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THE INSTITUTE OF MANAGEMENT & SCIENCES

FINAL PROJECT

ANALYSIS OF FINANCIAL SITUATION
OF

NESTLE PAKISTAN

SYED HAIDER HASSAN (MBA Executive)

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TABLE OF CONTENTS

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16.

COMPANY INFORMATION (overall) --------------------------------------------05 NESTLE PAKISTAN -----------------------------------------------------------------07 PRESENT BOAD OF DIRECTOR -------------------------------------------------08 COMPANY DIRETORY ------------------------------------------------------------10 REGINOL SALE OFFICE -----------------------------------------------------------12 VISION STATEMENT / DIRECTORS REPORT TO SHAREHOLDER ----14 DIRECTOR REPORT ON COOPERATE GOVERNANCE -------------------17 ROLE AND RESPONSIBILITY OF CHAIRMAN AND CEO ---------------18 BUSINESS REVIEW ----------------------------------------------------------------19 PRODUCTS AND BRAND ---------------------------------------------------------20 RATIO ANALYSIS OF NESTLE PAKISTAN ----------------------------------21 LIQUDITY RATIO -------------------------------------------------------------------22 PROFITIBILITY RATIO ------------------------------------------------------------25 DEBT RATIO -------------------------------------------------------------------------27 ACTIVITY RATIO -------------------------------------------------------------------28 SUMMARY OF RATIO ANALYSIS ----------------------------------------------29

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COMPANY INFORMATION
Nestle world’s largest food company and Switzerland’s largest industrial company. Nestle makes and markets a wide variety of foods and beverages, including chocolate, confectionery, instant and roasted coffee, powdered milk, infant and baby food, mineral water, pet food, breakfast cereals, ice cream and frozen desserts, frozen meals, condiments, sauces, soups, and pasta. The company also makes Alcon eye-care products and is a major shareholder in L’Oréal, one of the world’s largest manufacturers of cosmetics. In 2001 Nestle acquired Ralston Purina, making it the world’s largest producer of pet foods. Nestle is based in Vevey, Switzerland, but derives only a tiny portion of its revenues from sales in Switzerland. Its largest market is the United States. The company operates production facilities in numerous countries around the world. Nestlé’s well-known confectioneries include Nestle and Nestle Crunch chocolate bars, Baby Ruth and Butterfinger candy bars, Kit Kat wafer bar, Rolo caramels, and Toll House chocolate chips. Its line of beverages includes Nescafé and Taster’s Choice instant coffees, Nestle Quick and Milo chocolate-based drinks, Nestea iced tea, Perrier mineral water, and Carnation evaporated milk. In the mid-1860s Henri Nestle, a pharmacist, led efforts to find a healthy alternative to breast milk. He hoped to reduce mortality among infants who could not be breastfed. Nestle developed an infant cereal that combined cow’s milk, wheat flour, and sugar and in 1867 tested it on a sick, premature baby boy who had refused his mother’s milk. The baby accepted the formula and recovered. Later that year Nestle formed his own company, Farine Lactée Henri Nestle, in Vevey, to manufacture the infant formula, called Farine Lactée Nestle. Only a year earlier, in 1866, Americans Charles and George Page had founded the Anglo-Swiss Condensed Milk Company in Cham, Switzerland, to sell canned milk
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in Europe. It expanded in the mid-1870s to include infant formulas, entering into direct competition with Nestlé’s company. In 1875 Nestle sold his company to three local business executives. The company began selling chocolate in 1904 when it acquired the Swiss General Chocolate Company. In 1905 Farine Lactée Henri Nestle merged with the Anglo-Swiss Condensed Milk Company to become the Nestle and Anglo-Swiss Milk Company

