Project

:
SUBMITTED TO:

Ratio Analysis on Unilever Pakistan

Prof. Ch. MUZHAR HUSSAIN

SUBMITTED BY:
Sagheer Abbas Awan Taskeen Haider Khan (Reg. No. 4090) (Reg. No. 4070)

Nasir Wali Muhammad (Reg. No. 4089)

FACULTY OF MANAGEMENT SCIENCES INTERNATIONAL ISLAMIC UNIVERISTY ISLAMABAD
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Table of Contents
Acknowledgement Introduction to Unilever Vision History of Unilever Unilever Pakistan Financial Ratio Review Types of Ratio Ratio Analysis Caclculation of Ratio of Unilever Ratios of Unilever for Four Years Competitor’s(Colgate Palmolive) Financial Ratio Internal Analysis Comparision External Analysis Common Size Analysis Index Analysis Conclusion

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Acknowledgement

Our deepest thanks to Prof. Ch Muzhar Hussain in the Guide of the project for guiding and correcting various problems of us with attention and care. He has taken pain to go through the project and make necessary correction as and when needed. We have spent many of days working on it. We have put a bit of "heart and soul" into it. Therefore, We hope that you will very much enjoy this work as well as find it immensely educative!

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Introduction to Unilever
160 million times a day, someone somewhere chooses a Unilever product. From feeding your family to keeping your home clean and fresh, our brands are part of everyday life. With 400 brands spanning 14 categories of home, personal care and foods products, no other company touches so many people's lives in so many different ways. Our brand portfolio has made us leaders in every field in which we work. It ranges from muchloved world favorites including Lipton, Knorr, Dove and Omo, to trusted local brands such as Blue Band and Suave. From comforting soups to warm a winter's day, to sensuous soaps that make you feel fabulous, our products help people get more out of life. We're constantly enhancing our brands to deliver more intense, rewarding product experiences. We invest nearly €1 billion every year in cutting-edge research and development, and have five laboratories around the world that explore new thinking and techniques to help develop our products.

Continuous development
Consumer research plays a vital role in our brands' development. We're constantly developing new products and developing tried and tested brands to meet changing tastes, lifestyles and expectations. And our strong roots in local markets also mean we can respond to consumers at a local level. By helping improve people's diets and daily lives, we can help them keep healthier for longer, look good and give their children the best start in life. We also believe that the very business of conducting business in a responsible way has a positive social impact. We create and share wealth, invest in local economies and develop people's skills – both inside our organisation and in the communities around us. Today Unilever employs 163 000 people, sells products in 170 countries worldwide, and supports the jobs of many thousands of distributors, contractors and suppliers.

Our vision

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Unilever products touch the lives of over 2 billion people every day – whether that's through feeling great because they've got shiny hair and a brilliant smile, keeping their homes fresh and clean, or by enjoying a great cup of tea, satisfying meal or healthy snack. A clear direction The four pillars of our vision set out the long term direction for the company – where we want to go and how we are going to get there: • • We work to create a better future every day We help people feel good, look good and get more out of life with brands and services that are good for them and good for others. • We will inspire people to take small everyday actions that can add up to a big difference for the world. • We will develop new ways of doing business with the aim of doubling the size of our company while reducing our environmental impact. We've always believed in the power of our brands to improve the quality of people’s lives and in doing the right thing. As our business grows, so do our responsibilities. We recognise that global challenges such as climate change concern us all. Considering the wider impact of our actions is embedded in our values and is a fundamental part of who we are.

Purpose & principles
Our corporate purpose states that to succeed requires "the highest standards of corporate behavior towards everyone we work with, the communities we touch, and the environment on which we have an impact."

Always working with integrity
Conducting our operations with integrity and with respect for the many people, organisations and environments our business touches has always been at the heart of our corporate responsibility. Positive impact We aim to make a positive impact in many ways: through our brands, our commercial operations and relationships, through voluntary contributions, and through the various other ways in which we engage with society. 6

Continuous commitment We're also committed to continuously improving the way we manage our environmental impacts and are working towards our longer-term goal of developing a sustainable business. Setting out our aspirations Our corporate purpose sets out our aspirations in running our business. It's underpinned by our code of business Principles which describes the operational standards that everyone at Unilever follows, wherever they are in the world. The code also supports our approach to governance and corporate responsibility. Working with others We want to work with suppliers who have values similar to our own and work to the same standards we do. Our Business partner code, aligned to our own Code of business principles, comprises ten principles covering business integrity and responsibilities relating to employees, consumers and the environment.

