University of Education

Lahore( Multan Campus)

Department of Business Administration

Financial Ratios Analysis

Nestle ,Engro Foods and uniliver
Samina rehman
Mcf1601627

Sir shazad
ACKNOWLEDGEMENTS
Praise and thanks to “ALLAH” Almighty, the one testing us all at all times and making
decisions about what we don’t know and can’t know.
The report being submitted today is a result of collective effort. There are innumerous helping
hands behind who have guided us on our way. Writing this report appeared to be a great
experience to us. It added a lot to our knowledge. This report is one of our memorable
experiences in student life.
Though words are inadequate in offering thanks to our teacher but we owe our profound
gratitude to sir shazhd for stimulating our creative abilities by assigning this project to us and
for her able guidance and useful suggestions, which helped us in completing.
the project in time. Whatever we have learnt from her and this project report has put indelible
impression on our minds and it is our conviction that this learning experience will always be a
source of help in our practical life and professional career.

Finally, yet importantly, we would like to express our heartfelt thanks to our beloved parents, for
cooperation, help, kindness and blessings, our family and friends for their help and wishes for the
successful completion of the work.
Table of Content

1.Executive summary…………………………………………………………... 1
2.Introduction ……………………………………………………….…………..2
3.NESTLE………………………………………………………….…………....3
3.1NESTLE Pakistan………………………………………………………..3
3.2Vision…………………………………………………………………….4
3.3Mission…………………………………………………………….……..4
3.4Goals and Objectives…………………………………………….…….…5
3.5SWOT……………………………………………………………..……...9
4.ENGRO FOODS……………………………………………………………..10
4.1Vision……………………………………………………………………10
4.2Mission…………………………………………………………….…….10
4.3Core values………………………………………………………………10
4.4SWOT……………………………………………………………………12
5.Financial Statements of NESTLE …...……………………………………....….. 14
5.1Balance Sheet……………………………………………………………14
5.2Income Statement……………………………………………………….16
6.Financial Statements of ENGRO…………………………….…………….……..17
6.1Balance sheet……………………………………………………………17
6.2Income Statement……………………………………………………….19
7.Data Table…………………………………………………………………….…..20
7.1 The calculations…………………………………………………….……21
8.Balance sheet Analysis …………………………………………………………....23
9. Income Statement Analysis ……………………………………………………….24

10. Ratios of NESTLE………………………………………………………….….….24

11. Ratios of ENGRO………………………………………………………….….…..27
12.Financial Ratio Analysis……………………………......……………………….28
12.1Liquidity Analysis………………………………………………………28
12.2Profitability Analysis……………………………………………………28
12.3Activity Analysis………………………………………………………..29
12.4Capital Structure………………………………………………………...29
12.5 Capital Market Analysis Ratio …………………………………………29
13.Cash Budget of NESTLE…………………………………...……………………30
14.Cash Budget of ENGRO………………………………………………………….31
15.Conclusion………………………………………………………………………..32
16. Recommendations……………………………………………….…….…………33
17. References………………………………………………………….…….………34
 1. Introduction
This is the project about financial statement analysis of three companies .In this regard the
companies which were chosen to be analyzed are NESTLÉ PAKISTAN 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.
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.

2. NESTLÉ
Good Food, Good Life

Nestlé, theCompany which is renowned for its vast collection of foodproducts. The
Companywas formed in 1905 by the merger of the Anglo-Swiss Milk Company, established in
1866 by brothers George Page and Charles Page, and Farine Lactée.Nestlé was found in 1866 by
Henri Nestlé. The company grew significantly during the First World War and again following
the Second World War, expanding its offerings beyond its early condensed milk and infant
formula products. The company has made a number of corporate acquisitions, including Crosse
& Blackwell in 1950, Findus in 1963, Libby's in 1971, Rowntree Mackintosh in 1988 and Gerber
in 2007.