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NESTLE PAKISTAN
Nestle Pakistan is the largest food & beverages company of in Pakistan, reaching the remotest of location through Pakistan to serve the consumers. Nestle Pakistan is also pride itself in being the leaders in nutrition, health & Wellness. Ever since 1876, when Henri Nestle invented the first invent food, nutrition has been in our DNA, today more and more consumers mirror our emphasis on nutrition, as they realize that food choices affect their health and quality of life. We have personally to make available to every one every where the best quality foodwhether in trendy party of London, or a remote village in Madagascar and also in Pakistan from Karachi to Gilgit. This is good for consumers but also good for us. Quality is our basic approach to consumers. As we report the result at the year ending 2008 and steps in 2009, we complete 21 years of doing successful business in Pakistan. Nestle first entered in Pakistan market in 1988 through a joint venture with Milk pack Ltd. In 1992 Nestle took pavers the management of the company and changed the name of the company to Nestle Milkpak Ltd in 1996. In 2005 the name was formally changed to Nestle Pakistan Ltd. Nestle Pakistan operates four production facilities with its Headquarters in Lahore. Two of its factories n Sheikhupura and Kabirwala are multi product factories. One factory in Islamabad and one factory in Karachi produced bottled water. The largest Milk reception is in Kabirwala in the world. The company priority is to bring the best and most relevant products to people where they are, where their needs are, and for all age groups.

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In line with Nestles global philosophy, Nestle Pakistan is proud of its commitment to excellence in product safety and quality and to providing value and services to its consumers. Nestle Pakistan remains committed to high quality products and consumer trust, where people, products and brands are the main flag bearers of the Company’s image.

Management
Present board of Directors as on December 31, 2008 Syed Yawar Ali Chairman Trevor Clayton Managing Director Fritz Van Dijk Director Raymond Franke Director Alexendre Cantacuzene Director Syed Babar Ali Director Syed Hyder Ali Director Pakistani South Africa Dutch Canadian French Pakistani Pakistani June 26, 2010 June 26, 2010 June 26, 2010 June 26, 2010 June 26, 2010 June 26, 2010 June 26, 2010

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Officers
Trevor Claton CEO Raymond Frank CEO Muhammad Ali Sadozai Company Secretary

Management
Trevor Clayton MD Raymond Frank Head of Finance & Control Peter Wuethrich Head of Technical Haseeb Aslam Country Business Manager Water Salman Nazir Head of Supply Chain Uzma Qaiser Butt
Head HR

Khurram Zia Business Exceutive Manager Dr.Usmand Bahtti Country Business Manager Khurram Javed Business Manager Chilled Dairy

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Muhammad Ali Aziz
Business Manager Beverages

Shaheen Sadiq Head of Communication Syed Fakhar Ahmed Head of Corporate Affairs Nauman Khan Country Business Manager Samra MAqbool Product Unit Manager Audit Committee Syed Haider Ali Chairman Syed Babar Ali Member Peter Wuethrich Member & Secretary

Company Directory
Registered Corporate Office 308 Upper Mall Lahore PABX: 042-5789303 Corporate Office Annex 304 Upper Mall 1st & 2nd Floor, 172-Tufail Road Lahore Cantt. PABX: 042-6099300

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Auditors
K.P.M.G. Taseer Hadi & Company Chattered Accountants

Legal Advisors
Cheema & Ibrahim Advocate

Bankers
 Royal Bank OF Scotland  City Bank N.A  Deutsche Bank Ltd  Habib Bank Ltd  MCB Bank Ltd  Standard Chartered Bank Ltd  United Bank Ltd  National Bank of Pakistan Ltd  Allied Bank Ltd

Factories
Sheikhupura 29th KM, Lahore-Sheikhupura Road Sheikhura Punjab PABX: 042-411433-36 Kabirwala Khanewal-Kabirwala Road Kabirwala, District Khenewal Pakistan PH# 06512-411433-36

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Islamabad 32, St. 3, I-10/3 Islamabad Ph# 051-4445991-3 Karachi Plot # A-23 Northwest Industrial Zone, Port Qasim Karachi Ph# 021-4720151-4

Regional Sales Offices
North Zone Islamabad 92, East, 3rd Floor, Razia Sharif Plaza Fazal-e-Haq Road Islamabad Tel# 051-2271874 Jehlum House # 53-E, Jafar Road Jehlum Cantt. Jehlum Tel# 0544-720004 Peshawar Jalala House 42-D Old Jamrud Road, University Town Peshawar Tel# 091-5700859 Central Zone Lahore 29-B, Main Gulberg Lahore Tel # 042-5754335