Our history
Unilever's corporate mission – to add vitality to life – shows how clearly the business understands 21st century-consumers and their lives. But the spirit of this mission forms a thread that runs throughout our history. Helping people get more out of life In the 1890s, William Hesketh Lever, founder of Lever Bros, wrote down his ideas for Sunlight Soap – his revolutionary new product that helped popularise cleanliness and hygiene in Victorian England. It was 'to make cleanliness commonplace; to lessen work for women; to foster health and contribute to personal attractiveness, that life may be more enjoyable and rewarding for the people who use our products'. This was long before the phrase 'Corporate Mission' had been invented, but these ideas have stayed at the heart of our business. Even if their language - and the notion of only women doing housework – has become outdated. In a history that now crosses three centuries, Unilever's success has been influenced by the major events of the day – economic boom, depression, world wars, changing consumer lifestyles and advances in technology. And throughout we've created products that help people

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get more out of life – cutting the time spent on household chores, improving nutrition, enabling people to enjoy food and take care of their homes, their clothes and themselves. Balancing profit with responsible corporate behaviour In the late 19th century the businesses that would later become Unilever were among the most philanthropic of their time. They set up projects to improve the lot of their workers and created products with a positive social impact, making hygiene and personal care commonplace and improving nutrition through adding vitamins to foods that were already daily staples. Today, Unilever still believes that success means acting with the highest standards of corporate behaviour towards our employees, consumers and the societies and world in which we live. Over the years we've launched or participated in an ever-growing range of initiatives to source sustainable supplies of raw materials, protect environments, support local communities and much more. Through this timeline you'll see how our brand portfolio has evolved. At the beginning of the 21st century, our Path to Growth strategy focused us on global high-potential brands and our Vitality mission is taking us into a new phase of development. More than ever, our brands are helping people feel good, look good and get more out of life – a sentiment close to Lord Leverhulme's heart over a hundred years ago.

UNILEVER PAKISTAN
Unilever Pakistan limited is a largest consumer products company in Pakistan. It was born out of dream to Set-up in Pakistan an industry of excellence in 1948 as Lever Brothers Pakistan Limited. Unilever Pakistan Limited is Manufacturing & Marketing its Detergents, Personal Products, Tea, SCC Products & Ice Cream over 50 brands.

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In line with global alignment strategy and in order to leverage the synergies of Unilever’s International brand strength, market edge and corporate image, Lever Brothers Pakistan Limited has change its name to Unilever Pakistan Limited, in August 2002.

Financial Ratio Review
Financial ratio analysis is the calculation and comparison of ratios which are derived from the information in a company's financial statements. The level and historical trends of these ratios can be used to make inferences about a company's financial condition, its operations and attractiveness as an investment. Any successful business owner is constantly evaluating the performance of his or her company, comparing it with the company's historical figures, with its industry competitors, and even with successful businesses from other industries. To complete a thorough examination of your company's effectiveness, however, you need to look at more than just easily attainable numbers like sales, profits, and total assets. You must be able to read between the lines of your financial statements and make the seemingly inconsequential numbers accessible and comprehensible. Financial ratios are calculated from one or more pieces of information from a company's financial statements. For example, the "gross margin" is the gross profit from operations divided by the total sales or revenues of a company, expressed in percentage terms. In isolation, a financial ratio is a useless piece of information. In context, however, a financial ratio can give a financial analyst an excellent picture of a company's situation and the trends that are developing.

TYPE OF RATIOS
• Leverage Ratios which show the extent that debt is used in a company's capital structure.

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Liquidity Ratios which give a picture of a company's short term financial situation or solvency. Operational Ratios which use turnover measures to show how efficient a company is in its operations and use of assets. Profitability Ratios which use margin analysis and show the return on sales and capital employed. Solvency Ratios which give a picture of a company's ability to generate cash flow and pay it financial obligations.

Year of analysis:
We take four year financial statements of Unilever & Colgate palmolive. The year begin from 2006 & ends in year 2009. Sources of Data: We have taken the data from the annual reports of Unilever from the website of Unilever Pakistan. Then we take the financial statements for the annual reports. We also take the financial statements Colgate Palmolive.

Assumptions: We assume Sales as net Sales and credit sales. Then we assume other receivables taken from Balance Sheet as Account Receivable. Non-current liabilities are assumed as Long term debts.

Ratio Analysis:
Liquidity Ratios.

Liquidity ratios measure the firms ability to meet current obligations; i.e. the ability to pay its 10

obligations as and when they become due. They show whether the firm can pay its short term obligations out of short term resources or not. They establish a relationship between cash and other current assets to current liabilities. If a firm has sufficient net working capital it is assumed to have enough liquidity. The most common ratios which indicate the extent of liquidity are current ratio and quick ratio.

Current Ratio:
It is calculated by dividing the Current Assets by Current Liabilities.
Current Asset Current ratio = Current Liabilities.

Current assets include cash, securities, debtors B/R, stock etc and current liabilities include creditors/P, accrued expense, short term loan etc. Current ratio is a measure of the firm’s short term solvency. It indicates the availability of a current asset in rupees for every one rupee of current liability. A ratio greater than1 means that the firm has more current assets than current claims against them.