As Nestlé started with a condensed milk and later it climbed so fast at the ladder of success that
it is now a leading brand in food products with so many sub-brands.Currently Nestlé Blackwell
in 1950, Findus in 1963, Libby's in 1971, Rowntree Mackintosh in 1988 and Gerber in 2007.

As Nestlé started with a condensed milk and later it climbed so fast at the ladder of
success that it is now a leading brand in food products with so many sub-brands.Currently Nestlé
is dealing with bottled water, breakfast cereals, coffee, confectionery, dairy products, ice cream,
pet foods, other beverages, shelf stable, chilled, Ice cream, Infant nutrition, performance
nutrition, healthcare nutrition, frozen foods, refrigerated products, food services and professional
products and snacks.29 of Nestlé's brands have annual sales of over 1 billion Swiss francs (about
$ 1.1 billion). Nestlé has around 450 factories, operates in 86 countries, and employs around
328,000 people. It is one of the main shareholders of L'Oréal, the world's largest cosmetics
company.
NESTLÉ in Pakistan

Nestlé has been serving Pakistani consumers since 1988, when parentcompany, the
Switzerland-based Nestlé SA, first acquired a share in Milk PakLtd. Today Nestlé is fully
integrated in Pakistani life, and is recognized asthe producer of safe, nutritious and tasty food
and leaders in developing anduplifting the communities in which they operate.Nestlé Pakistan
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 Pakistan and the necessary details about Nestlé Pakistan
are as follow:
Ticker: NESTLÉ
Country: PAKISTAN
Exchanges: KAR
Major Industry: Food & Beverages
Sub Industry: Diversified Food
1. ENGRO FOODS
The Local Flavor with a global Vision

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.

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.
Top quality brands like Olper’s, Olwell, Tarang, Omore and Owsum have been
successfully launched under the helm of Company’s dairy products. To support these
brands and their highest standards of quality, Engro Foods has invested heavily in
milk processing and milk collection infrastructure
Coca Cola International
The Coca-Cola Company is the world's largest beverage
company.
It is no.1 brand according to fortune 2009 survey.
The company operates a franchised distribution system dating
from1889.
The Coca-Cola Company is headquartered in Atlanta, Georgia.
With local operations in over 200 countries around the world.
Coca Cola has 150,900 employees worldwide.
Financial Statements
Balance Sheet 2011 2012
RS.(000

EQUITY AND LIABILITIES

Share Capital and Reserves
Authorized Capital 750,000 750,000
Issued, subscribed and paid up capital 453,496 453,496

Share premium 249,527 249,527

General reserve
General reserve 280,000 280,000
Accumulated profit 6,629,393 249,527
7,612,416 11,560,264

Noncurrent liabilities
Long term finances 7,848,050 15,366,96
Deferred taxation 2,476,871 3,304,091
Retirement benefits 44,03,077 6,37,985
Liabilities against assets subject to finance lease 13,690 -
10,778,988 19,309,040
Current liabilities
Current portion of:
Current portion of non current liabilities 41,587 41,686
Short term borrowings from associated company – unsecured - -
Short term borrowings – secured 4,950,000 3,900,00
Short term running finance under mark–up arrangements – secur 41,75,236 5,937,37
Customer security deposits – interest free 149,791 184,441
Trade and other payables 7,343,507 9,743,56

Interest and mark–up accrued 128,334 196,345

 16,788,455 20,003,413
CONTINGENCIES AND COMMITMENTS
35,179,859 50,872,717
:

Balance Sheet 2011 2012

Assets:
Tangible fixed assets 16,230,528 21,970,957
Property, plant and equipment 53,70,561 11,549,623
Capital work–in–progress 21,601,089 33,520,580
Intangible assets 11,954 7,173
Long term loans and advances 161,982 236,639
Long term deposits and prepayments 9,817 98,663
Goodwill - 104, 178
Current assets
Stores and spares 1,278,416 1,373,239
Trade debts 276,858 491,842
Stock in trade 7,064,170 8,025,653
Current portion of long term loans and advances 30,914 45,735
Advances, deposits, prepayments and other receivables 4,042,634 6,208,184
Cash and bank balances 702,025 760,831
13,395,107 16,905,484
35,179,859 50,872,717
Profit and Loss Account 2008 2009 2010 2011 2012
Rupees(000)
Sales – net 64,8364 79,087,696
Cost of goods sold -48,099,046 -57,564,265
Gross profit 16,725,318 21,523,431
Distribution and selling expenses -6,862,113 -8,787,508
Administration expenses -1,405,298 -1,769,803
Operating prof, 8,457,907 10,966,120
Finance cost 1,050,355 -1,827,969
Other operating expenses 2,114,588 -3,148,288
Other operating income 159,545 160,142
Profit before taxation 6,502,864 7,977,974
Taxation -1,834,507 -2,113,463
Profit after taxation 5,864,511
Earnings per share - basic and diluted (Rupees) 102.94 129.32
Coca-Cola
BALANCE SHEETS Cont’d
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 8,680 $ 9,009
Loans and notes payable 16,297 12,871
Current maturities of long-term debt 1,577 2,041
Accrued income taxes 471 362
Liabilities held for sale 796 —
TOTAL CURRENT LIABILITIES 27,821 24,283
LONG-TERM DEBT 14,736 13,656
OTHER LIABILITIES 5,468 5,420
DEFERRED INCOME TAXES 4,981 4,694
THE COCA-COLA COMPANY SHAREOWNERS’ EQUITY
Common stock, $0.25 par value; Authorized — 11,200 shares;
Issued — 7,040 and 7,040 shares, respectively 1,760 1,760
Capital surplus 11,379 10,332
Reinvested earnings 58,045 53,621
Accumulated other comprehensive income (loss) (3,385) (2,774)
Treasury stock, at cost — 2,571 and 2,514 shares, respectively (35,009)
(31,304
)
EQUITY ATTRIBUTABLE TO SHAREOWNERS OF THE COCA-COLA COMPANY 32,790
31,635
EQUITY ATTRIBUTABLE TO NONCONTROLLING INTERESTS 378 286
TOTAL EQUITY 33,168 31,921
TOTAL LIABILITIES AND EQUITY $ 86,174 $ 79,974
THE COCA-COLA COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Year Ended December 31, 2012 2011
(In millions except per share data)
As
Adjusted

NETOPERATING REVENUES $ 48,017 $ 46,542

Cost of goods sold 19,053 18,215
GROSS PROFIT 28,964 28,327
Selling, general and administrative expenses 17,738 17,422
Other operating charges 447 732
OPERATING INCOME 10,779 10,173
Interest income 471 483
Interest expense 397 417
Equity income (loss) — net 819 690
Other income (loss) — net 137 529
INCOME BEFORE INCOME TAXES 11,809 11,458
Income taxes 2,723 2,812
CONSOLIDATED NET INCOME 9,086 8,646
Less: Net income attributable to noncontrolling interests 67 62
NET INCOME ATTRIBUTABLE TO SHAREOWNERS OF THE COCA-COLA COMPANY
. 9,019 8,584
BASIC NET INCOME PER SHARE1 2.00 1.88
DILUTED NET INCOME PER SHARE1 1.97 1.85
AVERAGE SHARES OUTSTANDING 4,504 4,568
Effect of dilutive securities 80 78
AVERAGE SHARES OUTSTANDING ASSUMING DILUTION 4,584 4,646
Liquidity Ratios
Current Ratio: current assest /current liabilities =$30,328/$27,821 =1.09
Years 2011 2012
year 2011 2012
current ratio 1.05 1.09

In 2011, the firm’s ability to cover its current liabilities with its current assets
was 1.05. In 2012, the ratio goes up to 1.09 as compared to 2011, which means
that the company has the ability to pay its liabilities, as the definition says that
higher the ratio, greater the ability of the firm to pay its bills. This tells that
Coca-Cola is improving their liquidity and efficiency, because their current ratio
is improving.