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Gujranawala Habib Bank Plaza 1st Floor, Statelife Town Gujranawala 055-3733415 Faislabad 2nd Floor, Al -Haq Plaza, 271-A Small D Ground Peoples Colony Faislabad Tel # 041-8716937 Multan Al-Syed House, Street # 2, Iqbal Park Sabzazar Colony, Bosan Road MUltan Tel# 061-6512800 South Zone Karachi F77/1, Block 7, Kehkashan Clifton, KDA Scheme 5 Karachi Tel # 021-5876770 Quetta 63-B-D, Chaman Housing Scheme Opp. Aslari Park Quetta Tel# 081-2834887 Hydrebad House # 178, Block-C, Uit 2, LAtifabad Hydrabad Tel# 022-3860403

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VISION STATEMENT
The Nestle global vision is to be the leading nutrition, health and Wellness Company in the world. Nestle Pakistan subscribes fully to this vision and of being the number one nutrition, health and wellness company in Pakistan. In particular, we vision to, 1) Lead a dynamic, motivated and professional workforce 2) Meet the nutrition needs of consumers of all age groups 3) Deliver shareholder value through profitable long term growth.

Directors Report to ShareHolders
The directors are pleased to submit their Annual Report along with the audited financial statements of the Company for the year ended December 31. 2008,

Financial Performance
2008 was indeed a very challenging year for the world economy for Pakistan, and for Nestle Pakistan. The dramatic inflation and energy crises were the most significant impact that directly affected our operations and indirectly customers at large. In our largest business area collection of fresh milk grew by 11% versus last year, but fell short of our production requirements, while inflation on fresh milk was more then 20%, meanwhile company continued its dairy development initiatives. Despite the adversely, we successfully enhanced our portfolio with several important new product launches including everyday mixed Tea, Nestle milk iron fortified MAGGI lemon Chaska noodles and new Guava nectar addition to the nestle juices range.

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PKR Million Sales Gross Profit Operating Profit Margin Net Profit Margin Net Profit Earnings per Share

2008 34184 26.20% 12.00% 4.50% 1553.00% 34.24%

2007 28235 28.20% 12.40% 6.40% 1805.00% 39.81%

Sale of the year did surpass PKR 34 billion, and the growth of 21% was split relatively between real growth and pricing movements. Gross profit margin declined in 2008 as our consumer pricing could not keep up with the significant inflation on virtually all input commodities particularly fresh milk and energy. Operating profit level where decline by only 40 bps versus 2007. Net profit and margin declined further due to the significant increase in the cost of financing.

Corporate Governance
The directors confirm compliance with the corporate and financial reporting Framework of the SECP code of corporate governance for the following, 1) The financial statement prepared by the management of the company present Fairly it’s state of affairs the results of its operations, cash flows and changes in Equity. 2) 3) 4) Proper books of accounts of the company have been maintained. There are no significant doubts upon the company ability to continue as going Appropriate accounting policies have been consistently applied in preparation

Concerns of finical statements.

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5)

International accounting standards as applicable in Pakistan have been

followed in preparation of finical statements.

External auditors
Messer KPMG Taseer Hadi and company chartered accounts have completed assignment for the year 2008 and retire at the conclusion of the 31st annual general meeting.

Corporate social responsibility
The company continues its commitment to social wellness and our CSR spending has been significant during the year. Our focus continue to be on 1) 2) 3) 4) 5) Rural education projects for children’s Infrastructure support for health facilities Nutrition support to vulnerable women and children groups in collaborations Academic enhancement and scholarship funding for several universities Our project with UNDP to develop rural women

with specialized institutions program.

Future Out look
We see 2009 as another challenging year for Pakistan with continued economic volatility. As there is often opportunity in adversity, the company build further on the focus efforts 2008 in stream lining our operation and re doubling our focus on consumer innovation. Nestle Pakistan is committed to Pakistan and bringing products to consumer that deliver nutrition, health and wellness.

