NESTLÉ INDIA & ENGRO
FOODS LIMITED :-
We have made analysis between engro and nestle companies .here we analyze that
sales of nestle (64824, 364) is more as compare to engro(29859,226). Because their
investment in fixed asset is more as compare to angro.Production is also increase due to
more investment. And as production increase ultimately their sales is also increase.
Nestle have more cost of goods sold that is (48099, 046) whereas engro have (23230,
445). Because engro have only dairy products whereas nestle have broad category of
products. As nestle sales is more so their gross profit is also more as compare to engro.
Nestle have more distribution and selling expense as compare to engro because engro
have their own distribution channels whereas nestle relay on others for distribution. As
well as engro products are also less and due to this their distribution expenses are less.
Nestle company employee (328000) are more as compare to engro. As well as they
uses more advertising compains so that’s why their administrative expenses are more.
Nestle Finance cost is also more because their interest expense are more.

28. [28]
< College Name / College Roll >
Operating expense of nestle (1064233) engro (208902) means they use more
directions to run their business. Nestle operating income is also more nestle is a well-
known brand and they generate high income.
Nestle have more tax because they have more products that is (1834,507) whereas
engro products are limited and their tax is (471,687).
Nestle have more no of shares and more earning.so Earning per share of nestle is also
more that is 102.94 as compare to engro that is 1.22
So after analysis of income statement we see that nestle have more sales and more
profit than engro which shows that nestle company is good than engro.

29. [29]
< College Name / College Roll >
RATIOS OF NESTLÉ & ENGRO FOODS :
Sl
No.
RATIOS NESTLÉ ENGRO FOODS
A. Liquidity Ratios :-
1) CurrentRatio =
Current Assets
Currentliablities
13,395,017
16,788,455
= 0.80
6,369,139
3,480,987
= 1.83
2) Quick Ratio =
Current Assets -Inventory
CurrentLiablities
13,395,017–7,046,126
16,788,455
= 0.38
6,369,139–3,046,859
3,480,987
= 0.95
3) Net Working
Capital Ratio =
Working Capital
Total Assets
13,395,017-16,788,455
35,179,859
= (–) 0.10
6,369,139 –3,480,987
16,639,184
= 0.17
B. Profitability Analysis Ratios :-
4) Return on
Assets Ratio =
Net Income
Average Total Assets
4,524,771
10,873,970*
= 0.42
890,973
14,549,624
=0.06
5) Return on
Equity Ratio =
Net Income
Average Stockholders'
Equity
4,524,771
6,597,144.5
= 0.69
890,973
2,923,870.5
=0.03
6) Returnon
Investment
Ratio
=
Net Profit AfterTaxes
Total Assets
4,668,357
35,179,859
= 0.13
890,973
16,639,184
= 0.05
7) Net Profit
Margin Ratio =
Net Profit After Taxes
Net Sales
4,668,357
64,824,364
= 0.01
890,973
29,859,226
= 0.03
8) Gross Profit
Margin Ratio =
Gross Profit
Sales
16,725,318
64,824,364
= 0.26
6,628,781
29,859, 226
= 0.22
9) Earnings Per
Share Ratio =
Earnings After Taxes
Number of Shares
4,668,357
45,350.272
=102.94
8,90,973
7,30,306
=1.22

30. [30]
< College Name / College Roll >
Sl
No.
RATIOS NESTLÉ ENGRO FOODS
C. Activity Analysis Ratios :-
10)
Asset
Turnover
Ratio
=
Net Sales
Total Assets
64,824,364
35,179,859
= 1.84
29,859,226
16,639,184
= 1.79
11)
Inventory
Turnover
Ratio
=
Cost of Goods Sold
Inventory
48,099,046
7,046,126.522
=6.83
23,230,445
3,046,859.795
= 7.62
D. Capital Structure Analysis Ratios :-
12) Debt to
Equity Ratio =
Total Liabilities
Total Stockholders'
Equity
2,756,443
7,612,416
= 3.62
9,402,242
7,236,942
= 1.30
13) Debt to
AssetRatio =
Total Debt
Total Assets
2,756,443
35,179,859
= 0.08
9,402,242
16,639,184
= 0.57
14) Interest
Coverage
Ratio
=
Income Before Interest
and Income Tax
Expenses
Interest Expense
6,586,973***
84,109
= 78.31
1,388,430
25,770
= 53.88
E. Capital Market Analysis Ratios :-
15)
Price
Earnings
Ratio
=
Market Priceper Share
Earnings per Share
4,844
102.94
= 47.06
25
1.22
= 20.49

31. [31]
< College Name / College Roll >
 FINDINGS :-
 COMMENT ON FINANCIAL RATIOS ANALYSIS OF NESTLÉ
INDIA & ENGRO FOODS LIMITED :-
 LIQUIDITY ANALYSIS
 Current Ratio
Current ratio tells us the short term solvency of the firm and tells the ability of
the firm to repay its short term obligations. In nestle the firm has 0.80 ability to repay
against the $ 1 loan and Engro has 1.83 so this implies that Engro food has more
ability to repay its short term obligations.
 Quick Ratio
Quick ratio measures the firm’s ability to pay off short term obligations
without relying on the sale of inventory. Nestle has the quick ratio of 0.38 whereas
Engro foods has 0.95 chances of paying off its short term obligations without relying
on the level or sales of inventory.
 PROFITABILITY ANALYSIS
 Return on Investment
How much a firm is returning to its stockholder only in the case if the firm is
earning profit? Nestle have return on investment ratio 0.13 or 13% whereas Engro
foods has 0.05 or 5% means nestle is returning more than Engro foods so it is better to
invest in nestle.
 Net Profit Margin Ratio
Net profit margin is calculated by dividing the net profit after taxes by the
sales means after paying the taxes you are earning some of the profit it means firm is
doing its business well. Nestle is earning 0.01 or 1% against $ 1 and Engro food is
earning 0.03 or 3% it shows in the profitability ratios Nestle is earning more than
Engro foods.