Quick Ratio (Acid Test Ratio):
This ratio establishes a relationship between quick or liquid assets and current liabilities. An asset is liquid, if it can be converted in to cash immediately or reasonably soon without a loss of value. Cash is the most Liquid asset. QA also include debtors, B/R and securities. Inventories are considered less liquid. They normally require some time for realizing in to cash. Quick assets Quick Ratio = Current Liabilities. . Quick assets = Current Assets – Inventories or stock Generally a QR of 1:1 is considered to represent satisfactory current financial position.

Financial Leverage / debt Ratio:
Debt Equity Ratio:
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The relationship between borrowed funds and owners capital is a popular measure of the long term Financial solvency of the firm. This relationship is shown by the debt equity ratio. Debt Debt Equity Ratio = Equity The term debt refers to the total outside liabilities. It includes all current liabilities and other outside liabilities Like loan debenture etc. The term equity refers to net worth or shareholders fund.

Debt-Asset Ratio:
Total Liabilities
=

Total Assets

Indicates what proportions of the company’s assets are being financed through debt.

• •

This ratio is very similar to the debt-equity ratio. A ratio under 1 means a majority of assets are financed through equity, above 1 means they are financed more by debt. Furthermore you can interpret a high ratio as a "highly debt leveraged firm".

Long-Term Debt to Capitalization Ratio:

A ratio showing the financial leverage of a firm, calculated by dividing long-term debt by the amount of capital available: 12

A variation of the traditional debt-to-equity ratio, this value computes the proportion of a company's long-term debt compared to its available capital. By using this ratio, investors can identify the amount of leverage utilized by a specific company and compare it to others to help analyze the company's risk exposure. Generally, companies that finance a greater portion of their capital via debt are considered riskier than those with lower leverage ratios. Receivables Turnover Ratio: An accounting measure used to quantify a firm's effectiveness in extending credit as well as collecting debts. The receivables turnover ratio is an activity ratio, measuring how efficiently a firm uses its assets.

Some companies' reports will only show sales - this can affect the ratio depending on the size of cash sales. By maintaining accounts receivable, firms are indirectly extending interest-free loans to their clients. A high ratio implies either that a company operates on a cash basis or that its extension of credit and collection of accounts receivable is efficient. A low ratio implies the company should re-assess its credit policies in order to ensure the timely collection of imparted credit that is not earning interest for the firm.

Accounts Payable Turnover Ratio:
Account Payable Turnover = Net Credit Purchase / Account Payable

A short-term liquidity measure used to quantify the rate at which a company pays off its

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suppliers. Accounts payable turnover ratio is calculated by taking the total purchases made from suppliers and dividing it by the average accounts payable amount during the same period.

If the turnover ratio is falling from one period to another, this is a sign that the company is taking longer to pay off its suppliers than it was before. The opposite is true when the turnover ratio is increasing, which means that the company is paying of suppliers at a faster rate.

Inventory Turnover: A ratio showing how many times a company's inventory is sold and replaced over a period. Inventory Turnover = Cost of Goods Sold Inventory This ratio should be compared against industry averages. A low turnover implies poor sales and, therefore, excess inventory. A high ratio implies either strong sales or ineffective buying. Asset Turnover Revenue
=

Total Assets Indicates the relationship between assets and revenue. • Companies with low profit margins tend to have high asset turnover, those with high profit margins have low asset turnover - it indicates pricing strategy.

This ratio is more useful for growth companies to check if in fact they are growing revenue in proportion to sales.

Profit Margin :
Net Income
=

Revenue

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Indicates what portions of sales contribute to the income of a company.

This ratio is not useful for companies losing money, since they have no profit.

A low profit margin can indicate pricing strategy and/or the impact competition has on margins.

CALUCATION OF RATIOS OF UNILEVER FOR THE YEAR OF 2009 Liquidity Ratio:
Current Ratio = Current Assets / Current Liabilities = 5912394 / 7101678 = 0.83253

Interpretation:
A generally acceptable current ratio is 2 to 1. But whether or not a specific ratio is satisfactory depends on the nature of the business and the characteristics of its current assets and liabilities. The minimum acceptable current ratio is obviously 1:1, but this ratio is low than 1 which is .83 so current assets of unlived is lesser than current liabilities. Quick Ratio = Current Assets-inventory / Current Liabilities = 5912394-3649070 / 7101678 = 0.318702

Interpretation:

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A 1:1 ratio is usually considered to be satisfactory but the asset test ratio of unlevel is unsatisfactory because the company immediate cash resources are not sufficient to meet its current obligation. The ratio is particularly important for bank.