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Directors report on corporate governance
The company is committed to adopt and implement high standards of corporate governess. it has adopted and implemented the corporate governess principle of its parent company, nestle SA Switzerland, which cover the following four business area.     Rights and responsibilities of share holder Equitable treatment of share holder Duties and responsibilities of board of directors Disclosure and transparency

Board of directors
The board of directors currently comprises a non executive chairman, Chief executive/Managing director with one executive and four non executive directors The directors meet four times a year to review the company performance

Board of directors meetings
During the year the board of directors had the following meeting Date of Meeting February 07, 2008 March 24, 2008 April 18, 2008 August 07, 2008 October 28, 2008 Time Place

10:00AM Corporate Office Lahore 09:00AM Corporate Office Lahore 09:30AM Corporate Office Lahore 10:00AM Corporate Office Lahore 10:00AM Corporate Office Lahore

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Role and responsibilities of chairman and chief executive
The role of the chairman and the chief executive are segregated and they have distinct responsibilities the chairman of the board has responsibilities and covers vested in him by law and the articles of associations of the company as well as duties assigned to him by the board. The managing director is the CEO of the company and is responsible for day to day operations and conduct business with the power vested in him by law the managing director recommend the policy and strategic directions and annual business plans for board of directors approval and responsible for exercising the over all control and supervision for sound management and conduct of the business of the company.

Audit committee
The audit committee comprises three members including chairman of the committee. All members are no executive directors the audit committee held four meetings in 2008. The CFO, internal auditors as well as external auditors were invited to the meetings.

Remuneration committee
The company has not established this committee as it does not deem it necessary to do so. All issue of remuneration are fully disclosed and decided at the meeting of the directors.

Strategic planning
The company strategic direction was reviewed at the meeting of directors a process has been put into the place where by long term market business strategies and annual operation plan established by management are regularly review by the directors in line with the companies overall business objective.

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Key Financial Data
2008 Trading Results Sales Goss Profit Operating Profit Profit Before tax Profit After Tax Balance Sheet Share Holders Funds Reserves Operating Fixed Assets Net Current assets/Liabilities Long Term Liabilities Investor Information For Two years Gross Profit Ratio Operating Profit Ratio Profit before tax Ratio Profit After Tax Ratio Inventory Turnover Ratio Total Assets Turnover Ratio Price Earning Ratio Return on Capital employed Market Value Per Share Debt Equity ratio Current Ratio Interest Cover Ratio 26% 12% 7% 5% 10.3:1 2.1:1 38.9 20% 1334 63:37 1.1:1 5:1 28% 12% 9% 6% 9.4:1 2:1 45.2 26% 1800 62:38 0.9:1 5.4:1 4389 3935 9177 432 7043 4112 3658 8913 -325 5788 34184 8952 4105 2227 1553 28235 7950 3511 2550 1805 2007

Business Review  Human Resources  Nutrition, Health & Wellness  Marketing and Sales  Nestle Quality Management System  Production  Milk Collection & Agri Services  Finance and Control  Corporate Social Responsibly
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Product & Brands  Dairy  Nestle Child Dairy  Infant Dietetic  Beverages  Confectionary  Culinary  Water  Nestle Professional Financial Statements 1. 2. 3. 4. 5. 6. 7. Auditors Report to the Members Balance Sheet Profit and Loss Account Cash flow Statement Statement of changes of equity Statement of Recognized Income and Expenses Notes to the Financial Statements

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Ratios Analysis Of Nestle Pakistan Ltd
ASSESSMENT OF THE SUPPLIERS’ FINANCIAL RISKS

BASIC MODEL

 Z-Score Altman: A simple and quick formula to identify the risk of bankruptcy of a company:

Abbreviations:
WC = Working Capital TA = Total Assets RE = Retained Earnings EBIT = Earnings before interest and taxes VE = Value of Equity TL = Total Liabilities S = Net Sales

Score (Z):

Z > 2, 99: Good shape 1, 81 < Z < 2, 99: Warning signs Z < 1, 81: Bankruptcy

ANALYSIS OF FINANCIAL RATIOS (I)  In the event that: Z-Score < 1, 81 (Warning signs) the following 6 Financial Ratios should be analyzed in order to identify where the potential risks are:  Liquidity:  Quick ratio (acid test ratio)
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 Solvency:  Current ratio  Debt quality  Financial leverage  Profitability:  ROE  ROA

LIQUIDITY RATIOS 1. CURRENT RATIO
The ability to meet short term obligations. “Generally, a high Current Ratio indicates the company has enough liquid assets to continue normal operations.” This is the most commonly used measure of short-term solvency.
Current Ratio = Current Asset Current Liabilities 2008 2007 5,684,078,000 / 5,306,571,000 5,623,823,000 / 5,978,522,000 107% 94%

 It is an indicator of a Company’s ability to meet short-term debt obligations.  If the current assets are more than twice the current liabilities, the company is generally considered to have good short-term financial strength.  If the current liabilities exceed current assets, the company may have problems meeting its short-term liabilities.
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2. ACID TEST RATIO
A stringent test that indicates whether a firm has enough short-term assets to cover its immediate liabilities without selling inventory. The acid-test ratio is far more strenuous than the working capital ratio, primarily because the working capital ratio allows for the inclusion of inventory assets.