32. [32]
< College Name / College Roll >
 Gross Profit Margin Ratio
It tells that how much a firm will receive against $ 1 sales. Nestle has 0.26
gross profit margin ratio and Engro has 0.22. So in this case nestle is earning more
profit than Engro foods.
 ACTIVITY ANALYSIS
 Asset Turnover Ratio
This ratio measures the turnover of the entire firm’s asset. It is calculated by
dividing the sales by total assets of the firm. If firm shouldn’t increase its sales so
there is a possibility that a firm will sale its some assets. There is 1.84 chances of
asset turnover in nestle and 1.79 in Engro foods against every $ 1.
 Inventory Turnover Ratio
Inventory turnover is calculated by dividing the CGS by inventory. The
inventory turnover of nestle is 6.83 times and of Engro foods is 7.62 times. Here the
best ratio is of Engro foods that is much more than nestle.
 CAPITAL STRUCTURE ANALYSIS
 Debt to Equity Ratio
Debt to equity ratio shows the comparison to equity this ratio tells that how
much firm has ability to pay its debt and if equity is more than the total debt of the
firm so firm will face low risk. In nestle the firm has 3.62 against $ 1 to pay debt
whereas Engro food has 1.30 to pay against $ 1 debt. Here Nestle has more ability to
pay its debt.
 Debt to Asset Ratio
Debt to asset ratio shows if the firms have more assets regardless of total debt
than that firm will easily pay off its debts. The debt to asset ratio in nestle is 0.08
whereas 0.57 in Engro foods. So Engro foods will pay off its debt more easily than
nestle.

33. [33]
< College Name / College Roll >
 Interest Coverage Ratio
Interest coverage ratio measures the extent to which the operating income of
the firm can decline before the firm is unable to meet its annual interest cost. Nestle
has 78.31 times interest coverage ratio whereas Engro foods has 53.88 times interest
coverage ratio so Engro foods has less chances of failure and facing bankruptcy than
nestle.

34. [34]
< College Name / College Roll >
CASH BUDGET
 NESTLÉ INDIA :-
2012(Rs)
Collection:
Cash Sales 63,493,494
Credit Sales 1,330,870
Total Sales 64,824,364
Disbursement:
Purchases 10,949,999
Other Payment:
Taxes 1,834,507
Rent 241,502
Wages and Salaries 4,277,554
Interest 364,375
Depreciation 1,618,271
Other Expenses 405,262
Total of Other payment and Purchases 19,691,470
Net Cash Flow:
Beginning Balance 67,365
Collections 64,824,364
Disbursement (19,691,470)
Ending Balance 45,200,259

35. [35]
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CASH BUDGET
 ENGRO FOODS :-
2012(Rs)
Collections:
Cash Sales 29,419,835
Credit Sales 439,391
Total Sales 29,859,226
Disbursement:
Purchases 3,334,977
Other payments:
Taxes 603,853
Rent 217,821
Wages and Salaries 1,271,114
Interest 51,537
Depreciation 1,023,597
Other expenses 208,902
Total of Other Payments and Purchases 6,711,801
Net Cash flow:
Beginning balance 5,124,407
Collections 29,859,226
Disbursement (6,711,801)
Ending Balance 28,271,832

36. [36]
< College Name / College Roll >
D. CONCLUSION & RECOMMENDATIONS

37. [37]
< College Name / College Roll >
 CONCLUSION :-
After all the findings, it is concluded that financial ratios are the basic and most
important part of any business. It describes the firm’s financial position. As the data
indicates that NESTLE is an international brand and has expanded its business on the
large geographical area and also offers the large range of products, but on the other side
ENGRO food offers the limited range of the products and most of them are dairy
products.
From the financial statements it is clear that the financial position of the NESTLE is
far better than ENGRO as it is more preferred by the customers and also an
internationally distributed. It also has less risk. It gives more return because it gains more
profit than ENGRO. On the other hand ENGRO deals with the limited products in a
limited geographical area but on the basis of financial ratios ENGRO has a better
financial position and also has an opportunity to expand its business. Both the companies
have some opportunities and threads and they need to work on it.
 RECOMMENDATIONS:-
 NESTLE doesn’t have any direct market and outlets so it can be a
disadvantage so they should facilitate their customers through pricing
strategies and if they start direct market or open the outlets so the prices will
fall automatically and customers need not to pay any extra money to the
suppliers.
 NESTLE India mostly depends on the local raw material and sometimes the
quality of the raw material is not as good as in the other countries so they
should not rely on the local raw material if they want to provide the quality
products.
 ENGRO foods should introduce other product lines and expand the business.
 ENGRO foods should distribute their products to more geographical areas.
 As NESTLE is a well-known product and ENGRO food is not as known
internationally as NESTLE is, so they need to spend more money on the
marketing activities.
 ENGRO food is better than NESTLE in the financial analysis so if they
expand their product line and cover the same geographical area as NESTLE
has covered so ENGRO can appear as a strong competitor of NESTLE and
HALEEB.

38. [38]
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 REFERENCES :-
1. NESTLE annual report 2012 .
2. ENGRO FOODS annual report 2012 .
3. www.nestle.pk .
4. www.engrofoods.com.
5. FINANCIAL ACCOUNTING III , Prof. Amitabha Basu .