Accounting for Business Management

Assignment

Date of Submission: 05/10/2020

Group Number: 03
Group Members:
Roll No Name of the Student

20MBAGEN010 Apurva Sukumar Mantri

20MBAGEN011 Ayush Satyam

20MBAGEN012 Bhakti Dnyanoba Thormote Patil

20MBAGEN013 Diksha Rana

Summary of company profile:-
Nestle India Limited is an India-based company engaged in food business. Nestle is the world`s
leading Nutrition, Health and Wellness Company the company was founded in 1866 by Henri
Nestle. The food business incorporates product groups through milk products and nutrition,
beverages, prepared dishes and cooking aids, chocolates and confectionery. The Company
brands include -NESCAFE, MAGGI, MILKYBAR, KIT KAT, BAR-ONE, MILKMAID,
NESTEA, NESTLE Milk, NESTLE SLIM Milk, NESTLE Dahi and NESTLE Jeera Raita. The
Company beverages include NESCAFE CLASSIC, NESCAFE My First Cup, NESCAFE
CAPPUCCINO, NESCAFE SUNRISE Premium, NESCAFE SUNRISE and NESTEA ICED
TEA.
NESTLÉ India is a subsidiary of NESTLÉ S.A. of Switzerland. The company has attendance
across India with 7 manufacturing facilities and four branch offices extend across the region. The
four branch offices in the country help facilitate the sales and marketing of its products. They are
in Delhi, Mumbai, Chennai and Kolkata.
The Company insists on honesty, integrity and fairness in all aspects of its business and expects
the same in its relationships. This has earned it the trust and respect of every strata of society that
it comes in contact with and is acknowledged amongst India's 'Most Respected Companies' and
amongst the 'Top Wealth Creators of India'.

1. Financial status of the company:-

The financial status of a company is measured by the performance it takes in company financial
statements: a positive and growing cash flow statement, growing profits in the profit and loss
statement and a balance of assets, liabilities, and owner’s equity in the balance sheet.
If we talk about Nestle India the company has a lot of potential and is having very good financial
status as of right now. Going by latest the annual report of nestle it can be easily traced that
company profits have grown significantly from last year. Also the company witnessed growth in
sales by 9.6%. Also the Earning per Share (EPS) and Dividend per Share (DPS) increased
significantly as the company was able to generated good cash from its operating activities and
increase net profit.
Also if we compare various financial ratio of the company as per the industry norms, we can see
that Nestle is doing very good in all the areas.
In millions (Otherwise except stated)

Results 2019 2018

Sales 122,953 112,162
Profit from the 23,509
operations (in million) 25,863
Profit after Tax 16,069
19,696
Return on Average Equity (%) 45.3
70.3
Operating Cash Flow 22,337 20,525
Earnings per share 204.3 166.7
Dividend per 342.0 115.0
share
Market capitalization, end December 1,425,983 1,070,913

Particulars NESTLE INDUSTRY

Operating Profit Margin (%) (Profit From Operations/Sale 21.0 8.09

of Products)
Net Profit margin (%) (Profit After Tax/Sale of products) 16.0 4.8

Return on Net Worth (%) (Profit After Tax/Average Equity) 70.3 9.94

Current Ratio (Current Assets/Current liabilities) 1.8 1.05

Inventory turnover Ratio (Sale of products/Average 10.9 9.58

Inventories)
Debtors Turnover Ratio (Sale of products/Average trade 98.8 11.81
receivables)
 2. Details of component of financial statement assigned to group

BALANCE SHEET AS AT 31 DECEMBER 2019

LIABILITIES

As at 31st December As at 31st December

Current liabilities 2019 2018
(in millions) (in millions)
Trade payables 14,946.90 12,403.70

Other financial liabilities

Payables for capital expenditure 888.5 469.8
Customers’ credit balances and payables 1,648.6 1,082.0
Employee costs and reimbursements 1,556.9 1,379.6
Book Overdraft 0.9 0.9
148.9 112.9
Unpaid Dividends
65.3 60.6
Security deposits
5.7 56.0
Derivative liabilities - forward contracts
4,314.8 3161.8

Current Provisions
Employee benefits:-
Pension 295.1 240.8
Other incentives and welfare benefits 327.1 251.7
Contingencies 232.4 1,080.1

854.6 1,572.6
Current tax liabilities -
19.2
Other current liabilities
Statutory liabilities (Goods & Services tax, TDS etc.) 554.8 519.1
Advance from customers 366.5 407.9
Others 418.3 484.4
 1,339.6 1,411.4
TOTAL 21475.1 18,549.5

3. Explanation:-

1. Current liability: - Current liabilities are a company's short-term

financial obligations that are due within one year or within a normal
operating cycle. It can vary by industry or according to various
government regulations. Current liabilities are listed on the balance sheet
under the liabilities section and are paid from the revenue generated
from the operating activities of a company.

2. Trade Payables: - It is the total amount payable by a business for goods

purchased or services availed as a part of their business operations.
Trade payables comprise of Creditors and Bills Payables. Trade
payables arise due to credit purchases

3. Other financial liabilities:- It basically include debt payable and

Interest payable which is as a result of the use of others' money in the
past, accounts payable to other parties. In the above table this is further
classified as: - Payables for capital expenditure, Customers’ credit
balances and payables, Employee costs and reimbursements, Book
Overdraft, Unpaid dividends, Security deposits and Derivative liabilities
- forward contracts

4. .Current Provisions: - Provisions in Accounting are an amount set

aside to cover a probable future expense, or reduction in the value of an
asset. Often provision amounts need to be estimated

5. Current tax liabilities: - Tax liability is the amount of money you owe
to tax authorities, such as your local, state, and federal governments.
When you have a tax liability, you have a legally binding debt to your
creditor. Current tax liabilities are such short-term tax obligations that an
individual must pay within a year.

6. Other Current liabilities: - Other current liabilities are categories of

short-term debt that are lumped together on the balance sheet. These are
 those current liability which are grouped together and are not significant
enough to identify separately on their own lines in financial statements.

7. Provision and contingencies:- . Provisions are recognised when the

Company has a present obligation (legal/constructive as a result of a past
event, for which it is probable that a cash outflow will be required and a
reliable estimate can be made of the amount of the obligation. As the
timing of outflow of resources is uncertain, being dependent upon the
outcome of the future proceedings, these provisions are not discounted
to their present value. A disclosure for a contingent liability is made
when there is a possible obligation or a present obligation that may, but
probably will not require an outflow of resources.

 Learnings of the group:-

 Nestle has been performing financially well in the industry as it has managed to
increase its profit every year and in 2019 it again managed to have sound financial
position in the market.

 Nestle managed to increase their dividend pay-out significantly and also sustained
value creation for the shareholders.

 While the Profits, Sales and the cash flow increased the company still saw an
increase in the liabilities as the trade payables and tax liability increased, however
the provision were reduced significantly from the last year.

 The component under the Head Liabilities i.e. current liability provides a brief
picture of various liabilities that are to be paid in that particular year and hence it
makes easy for the marking against current asset of the company and thus helps in
calculating Current ratio.

 The company in the year 2019 increased the provision relating to the employee
benefits such as- pension and incentives which would directly affect the
performance of the personnel in the organisation positively. While on the other
hand contingencies were significantly reduced from the previous year as some of
the certain settlement of obligation took place.