Profitability

Ratios
Return of
Equity(ROE)

Ratio Analysis on the Business Based on the Year 2011 &

2012
2011

2012

net profit
average owne r ' s equity

net profit
averageowne r ' s equity

100

9804
= [ ( 58274+62598 ) 2]

100
=16.22%
Net Profit
Margin(NPM)

9804

= 18.30%

100

=11.72%
Gross Profit
Margin(GPM)

25009

Selling Exp.
Ratio(SER)

net profit
100
= net sales
11060

= 92186

100

= 11.99

gross profit
100
net sales

= 83642

11060
= [ ( 58274+62604 ) 2]

During the period 2011

to 2012, the ROE has
increase from 16.22% to
18.30%. This means
that the owner is
getting a higher return
of his capital this year.

100

net profit
100
= net sales
= 83642

100

Interpretation

100

gross profit
100
net sales
27944

= 92186

100

=29.90%

= 30.31%

total selling expense

100
net sales

total selling expense

100
net sales

13210
100
= 83642

14235
100
= 92186

15.79%

15.44%

During the period 2011

to 2012, the NPM has
increase from 11.72% to
11.99%. This means
that the business is
getting better at
controlling expenses.
During the period 2011
to 2012, the GPM has
increase from 29.90% to
30.31%. This means
that the business is
getting better at
controlling its COGS.
During the period 2011
to 2012, the SER has
decrease from 15.79%
to 15.44%. This means
that the business is
getting better at
controlling its selling
expenses.

4 | Page

General Exp.
Ratio(GER)

During the period 2011

to 2012, the GER has
total general expense
total general expense
100
100 decrease from 15.79%
net sales
net sales
to 15.44%. This means
that the business is
13210
14235
100
100
= 82642
= 92186
getting better at
controlling its general
=15.79%
=15.44%
expenses.

Stability
Ratios
Working
Capital(WCR)

2011
=

total current asset

total liabilities
33324

Total Debt

total current asset

total liabilities
35205

= 35232

= 38753

=0.94:1

=0.91:1

total liabilities
100
total asset
55817

= 114091
Stock
Turnover(ICR)

2012

100

=48.92%
= 365

COGS
( averageinventory
)

total liabilities
100
total asset
63625

= 126229

100

=50.40%
= 365

COGS
( averageinventory
)

Interpretation
During the year 2011 to
2012, the working
capital has decrease
from 0.94:1 to 0.91:1.
This means that the
business ability to pay
off its current liabilities
with using current asset
is getting better.
During the year 2011 to
2012, the total debt has
increase from 48.92% to
50.40%. This means
that the total debt has
getting worse.

During the year 2011 to

2012, the stock turnover
has decrease from
71.05 days to 69.30
days. This means that
the business has been
selling its stock faster.
5 | Page

Debtor
Turnover(DTR)

( 9255+7925 ) 2

44127
=365

( 9125+9255 ) 2

48398
=365

=71.05 days
=365

= 69.30 days
=365

credit sales
( average
deptors )

=365

( 12083+13340 ) 2

83642

Interest
Coverage(ICR)

=55.47 days
=

credit sales
( average
deptors )

=365

( 13404+13340 ) 2

92186

During the year 2011 to

2012, the debtor
turnover has decrease
from 55.47 days to
52.94 days. This means
that the business is
getting faster in getting
its debt.

= 52.94 days
=

During the year 2011 to

interest expense+ net profit
interest expense+ net profit 2012, the interest
coverage has decrease
interest expense
interest expense
from 19.60 times to
14.40 times. This means
527+ 9804
825+11060
=
=
that the business its
527
825
ability to pay back the
=19.60 times
=14.40 times
interest expenses is
worse.

Appendix 1
P/E Ratio
6 | Page

current share price

Earnings per share
68.65
3.26

=21.06
The high P/E Ratio for this company will not have any investors because they
have to wait for such a long time to claim back their original principal.

Appendix 2: investment Recommendation

Profitability:
Based on our calculations, we found out that the business we chose,
Nestle is doing well at controlling its profitability ratios. In 2011, Nestle
was listed number 1 in the fortune global 500 as the worlds most
profitable co-operation. With a market capitalization of $ two hundred and
thirty three billion, Nestle ranked number 9 in the fortune global 500 of
2013.
Stability:
Based on our calculations, we found out that the business we chose,
Nestle is doing slightly bad on controlling its total dept and interest
coverage. Not only that, it is doing good on its working capital, stock
turnover and deptor turnover.
Price:
Based on the companys P/E Ratio, it is 21.06, it means that an investor
needs to wait for a long time claim back his original principal. We would
say that, we would not invest on it.

7 | Page

APPENDIX

P & L Statement for the year 2011

8 | Page

9 | Page

Balance Sheet for the year 2011

10 | P a g e

P & L for the year 2012

11 | P a g e

Balance Sheet for the year 2012

12 | P a g e

13 | P a g e

Reference
Bursamalaysia.com.
NESTLE (MALAYSIA) BERHAD [S] (4707) | Bursa Malaysia Market

In-text: (Bursamalaysia.com, 2014)

Bibliography: Bursamalaysia.com. 2014. NESTLE (MALAYSIA) BERHAD [S] (4707) |
Bursa Malaysia Market. [online] Available at:
http://www.bursamalaysia.com/market/listed-companies/list-of-companies/plcprofile.html?stock_code=4707 [Accessed: 22 Jan 2014].

Businesscasestudies.co.uk.

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Introduction - Nutrition, Health & Wellness - New Product Development at Nestl - Nestl |
Nestl case studies, videos, social media and information | The Times 100

In-text: (Businesscasestudies.co.uk, 2014)

Bibliography: Businesscasestudies.co.uk. 2014. Introduction - Nutrition, Health &
Wellness - New Product Development at Nestl - Nestl | Nestl case studies,
videos, social media and information | The Times 100. [online] Available at:
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Nestle
History

In-text: (http://www.nestle.com, 1866)

Bibliography: http://www.nestle.com. 1866. History. [online] Available at:
http://www.nestle.com/aboutus/history [Accessed: 22 Jan 2014].

Nestle.
Consolidated Financial Statement of the Nestle Group 2012

In-text: (Nestle, 2012)

Bibliography: Nestle. 2012. Consolidated Financial Statement of the Nestle Group
2012. [online] Available at: http://www.nestle.com/assetlibrary/Documents/Library/Documents/Financial_Statements/2012-FinancialStatements-EN.pdf [Accessed: 22 Jan 2014].

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Nestle.
Consolidated Financial Statement of the Nestle Group 2011

In-text: (Nestle, 2011)

Bibliography: Nestle. 2011. Consolidated Financial Statement of the Nestle Group
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