Quick/Acid Test Ratio:

Quick Ratio: Current Assets- Inventory/Current Liabilitie $ =$27,064/$27,821=0.97

year 2011 2012

Quick Ratio 0.92 0.97

According to the definition of Acid Test Ratio, the company should have the ability
to pay its liabilities through its most liquid assets. The table shows that in 2011, the
firm has the ratio 0.92 cents. Then we observe a slight improvement in 2012. So we
can figure out from the ratios that Coca-Cola still cannot pay its debts without its
inventory.
Total Asset Turnover Ratio:

Total Asset Turnover Ratio: sale/total assets= $48,017/ $86,174= 0.55

year 2011 2012
Assets Turnover 0.58 0.55

The ratio is supposed to be high. Here we can see that the coca-cola
company’s total asset turn over ratio in 2011 was 0.58, which means that
the company generated more revenue per dollar of asset investment. The
ratio then comes slightly down in 2012 .
 Inventory Turnover Ratio:
Inventory Turnover: Cost of goods sold/Inventory=$19,053/$3,264=5.8

year 2011 2012

Inventory Turnover 5.90 5.80

The Coca-Cola’s Inventory turnover ratios deteriorated from 2011 to 2012,

which means that its ability to sell inventory has relatively come down. In 2011
Coca-Cola had a ratio of 5.90 and in 2012 has a ratio of 5.80
Average Collection Period:
Avg. Collection Period: 365/Receivables Turnover=365/10.09=36.17days
year 2011 2012

Inventory Turnover 38.60 36.17

The ability of the firm of collecting the receivables in the specific time. Here
in the year 2011 the turnover in days was almost 39, but the collection days
decrease in the year 2012 and the collection period of approximately 36 days
is well within the 60 days allowed in the credit terms. This shows that the
collection is faster as compared to the previous year.
Average Payment Period:
Avg. Payment Period=365/Payable Turnover=365/24.39=14.96 days

year 2011 2012

Avg. Payment 17 15
Period (days)

Coca-Cola’s average period for payment has reduce to 15 days in 2012 which
was 17 days in 2011. This reduction in average payment period shows that how
efficiently company is paying back their creditors and also assuring that
payments are being made in a prompt manner by Coke to its creditors. This
period should remain low as much as possible.

Debt Ratios
Debt Ratio: Total Liabilities/Total Assets=$53,006/$86,174=61.51%
year 2011 2012

Debt Ratio % 60.09 61.51

The ratio shows the company’s ability to cover its debts through its total
assets. The ratio was 60.09% in 2011, then goes up in 2012. The ratio has to be
low. So we can interpret that in the year 2012, the risk of the firm is getting
higher as the ratio goes up.
Times Interest Earned Ratio:
Times Interest Earned Ratio: EBIT/Interest=$11,809/$471=25.07

year 2011 2012

T.I.E Ratio 23.72 25.07

In 2012 Coca-Cola has a ratio of 25.07 which is a large increase from 2011
when their ratio was 23.72. This means that they have a comfortable
coverage of interest, and that the coverage has increased from the previous
year.

Profitability Ratios
Gross Profit Margin: Gross Profits/ Sales= $28,964/ $48,017= 60.32%
year 2011 2012

Gross Profit 60.90 60.32

Margin %
The ratio should be high according to the definition. Because higher the ratio,
higher will be the firm’s ability to produce goods and services at low cost with
high sales. Here in this table there is small difference between the ratios in two
years, but its still high, which means it is favorable

Operating Profit Margin:

Operating Profit Margin=EBIT/Sales=$11,809/$48,017=24.59%

year 2011 2012

Operating Profit 21.80 24.59
Margin %

Coca-Cola’s operating profit margin has increased in 2012 than the margin in
2011 by approximately 3%. This increase in Operating Profit Marin is mainly due
to growth of net revenue, good cost control and strong productivity in company in
2012. This higher margin reflects that the Coca-Cola is more efficient cost
management or the more profitable business.