Financial Leverage / Debt Ratio:
Debt to Equity Ratio = Total Debt / Shareholder Equity = 1019952 /3291120 = 0.31

Interpretation:
In this ratio we find how much amount is debt is covered by shareholder equity. In this we can find that if 100 is taken as loan then 31 is covered by shareholder and remaining is taken from debts. Debt to Total Assets = Total Debt / Total Assets = 1019952 / 11425715 = 0.08926

Interpretation:
This ratio is an indicator of the financial stability of the enterprise. The lower is the debt ratio more comfortable the creditor will feel as regards security of their debts. Too excessive debt to total may expose an entity to insolvency. The debt to assets ratio is very lower so there is no risk of insolvency of the company. Long Term Debt Ratio = Long term Debt / Capitalization = 1019952 /4311072 = 0.2365

Interpretation:
This value computes the proportion of a company's long-term debt compared to its available capital. Companies that finance a greater portion of their capital via debt are considered riskier than those with lower leverage ratios.

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Activity Ratio:
Receivables Turnover = Net Credit Sale / Account Receivables = 38187582 / 82141 = 464.9028 Average Collection Period = Days in Year / Receivables Turnover = 365 / 464.9028 = 78 days

Interpretation:
The lower the average collection period the higher will be return on investment. It depends upon the credit policy of the company.

Payable Turnover = Net credit Purchase / Account Payable = 20593398/5785776 = 3.56 Payable Turnover in Days = Days in Year / Payable Turnover = 365 /3.56 = 102 days

Interpretation:
In this ratio we find in how many days they pay to creditors. The unilever company pays back the creditor in 102 days the amount they lend. These days are extended due to financial crises in the world.

Inventory Turnover Ratio:
Inventory Turnover = Cost of Goods Sold / Inventory = 24852625 / 3649070 = 6.81067

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Inventory Turnover in Days = Days in Year / Inventory Turnover = 365 / 6.81067 = 53 days

Interpretation:
In this ratio we find in how many days company order the inventory. The unilever company gives order for inventory in 53 days.

Asset Turnover = Total Sales / Total Asset = 38187582 / 11425715 = 3.34224

Interpretation:
Asset turnover ratio has a significant impact on return on investment. In this ratio sales is greater than assets and the ratio is 3.3. this is the basic ratio to measure profitability.

Gross Profit Margin = Gross Profit / Net Sale
= 13334957

/ 38187582

= 0.34919 or 34.919% Interpretation:
The ratio indicates the margin of safety as to reduction of selling price of products of a company without incurring loss. The ratio of gross profit margin is increase little bit from previous year which is .33 %.

Net Profit Margin = Net Income after Tax / Net Credit Sale = 3055740 / 38187582 18

= 8.00 %

Interpretation:
The ratio indicates the effectiveness and efficiency with which the entity’s resources have been used by the management. No norms can be set. The profit margin of company is 8 %. Return on Investment or Earning Power = Net Income after Tax / Total Assets = 3055740 / 11425715 = 26.74 %

Interpretation:
In this ratio we find return on investment. The company gets 26.74% return on investment.

Return on Equity = Net Income after Tax / Shareholder Equity = 3055740 / 3291120 = 93%

Interpretation:
In this ratio how much they earn from shareholder’s investment. The unilever gets 93% from the shareholder investment.

Ratios of Unilever for Last Four Years

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Particulars Current Ratio Quick Ratio Debt to Equity Ratio Debt to Total Asset Long term Debt Ratio Average Collection Period Payable turnover in Days Inventory turnover in Days Asset Turnover Gross Profit Margin Net Profit Margin Return on Investment Return on Equity

2009 0.83253 0.318702 0.03099 0.08926 0.2365 78 days

2008 0.70714 0.205163 0.03099 0.060315 0.2366 26 days

2007 0.73235 0.244477 0.2537 0.06215 0.2024 39 days

2006 0.86989 0.36094 0.1899 0.05407 0.1596 16 days

102 days

97 days

145 days

127 days

53 days

76 days

70 days

59 days

3.34 34.9% 8% .27 0.89

2.72 34.7% 6% .17 0.85

2.88 38.9% 7% .21 0.89

3.26 36.9% 7% .25 0.93

Competitor’s(Colgate Palmolive) financial ratios

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Particulars Current Ratio Quick Ratio Debt to Equity Ratio Debt to Total Asset Long term Debt Ratio Average Collection Period Payable turnover in Days Inventory turnover in Days Asset Turnover Gross Profit Margin Net Profit Margin Return on Investment Return on Equity

2009 2.521 1.469 0.062 0.043 0.058 0.396 days

2008 2.564 1.357 0.095 0.052 0.087 1.966 days

2007 2.139 1.189 0.096 0.047 0.490 1.886 days

2006 1.911 1.033 0.087 0.053 0.079 0.792 days

242.04

325.31

70 days 2.239 31.67% 10.19% 0.228 0.466 2.371 32.23% 9.17% 0.217 0.353

66 days

48 days

73 days

2.839 24.16% 6.71% 0.190 0.278

2.275 29.37% 9.51% 0.121 0.398

INTERNAL ANALYSIS:
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Particulars Current Ratio