Acid Test Ratio

= Quick Assets Current Liabilities

2008 2007

3195505000 / 5306571000 3230517000 / 5978522000

60.22% 54%

 It’s an indicator of a Company’s ability to meet its obligations without selling inventories.  It’s viewed as a sign of company’s financial strength or weakness (higher number means stronger, lower number means weaker).

3. INVENTORY TURNOVER RATIO
Inventory turnover ratio is one of the Accounting Liquidity ratios, a financial ratio. This ratio measures the number of times, on average; the inventory is sold during the period. Its purpose is to measure the liquidity of the inventory. A popular variant of the Inventory turnover ratio is to convert it into average days to sell the inventory in terms of days. Remember that the Inventory turnover ratio is figured as "turnover times" and the average days to sell the inventory is in "days".

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Inventory Turnover Ratio = Cost Of Goods Sold Average Inventory

2008 2007

25231532000 / 2440939500 20285142000 / 2393306000

10.34 8.48

4. AVERAGE AGE OF INVENTORY
365 / INVENTORY TURNOVER

2008 2007

365 / 10.34 365 / 8.48

35.29 81.47

5. AVERAGE COLLECTION PERIOD
Receivable Turnover = Net Credit Sales Average Net Receivables

2008 2007

34183847000 / 400433000 28235393000 / 344053000

85 Days 82 Days

Average Collection Period 2008 2007 365 / 85 365 / 82

= 365 Days Receivable Turnover 4.29 4.45

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6. OPERATING CYCLE
Average time period between buying inventory and receiving cash proceeds from its eventual sale. It is determined by adding the number of day’s inventory is held and the collection period for accounts receivable.

Operating Cycle = Avg Collection Period + Average Age Of Inventory

2008 2007

85 82

+ +

35.29 81.47

120.29 163.47

PROFITABILITY RATIOS
A class of financial metrics that are used to assess a business's ability to generate earnings as compared to its expenses and other relevant costs incurred during a specific period of time. For most of these ratios, having a higher value relative to a competitor's ratio or the same ratio from a previous period is indicative that the company is doing well.

1. Profit Margin
A ratio of profitability calculated as net income divided by revenues, or net profits divided by sales. It measures how much out of every dollar of sales a company actually keeps in earnings. Profit margin is very useful when comparing companies in similar industries. A higher profit margin indicates a more profitable company that has better control over its costs compared to its competitors. Profit margin is displayed as a percentage.

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Profit Margin = Net Income Net Sales

2008 2007

1552894000 / 34183847000 1805212000 / 28235393000

4.54 6.39

2. ASSET TURNOVER RATIO
An overall measure of how effectively assets are used during a period; computed by dividing net sales by average total assets
Asset Turnover Ratio = Net sales Average Total Assets

2008 2007

34183847000 / 16266375000 28235393000 / 15848574000

2.10 1.78

3. RETURN ON ASSETS
 It gives an idea of how effectively the company is converting the invested money into net income.  It determines the company’s capacity to pay all the financial resources (internal & external).
Return On Assets = Net Income Average Total Assets

2008 2007

1552894000 / 16266375000 1805212000 / 15848574000

9.54% 11.39%

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 It gives an idea of how effectively the company is converting the invested money into net income.  It determines the company’s capacity to pay all the financial resources (internal & external).

4. DEBT RATIO
Debt Ratio 2008 2007 = Total Liabilities Total Assets 73.69% 74.05%

12295329000 / 16684176000 11736869000 / 15848574000

 It shows the percentage of long term debt in the total debt.  it is more positive for the Company to be indebted on the long term.