Net Profit Margin:

Net Profit Margin: =Net Income/Sales=$9,019/$48,017=18.78%

year 2011 2012

Net Profit 18.40 18.78

Margin %

According to the definition, higher the ratio, higher will be the firm’s ability to
pay its taxes. In the year 2011, the margin was little low but in 2012 the margin
increases by 0.4%. For the company, roughly 0.38 cents out of every sales dollar
consists of ‘After Tax Profit'. Coca-Cola is more efficient at converting sales into
actual profit and its cost control is good .
Return on Assets (ROA):
ROA=Net Income/Total Assets=$9,019/$86,174=10.46%

year 2011 2012

ROA % 10.70 10.46

The decrease in Return on Assets indicates that the company is generating

less profits from all of its resources in the year 2012 as compared to the year
2011. The higher of this ratio is, the better for the company. Therefore this
decrease in Coca-Cola’s ratio is indicating that the company is not that much

Return on Equity (ROE):

ROE=Net Income/Total Common Equity=$9,019/$32,790=27.51%

year 2011 2012

ROE % 27.10 27.51

The ratio should be higher. Here starting from 2011, the ratio was 27.10% and
goes up in 2012 to 27.51%. This increase in Return on Equity is a good thing
for stockholders and indicates that Coca Cola is using the equity provided by
stockholders during this specific year effectively and using it to generate more
equity for the owners.

Conclusion
After applying all the ratios we got an idea that
the Coca Cola Company is a profitable firm.
Because through out the analysis of two years, we
found that the company is getting profitable
return on short term and long term investment,
their profit margin has been increased as well
and they are in the position to pay their debts
with in their resources

Ratio analyses of nestle

Liquidity ratios:

Current ratio= Current Assets/ Current Liabilities

 2011 2012
0.80 0.85
.
Quick ratio:

Quick ratio = Current Assets –Inventory / Current Liabilities

2011 2012
0.38 0.44
.
Net working capital:
2011 2012
3,393,348 3,097,929

Activity Analysis

Inventory Turnover

Inventory Turnover Ratio = Sales/Inventory

2011 2012
9.18 time 9.85 time
.
Days Sales Outstanding (DIO)
Days sales outstanding = Receivables/Average Sale per day
2011 2012
1.54 days 2.24 days

Fixed Assets Turnover= Sales/Net Fixed Assets

2011 2012
3.00 time 2.36 time
Current asset turnover =
_Sale___________
current Asset
2011 2012
4.83 times 4.67 times

Total Asset Turnover

Total Assets Turnover= Sales/Total Assets
2011 2012
1.84 time 1.55 time
that the company generate more sale by using less total assets and in 2012 the ratio reduce more
compare to 2011.
Total Debt to Total Assets
Total Debt to Total Assets= (Total Debt/Total Assets)*100
2011 2012
78.36% 77.28%
Time-Interest-Earned Ratio:

Time-Interest-Earned Ratio= EBIT/Interest Charges

2011 2012
7.19 time 5.36 time
.
Profitability Ratios:

Profit Margin on Sales = ( Net income/Sales)*100

2011 2012
7.20% 7.42%
Return on Total Assets :

Return on Total Assets Ratio = Net income/Total Assets

2011 2012
13.27% 11.53%
Basic Earning Power Ratio :

Basic Earning Power Ratio = (EBIT/Total Assets)*100

2011 2012
21.47% 19.28%
.
Return on Common Equity :

Return on Common Equity = (Net Income/Common equity)*100

2011 2012
61.33% 50.73%
.
Conclusion:
the company performance not bad, and still nestle is the market leader in pak
but the company have more chance to increase its growth and market share
because uniliver is the big competitor and he give more challenge in the
market.