Liquidity Ratios

Current Ratio
1.2
1.08

1.09

1.11

0.9

0.87

0.8
0.6

0.4
0.2

2009

2010

2011

2012

2013

Based on the graph, overall, the current ratio increase then decrease between 2009 till
2013. The current ratio is close to ideal between 2009 and 2011.This is due to Nestle have
enough liquid assets to cover current liabilities because they cash flow and financial position
have ability to repay its short term obligations. (Nestle (Malaysia) Berhad, 2009-2011) However,
the following years are reduce 19% ability to repay its short term obligations which less than
ideal might meeting financial difficulties. They are not enough liquid assets to cover its debts.
This is due to cash flow fall in 2012 because the repayment of borrowings increase to make more
payment to its creditors. (Nestle (Malaysia) Berhad, 2011-2012) Further, the cash flow fall is due
to global economic collapse and financial crisis between 2011 and 2013. (Economic Collapse,
2013) So, the Nestle lower its raw material and delay repayment of debt to its creditors. (Nestle
(Malaysia) Berhad, 2011-2012)

Quick Ratio
0.7
0.6

0.58

0.56

0.54

0.5

0.46

0.49

0.4
0.3
0.2
0.1
0

2009

2010

2011

2012

2013

Overall, the quick ratio is less than ideal between 2009 till 2013 might face financial
difficulties. This is due to insufficient liquid asset to cover its current liabilities. The Nestle has
less ability to repay its short term obligations. The Nestle tied up too much of inventory have
wastage to pay expenses might have less liquid assets to cover its current liabilities. (Nestle
(Malaysia) Berhad, 2009-2013) However, in food and beverage industry, the corperate average
quick ratio is 0.43 times and current ratio is 1.08 times in 2011 approximately. (BizMiner, 2011)
Therefore, the result of Nestle is acceptable in their own industry. It shows that Nestle is more to
ideal which the company have liquid assets to cover its debt.
From the both liquidity ratios of Nestle view that they have insufficient cash to cover its
current liabilities, it will lead to problem which unable to pay financial obligations due.
However, the industry norm shows that the Nestle liquidity ratios level are same with industry
financial ratios. It means Nestle have enough liquid assets to cover its current liabilities.

References
BizMiner. (2011). Industry Income-Expense Statements. Retrieved from Free
business statistics and financial ratios.
Economic Collapse. (2013). Retrieved from x22 Report:
http://x22report.com/economic-collapse/
Nestle (Malaysia) Berhad. (2009-2011). Nestle Annual Report. Malaysia: Nestle
(Malaysia) Berhad. Retrieved from
http://www.nestle.com.my/aboutus/investors/annual_report
Nestle (Malaysia) Berhad. (2009-2013). Nestle Annual Report. Malaysia: Nestle
(Malaysia) Berhad. Retrieved from
http://www.nestle.com.my/aboutus/investors/annual_report
Nestle (Malaysia) Berhad. (2011-2012). Nestle Annual Report. Malaysia: Nestle
(Malaysia) Berhad. Retrieved from Nestle (Malaysia) Berhad:
http://www.nestle.com.my/aboutus/investors/annual_report

Appendix
Ratios
Liquidity Ratios
Current ratio

Formula (RM'000)

2013 (RM'000)

929,987
1,071,862

0.87:1

2012 (RM'000)

840,703
929,392

0.90:1

2011 (RM'000)

1,015,064
914,740

1.11:1

2010 (RM'000)

783,869
720,915

1.09:1

2009 (RM'000)

757,671
698,779

1.08:1

Quick ratio

Answer

Current Assets
Current Liabilities

Current Assets - Inventory

Current Liabilities

2013 (RM'000)

(929,987-408,614)
1,071,862
521,373
1,071,862

0.49:1

2012 (RM'000)

840,703-411,170
929,392
429,533
929,392

0.46:1

2011 (RM'000)

1,015,064-517,573
914,740
497,491
914,740

0.54:1

2010 (RM'000)

783,869-380,539
720,915
403,330
720,915

0.56:1

2009 (RM'000)

757,671-354,381
698,779
403,290
698,779

0.58:1

Industry Financial Ratios

Food and beverage stores (Asset Class: 500,000-2,500,000)

2011

Corp Average Financial Ratios

Return on Sales

2.21%

Return on Assets

6.69%

Return on Net Worth

15.70%

Quick Ratio

0.43

Current Ratio

1.08

Inventory Turnover

16.27

Assets:Sales

0.33

Tot Liabilities:Net Worth

1.35
BizMiner, 2011.Industry Financial Ratios.