2009 0.83253

2008 0.70714

2007 0.73235

2006 0.86989

Analysis:

Unilever Pakistan Company has weak current ratio to meet short term obligations. Performance of the company is not consistent as compared to the last four year rations. Unilever should improve his policies to improve the current ratio to meet its short term obligations. The current liabilities increases 84% in comparison to 2008.Increase in current liabilities tends to decrease the current ratio. So the increase in current assets is less than the increase in current liabilities. Particulars Quick Ratio 2009 0.318702 2008 0.205163 2007 0.244477 2006 0.36094

Analysis:

Unilever Pakistan quick ratio or acid-test ratio is very poor in last four years. The ratio has increased from 2007 to 2009 is 77%. But this increase is not sufficient as should be as compare to 1:1. The decrease in quick ratio for year 2007 & 2006 was due to increase in the inventory levels. This tends to decrease the quick ratio for the company. Particulars Debt to Equity Ratio 2009 0.043 2008 0.052 2007 0.047 2006 0.053

Analysis:
In 2009 the ratio of debt to equity is 0.043 which is the least in last three years. This ratio give the information about how much amount is taken from debt and how much is taken from shareholders. Unilever take 43% from shareholder and 47% from debts in 2009. The ratio of debt is greater from year 2006 to 2008. The increase in debt is 34% from year 2006 to 2009.

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The company has to reduce its debt to increase its profit. Because these debts also increases the interest expense which they have to pay. Particulars Debt to Total Asset 2009 0.08926 2008 0.060315 2007 0.06215 2006 0.05407

Analysis:
Indicates what proportions of the company’s assets are being financed through debt. Debt-to asset is the important ratio and the Unilever Pakistan continually works for the improvement of this ratio as from the previous ones. The trend of this ratio is increasing and has benefits for the company. The company increases the property plant and equipment by 94% as compare to 2008 in 2009. The total asset of the company has increased 99% as compare to 2008. But the Debt of the company is increases as well, which contribute to increase the debt ratio of the company. Particulars Long term Debt Ratio 2009 0.058 2008 0.087 2007 0.490 2006 0.079

Analysis
This value computes the proportion of a company's long-term debt compared to its available capital. By using this ratio, investors can identify the amount of leverage utilized by a specific company and compare it to others to help analyze the company's risk exposure. Generally, companies that finance a greater portion of their capital via debt are considered riskier than those with lower leverage ratios. In this ratio the company has lower ratio so it is lesser risky.

Particulars Average Collection

2009 78 days

2008 26 days

2007 39 days

2006 16 days

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Period

Analysis:
This ratio shows the quality of the firm receivables and how successful the firm is in its collections. This ratio shows the number of times receivables turn into cash. The collection period for the company is 16 days in 2006 but this rate is increases from 16 days to 39 days. This rate decreases in 2008 from 39 to 26 days as compare to 2007. But this rate has increases from 26 days to 78 days due to financial problems of the dealers. So after the sale of the goods they have to wait 78 days to collect the amount.

Particulars Inventory turnover in Days

2009 53 days

2008 76 days

2007 70 days

2006 59 days

Analysis:
The inventory turnover in days in how many days, on average, before inventory is turned into accounts receivable through sales. In this case Unilever Pakistan trend of inventory turn over is increasing from 59 days to 70 days which tends the efficiency of the company increases. This trend further increases from 70 days to 76 days as compare to 2007 to 2008. But this trend decreases from 76 days to 53 days. This shows that company progress is very well in the recent year as compare to previous years. Particulars Asset Turnover 2009 3.34 2008 2.72 2007 2.88 2006 3.26

Analysis:
This ratio shows how many times you are getting sales on your assets, the higher the ratio the higher sales you are generating on your assets. In this case Unilever Pakistan has high asset turnover ratio that is 3.34 times. They are generating 3.34 times sales on their assets. Trend of this was good in 2006. But this trend decreases in 2007 & 2008 because sales of the company decrease due to financial crises in the world. But this matter is settling so the trend of the 24

company is again becoming better and their sales in 2009 has increased this cause the company to increase the assets turnover ratio for year 2009. Particulars Gross Profit Margin 2009 34.9% 2008 34.7% 2007 38.9% 2006 36.9%

Analysis:
This ratio shows how much gross profit is earned on sales. The higher the ratio the higher the gross profit. This ratio also shows the efficiency of the firm. In this case Unilever Pakistan has gross profit margin 34.9% then the last years 2007 that is 34.7%. The last four year trend shows mixed trend in the company gross profit margin. The Company made significant progress in sales in 2009 which increases 81% as compare to 2008. The company made good progress in gross profit margin in 2007 which has value of 38.9%. This is due to lesser cost of good sold which help the company to make good progress in 2007.