5. NET WORKING CAPITAL!
Net Working Capital = Current Assets _Current Liabilities 2008 2007 5684078000 - 5306571000 5623823000 - 5978522000 377507000 (354699000)

6. GROSS PROFIT MARGIN!
The excess of sales over the variable costs, which is always expressed as a percentage of sales. It shows the accuracy of pricing policies, in terms of the direct costs involved in producing/providing the products/services and is calculated by dividing the gross profit by sales.
Gross Profit Margin = Gross Profit Sale

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2008 2007

8952315000 / 34183847000 7950251000 / 28235393000

26.18% 28.16%

7. NET PROFIT MARGIN!
Net Profit Margin equals the Total Net Income divided by Revenue, expressed as a percentage. The percentage represents the amount of each rupee of Revenue that results in Total Net Income.
Net Profit Margin = Net Profit Sale 2008 2007 1552894000 / 341838470000 1805212000 / 28235393000 4.54% 6.39%

ACTIVITY RATIOS
Used in standard costing to express the actual work produced as a percentage of the budgeted work for the same period when both are expressed in standard hours.
1. ACCOUNTS RECEIVABLE TURNOVER Net Credit Sales Average Accounts Receivable 2008 2003 2842640 2632060 / 671409.5 = = 4.23 4.44

/ 591537.5

MARKET VALUE
The most probable price that a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus.

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1. PRICE / EARNING RATIO

Price / Earning Ratio = Market Price Per Share Earning Per Share

2008 2007

96.77 / 34.24 90.66 / 39.81

2.82 2.27

2. DIVIDEND PAYOUT Dividend per share/Earning per share 2008 2007 26.49 / 34.24 5 / 39.81 0.77 0.12

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SUMMARY OF RATIO ANALYSIS
 The analysis of these above ratios should enable us to compare the financial health of Nestle Pakistan Limited:  Data of last two years.  Liquidity Ratio  Profitability Ratio  Activity Ratio  Market Value The over all analysis of the NESTLE PAKISTAN shows good financial position of company and financial position is stable & above average. All the main types of ratios which help in finding out the pure financial condition of any industry are good as compared to the previous years All ratios as indicated above shows a better condition. In short we can say overall financial position of Nestle Pakistan is better.

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RATIO ANALYSIS
RATIOS CURRENT RATIO QUICK RATIO INVENTORY T/O AVG. COLLECTION .P TOTAL ASSETS T/O DEBT RATIO AVG AGE OF INVENTORY NET PROFIT RATIO RETURN ON T. ASSET EARNING PER SHARE OPERATING CYCLE ACCOUNT RECEIVABLE T/O GROSS PROFIT MARGIN DIVIDEND PAYOUT 2008 107 60.22 10.34 4.29 2.1 73.69 35.29 4.54 9.54 2.82 120.29 85 26.18 0.77 2007 94 54 8.48 4.45 2.78 74.05 81.47 6.39 10.39 2.27 163.47 82 26.16 0.12 AVG 100.5 57.11 9.41 4.37 2.44 73.87 58.38 5.465 9.965 2.545 141.88 83.5 26.17 0.445 CROSS ANAYSIS Stronger Ok Above Stronger Good Normal Good Above Good Good Average Good Above Ok Avg Avg Avg OVER ALL Stronger Ok Above Stronger Good Normal Normal Above Good Good Average Good Above Ok Avg Avg Avg

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GLOSSARY Total Assets = Current Assets (1) + Long-term Assets (2). Total Liabilities = Current Liabilities (3) + Long-term Liabilities (4). Equity Value = Total Assets - Total Liabilities. Working Capital = Current Assets - Current Liabilities. (1) Current Assets: Value of all assets that are reasonably expected to be converted into cash within 1 year in the normal course of business. It includes cash, accounts receivable, inventory, marketable securities, prepaid expenses and other liquid assets that can be readily converted to cash. (2) Long-term assets: Value of a company's property, equipment and other capital assets, minus depreciation. It includes manufacturing equipment, real estate and furniture. (3) Current Liabilities: A company's debts or obligations those are due within 1 year. It includes short term debt, accounts payable (suppliers), accrued liabilities and other debts. (4) Long-term liabilities: A company's debts or obligations for leases, bond repayments and other items due in more than 1 year. EBIT (Earnings before Interests and Taxes) = Revenue - Operating Expenses. Net Earnings = EBIT - Operational Interests - Taxes - Depreciation. Retained Earnings = Net Earnings - Dividends. It’s the percentage of net earnings not paid out as dividends but retained by the company to be reinvested in its core business or to pay debt.

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