Financial Ratio Analysis

Faculty of Business, Accountancy & Management (FOBAM)

Course Details:

Module Code and Title        :          FIN2214 FINANCIAL ACCOUNTING 2

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Programme of Study                :          Bachelor of Accounting

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Lecturer’s Name                :           Ms. Saraniah Thechina Murthy

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Semester                         :          SEPTEMBER 2016

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Assignment Details:

Title of Assignment                     :           Group Assignment  [pic 5]

Due Date                        :        18.11.2016[pic 6]

Submission Date                :         18.11.2016[pic 7][pic 8][pic 9]

Type (* please tick [√])        :                        Individual                        Group

Declaration by student(s):

I/We, hereby declare that the attached assignment is my/our own work and understand that if I/we am/are suspected of plagiarism or another form of cheating, my/our work will be referred to the Programme Coordinator/Head of Faculty who may, as a result recommend to the Examinations Board on academic disciplinary action including expulsion for the SEGi University and Colleges.

Student’s Details:

Name: AU Chow Fhong        Student ID: SUKD1600545    Signature: ________

Name:  Li Ya Jie                    Student ID: SUKD1600290    Signature: ________

Name:  Kwan Wei Ling         Student ID:  SCM029586       Signature: ________

Name:  Mohsin Shahbaz        Student ID: SUKD1503163   Signature: ________

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Summary

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Summary

This report is to evaluate the financial performance of Nestlé according to the financial statements from year 2011 to year 2014. First we will use several suitable ratios to analysis the company’s profitability, efficiency, liquidity and market value of Nestlé over the four years. Through comparing the ratios of the past four year, we will evaluate its performance and give some recommendations to improve the company’s performance. There are also some differences between MPERS and MFPS when do the financial reports in Malaysia, we will also discuss about several difference between them according to the reports. In the end, after all analysis about Nestlé’s financial statements and historical data, we will some related recommendations for the Board of Directors to make the strategic decisions.

Table of content

Introduction

Introduction

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Nestle begins in 1866, with the foundation of Anglo-Swiss Condensed Milk Company. Henri Nestle develops a breakthrough infant food in 1867 and in 1905, the company he founded merges with Anglo-Swiss and became the Nestle Group today.

Nestle is a Swiss transnational food and drink company headquartered in Vevey, Vaud, Switzerland. It is the largest food company in the food measured by the revenues and other metrics. Nestle providing safe, quality nutrition for 150 years. Furthermore, Nestle has over 8000 brands with wide range of products across the market, including coffee, bottled water, milkshakes and other beverages, breakfast cereal, infant food, pet food, seasonings and healthcare nutrition. Their products are selling in 189 countries. In 2015, Nestle had reach CHF 88.8 billion sales.

Nestlé’s Nutrition, Health and Wellness strategy supports people who wants to live a healthier lifestyle. The industry-leading research and development drives the innovation and supports their food and beverage portfolio. In addition, the researchers of Nestle are exploring the role of nutritional therapies to maintain or improve people’s health and investigate how they can help people look after their skin. By sharing of their strategy as a challenge, building partnerships and engaging with policymakers, stakeholders could bring positive impact on the societies in which Nestle operate.

a)

Profitability Ratio

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From year 2011 to year 2014, the Nestlé has RM0.09, RM0.11, RM0.12, RM0.11 of net income for every RM sale. These are low ratios for the company, and it even dropped in year 2014, it means that the company is not very effective at its cost control. So they can decrease their cost to increase the net income so that they can manage the cost control in the future.

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The company is effectively managing its assets to produce greater amounts of net income since the ROA ratios are all positive, so the profit has an upward trend as well. While the Ratios are not stable in these four years, the company’s assets were keeping increasing, while the net income even dropped in 2014, so the company should not spend more cost on the assets since the net income was not good that year.

Efficiency Ratio

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From year 2011 to 2014, the sales of Nestlé were keeping increasing, but the assets turnover ratio decreased in year 2014 suddenly, so the company did not use its assets efficiently that time or most likely had production or management problems. The company should check out what happened in year 2014 about using the assets and take actions to make sure the assets are well used so that to improve the sales.

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The company is performing well in giving credit and colleting debts, in the particular four years, the company keeps a high receivable turnover ratio, even if it dropped 3% in year 2014 comparing the year 2013, it still implies that Nestlé has been making the timely collection of debts.