Particulars Net Profit Margin

2009 8%

2008 6%

2007 7%

2006 7%

Analysis:
This ratio shows how much Net profit is earned on sales. The higher the ratio the higher the net profit. This ratio also shows the efficiency of the firm. In this case Unilever Pakistan has high net profit margin shows the more net profit of the company in 2009. Which improves the position of the company and its share, values in the market? There is decreasing trend in net profit margin as compared to previous performances of the company in 2008. The Company made significant progress in volume growth during 2009 delivering a record sales volume of 3.8 billion, an increase of 81% in comparison to 2008. Particulars Return on 2009 27% 2008 17% 25 2007 21% 2006 25%

Investment

Analysis:
This ratio shows how much return is earned on investment. The return on investment in 2006 is 25% which has decreases to 21% in 2007. The decrease in return on investment in 2007 & 2008 is due to decrease in net profit of the company. The total asset of the company is increases which cause them to decrease the return on investment. The return on investment is increases in 2009 as compare to 2008. Return on investment is 27% which is increase of 63 % in 2009. This is due to increase in net profit after tax and total asset decreases which cause them to increase in ROI. Particulars Return on Equity 2009 89% 2008 85% 2007 89% 2006 93%

Analysis:
This ratio shows the declining trend also in this ratio and return on equity was declined through the year 2006 and improved in the last year that is 2009. This ratio shows the company shareholders equity return with every year’s sale. The company returns on equity declining as compared to the last four years performance of the company. The return on equity in 2009 is 89% which is better than last year performance.

YEAR WISE COMPARSION OF U.P & C.P

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Ratios

2009 Unilever Pakistan Colgate Palmolive 2.521 1.469

2008 Unilever Pakistan 0.707 0.205 Colgate Palmolive 2.564 1.357

2007 Unilever Pakistan 0.732 0.244 Colgate Palmolive 2.139 1.189

2006 Unilever Pakistan 0.869 0.360 Colgate Palmolive 1.911 1.033

Current Acid Test Debt to equity Debt to Asset Long term Debt Average Collectio n Period Payable turnover Inventor y Turn Over Total Asset turn Over G.P Margin % N.P Margin % ROI Ratio % ROE Ratio %

0.832 0.318

0.08926

0.062

0.0603

0.095

0.06215

0.096

0.0540

0.087

0.089

0.043

0.060

0.052

0.062

0.047

0.054

0.053

0.2365

0.058

0.2366

0.087

0.2024

0.490

0.1596

0.079

78 days

0.396 days

26 days

1.966 days

39 days

1.886 days

16days

0.792 days

127 days

242.04

145 days

325.31

97 days

235.53

102 days

305.76

53 days

48 days

76 days

73 days

70 days

70 days

59days

66 days

3.34

2.839

2.72

2.275

2.88

2.239

3.26

2.371

34.9%

24.16%

34.7%

29.37%

38.9%

31.67%

36.9%

32.23%

8%

6.71%

6%

9.51%

7%

10.19%

7%

9.17%

27%

19%

17%

12.1%

21%

22.8%

25%

21.7%

89%

27.8%

85%

39.8%

89%

46.6%

93%

35.3%

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EXTERNAL ANALYSIS
1. Current Ratio:

Comparison:
Current ratio is used to see the company’s ability to meet the short term obligations. By doing the comparison Between Unilever Pakistan and Colgate Palmolive Company, the current ratio of Unilever Pakistan is better than the Colgate Palmolive for the year 2009, 2007 & to 2006.

2. Acid Test Ratio:

Comparison:
The comparison between U.P & C.P is that the C.P has the better ratio of quick acid ratio. The ratio of U.P is not better than the C.P. 3. Debt to equity:

Comparison:

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The debt to equity ratio of U.P is better than C.P for the year 2009. But for previous 3 years the debt to equity rati of C.P is better than U.P. this ratio shows how much is financed by a company with debt as compare to shareholder equity.

4. Debt to Asset:

Comparison:
This ratio gives the idea about how much debt can be recovered by total assets. The U.P ratio for year 2009 is better than C.P. this ratio was also good in year 2008 & 2007. In the year 2006 C.P has better ratio then U.P.

5. Long term Debt:

Comparison: The long term debt ratio is better for C.P. because it is lesser than U.P. This ratio gives the information about the debts of the company and relation of shareholder’s equity. 6. Average Collection Period:

Comparison:
The lesser the average collection period the better will be the position of the company in this ratio. But it depends upon the industry average. In this comparison the U.P collection Period remains greater than C.P in three years except in year 2008 when it was lower than C.P.

7. Payable turnover:
29

Comparison:
The payable turnover for U.P remains lesser than the C.P. This show that U.P pays the amount to their creditors earlier than C.P. in this respect lender has more confidence on U.P

8. Inventory Turn Over:

Comparison:
The inventory turnover ratio is almost same to the compare company C.P. in inventory turnover companies found after how many days they place they order.

9. Total Asset turn Over Comparison:
The asset turnover ratio of U.P is better than the C.P. In these four year comparisons U.P has the edge on asset turnover ratio on C.P.

10. G.P Margin %:

Comparison:
The gross profit margin of U.P is greater than the C.P. the reason is that they have greater sales as compare to C.P in these years. The sale of C.P has decrease in 2009 as compare to 2006.

11. N.P Margin %:

30

Comparison:
The net profit margin of C.P is better than the U.P. In last 3 consecutive years the net profit margin of C.P was greater than U.P. but in year 2009 the U.P show greater profit than the C.P.

12. ROI Ratio %:

Comparison:
The return on investment of U.P is better than the C.P except the year 2008. In 2008 the return on investment of C.P was good than U.P.

13. ROE Ratio %:

Comparison:
The return on equity of U.P is good as compare to C.P. The Unilever get greater return from the shareholder’s investment. These results are reflected in the graph above.

COMMON SIZE ANALYSIS
Common size analysis = Balance sheet items / total assets

Fixed Assets

B/s items Property, plant

2009

2008 38.89

2007 43.46

2006 33.24

31

and equipment Longterm investment Long loans Long deposits

4,736,619/11,425,715*100 95,202/11,425,715*100

= 41.45 = 0.83 0.83 1.17 1.48

term 98,117/11,425,715*100

= 0.85

1.05

1.43

1.49

term 392,896/11,425,715*100 and

= 3.43

4.74

0.06

0.39

prepayments Retirement benefits prepayments Intangibles 188,054/11,425,715*100 ..,,,433 2,433/11,425,715*100 = 0.02 0.00064 0.0015 0.0026 =22.64= 1.80 3.10 5.79

Current Assets

B/s items Stock-in-trade

2009 3,649,070/11,425,715*100 = 0.3193

2008 0.3734

2007 0.3372

2006 0.3354

Stores spares Trade debts Loans advances Trade

and 265,420/11,425,715*100

= 0.0232

0.0212

0.0223

0.0320

506,357/11,425,715*100 and 131,852/11,425,715*100

= 0.0443 = 0.0115

0.02009 0.0108

0.0296 0.0150

0.0272 0.0271

deposits 682,949/11,425,715*100

= 0.0597

0.0453

0.0292

0.0158

and short term prepayments

32

Other receivables

82,141/11,425,715*100

= 0.0071

0.0191

0.0308

0.1497

Cash and bank 239,553/11,425,715*100 balances Tax due refunds 355,052/11,425,715*100 from

= 0.0209

0.0093

0.0233

0.0911

= 0.0310

0.0265

0.0183

0.2897

Government

Current Liabilities

B/s items Accrued interest / markup Short borrowings

2009 28,892/11,425,715*100 = 0.0025

2008 0.0056

2007 0.0005

2006 0.0002

term 1,037,911/11,425,715*100 = 0.0939

0.2838

0.0524

0.0000

Trade and other 5,785,776/11,425,715*100 = 0.5306 payables Current maturity of liabilities a Provisions 28,419/11,425,715*100 220,680/11,425,715*100 = 0.0024 = 0.0193

0.3994

0.588

0.6201

0.0028 0.0521

0.0021 0.0459

0.0181 0.0171

Taxation provision

less

Share capital and reserves

-

0.0026

0.0187

33

B/s items Share capital Reserves Surplus revaluation fixed assets

2009 669,477/11,425,715*100 = 0.0585

2008 0.0587 0.1358 0.0011

2007 0.0828 0.1620 0.0017

2006 0.1041 0.1805 0.0023

2,621,643/11,425,715*100 = 0.2294 on 12,965/11,425,715*100 of = 0.0011

Non-Current liability

B/s items Liabilities against assets subject to finance leases Deferred taxation Retirement benefits obligation

2009 56,762/11,425,715 *100 = 0.0049

2008 0.0067

2007 0.0064

2006 0.0022

636,130/11,425,715*100 327,060/11,425,715*100

= 0.0556 = 0.0286

0.0324 0.0211

0.0382 0.0173

0.0316 0.0201

Income Statement Items

I/S Items Sales Cost of sales Gross profit Distribution cost Admin. Cost Other O.P. Exp

2009 38187582/38187582*100 24852625/38187582*100 13334957/38187582*100 7179694/38187582*100 1030478/38187582*100 373785/38187582*100 = 100 = 65.08 = 34.92 = 18.80 = 2.70 = 0.98

2008 100 65.31 34.68 18.90 3.24 0.798

2007 100 61.07 38.93 21.52 4.31 1.00

2006 100 63.10 36.89 19.79 4.30 1.09

34

Other O.P. Income Restructuring cost Profit from O.P Finance cost Profit before taxation Taxation Profit after taxation

192313/38187582*100

= 0.50

0.78 1.58

0.82 1.60 11.31 0.47 10.84 3.61 7.23

0.97 0.52 12.15 0.30 11.84 4.06 7.78

4943313/38187582 *100 427708/38187582*100 4515605/38187582 *100 1459865/38187582*100 3055740/ 38187582*100 = 12.94 = 1.12 = 11.82 = 3.82 = 8.00

10.95 1.50 9.45 3.04 4.41

INDEX ANALYSIS
Index analysis = Current year / Base year
Fixed Assets

B/s items Property, plant and equipment Long investment

2006

2007 164.38

2008 207.18

2009 221.61

2137350/2137350

= 100.00 = 100.00 100.00 100.00 100.00

term 95202/95202

35

Long loans Long deposits

term

96417/96417

= 100.00

119.67

125.02

101.76

term 25357/25357 and

= 100.00

14.40

2129.69

1549.45

prepayments Retirement benefits prepayments Intangibles 372638/372638 ..,,,433 17043/17043 = 100.00 71.42 42.85 14.27 = 100.00= 67.32 55.10 50.46

Current Assets

B/s items Stock-in-trade

2006 2156472/2156472 = 100.00

2007 126.41

2008 197.16

2009 169.21

Stores spares Trade debts Loans advances Trade

and 206021/206021

= 100.00

87.54

117.34

128.83

174722/174722 and 173960/173960

= 100.00 = 100.00

136.96 70.64

130.93 71.22

289.81 75.79

deposits 101680/101680

= 100.00

232.16

507.91

671.66

and short term prepayments Other receivables Cash and bank 585860/58586 balances = 100.00 32.20 18.22 40.88 96232/96232 = 100.00 258.89 226.87 85.35

36

Tax due

refunds 186287/17 from

= 100.00

79.71

190.59

162.01

Government

Current Liabilities

B/s items Accrued interest / markup Short borrowings term 200/200 1898/1898

2006 = 100.00

2007 193.31

2008 3375.92

2009 1522.23

= 100.00

211778.5

1616261.5

518955.5

Trade and other 3987437/3987437 payables Current maturity of liabilities a Provisions 16962/16962 110000/110000

= 100.00

119.13

114.05

145.10

= 100.00 = 100.00

101.83 337.30

190.55 539.59

167.54 200.62

Share capital and reserves

B/s items

2006 37

2007

2008

2009

Share capital Reserves Surplus revaluation fixed assets

669477/669477 1160685/1160685 on 14909/14909 of

= 100.00 = 100.00 = 100.00

100.00 112.90 95.65

100.00 133.22 91.31

100.00 225.87 86.55

Non-Current liability

B/s items Liabilities against assets subject to finance leases Deferred taxation Retirement benefits obligations 14273/14273

2006 =100.00

2007 370.85

2008 541.77

2009 397.68

203595/203595 129799/129799

=100.00 =100.00

151.79 108.21

181.56 184.74

312.45 251.97

Income Statement Items

I/S Items Sales Cost of sales Gross profit Distribution cost Admin. Cost Other O.P. Exp

2006 20987885/20987885 13244679/1344679 7743206/7743206 4153147/4153147 903646/903646 229664/229664 =100.00 =100.00 =100.00 =100.00 =100.00 =100.00

2007 111.16 107.57 117.30 120.91 111.50 101.82

2008 147.49 152.65 138.67 140.80 110.91 107.66

2009 181.95 187.64 172.21 172.87 114.03 162.75

38

Other O.P. Income Restructuring cost Profit from O.P Finance cost Profit before taxation Taxation Profit after taxation

202923/202923 110000/110000 2549672/2549672 63946/63946 2485726/2485726 853242/853242 1632484/1632484

=100.00 =100.00 =100.00 =100.00 =100.00 =100.00 =100.00

93.92 338.39 103.49 170.78 101.76 98.71 103.36

118.22 444.80 132.99 728.99 117.66 110.22 121.55

94.77 272.32 668.85 181.66 1343.09 187.18

CONCLUSION
From the ratio analysis of the both companies (Unilever Pakistan and Colgate Palmolive) we see that the increase in Current ratio of the U.P was not stronger than the previous four years comparison and continually falling from the 2006 ratio. Acid test ratio is better than the last four years data.. Net profit margin and return on investment as compared to previous years are improved. Collection policy of the company is not good and there must be a better policy to collect the receivables. The inventories turn over and payable turnover ratio increases as compared to the last performances. C.P have good current and acid test ration as compared to previous last four years performance. Financial leverage ratios are also good as compared to the last year performance. Net profit margin and return on investment increases as compare to last year. The cost of sales to net turnover ratio increases as compared to the last period which reveals measures taken by the management to improve the efficiency in the business (20082009). In 2009, the sale was Rs.38.1 billion as compared to 30.9 billion last year i.e. increase of 80% in comparison. In line with the increase in sales, the gross profit has also increased by 80% over last year. Due to a moderate increase in marketing and distribution, administrative and other operating expenses the operating profit, profit before and after tax has increased by 64.93% over last year.

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