STATEMENTS OF FINANCIAL POSITION

STATEMENTS OF OF COMPREHENSIVE INCOME

FINANCIAL ANALYSIS RATIOS FOR THE YEAR ENDED 31 DECEMBER
2019 & 2020

Liquidity Ratios
RATIOS FORMULA 2019 2020
Current Ratio
(CR) CR = Current CR = RM1,073,013 CR = RM1,079,882
Assets/ Current RM1,654,750 RM1,816,829
Liabilities = 0.65 times = 0.59 times

Quick Ratio
(QR) QR = (Current QR=(RM1,073,013- QR=(RM1,079,882 -
Assets - Inventory)/ RM551,827) RM597,270)
Current Liabilities RM1,654,750 RM1,816,829
= 0.31 times = 0.27 times

Net Working
Capital NWC = Current NWC = NWC =
(NWC) Assets - Current RM1,073,013 - RM1,079,882 -
Liabilities RM1,654,750 RM1,816,829 =
= RM -581,737 RM-736,947

According to the table above, in 2019, the current assets was RM1,073,013
and current liability was RM1,654,750. After current assets being divided by the
current liability so current ratio in 2019 is 0.65 times. In 2020, the current assets was
RM1,079,882 and current liability was RM1,816,829. So, the current ratio in 2020 is
0.59 times. This shows that the current ratios for Nestle Company decreased from
0.65 times in 2019 to 0.59 times in 2020. This indicate that Nestle Company are not
enough current assets to cover the payments that are due on the company’s current
liabilities.

The quick ratios measures Nestle Company’s capacity and ability to pay its
short term obligations without rely on inventories. From the above calculation data,
we analyzed that the quick ratio has been decreases from 0.31 times in 2019 to 0.27
times in 2020. This means that Nestle Company has a low quick ratios which is the
company has fewer liquid assets than its liability.

For net working capital, it shows that both year are showing a negative
working capital. In 2019, the net working capital is RM-581,737 and in 2020 its
increase by RM155,210 which is RM-736,947. It shows that if the company need to
pay off all its short-term debts today, Nestle company might be struggle.

Activity Management Ratios

RATIOS FORMULA 2019 2020

Inventory
Turnover ITO = Cost of ITO = RM3,444,561 ITO = RM3,446,678
(ITO) goods sold RM551,827 RM597,270
Inventory = 6.24 times = 5.77 times
Average
Collection ACP = A/c ACP = RM508,097 x ACP = RM472,705
Period (ACP) Receivable x 360 360 x 360
Sales RM5,518,076 RM5,412,180
= 33.15 days = 31.44 days

Fixed Assets
Turnover Fixed Assets Fixed Assets Fixed Assets
Turnover = Turnover = Turnover =
Sales RM5,518,076 RM5,412,180
Net Fixed Assets RM1,653,525 RM1,781,489
= 3.34 times = 3.04 times
Total Assets
Turnover Total Assets TATO = TATO =
Turnover = RM5,518,076 RM5,412,180
Sales RM2,726,538 RM2,861,371
Total Assets = 2.02 times = 1.89 times

Activity management ratios measure the effectiveness of the firm’s investment

decision and its ability in utilizing the firm’s assets to produce sales. According to the
table above, inventory turnover in 2019 is 6.24 times while inventory turnover the
year of 2020 is 5.77 times. This shows that inventory turnover for both year are
decreases by 0.47 times. This means that Nestle Company more effective in utilizing
its inventories to generate sales in the year of 2019 than 2020.

The result of the average collection period for Nestle Company is 33.15 days
in 2019 and 31.44 days. This shows that Nestle Company have no problem in
collecting its debts. This is because in Nestle Company take more longer in collect its
debts in 2019 than 2020.
 For fixed assets turnover, its shows that Nestle Company’s fixed assets
turnover has been decreases by 0.3 times. From the calculation above, it shows that
fixed assets turnover in 2019 is 3.34 times and in 2020 is 3.04 times. This means that
Nestle Company more efficient in generate its income from its assets in the year of
2019 than 2020. In the of 2020 shows that Nestle Company is inefficient in generating
income from its assets.

The assets turnover ratio measures how efficiency the Nestle Company’ assets
to generate sales. From the above calculation data, the total assets turnover has been
decreases from 2.02 times in 2019 to 1.89 times in 2020. This is because the higher
the asset turnover ratio, the more efficient Nestle Company at generating revenue
from its assets.

Profitability Ratios
RATIOS FORMULA 2019 2020

Gross Profit
Margin GPM = GPM = GPM =
(GPM) Gross Profit RM2,073,515 100
RM1,965,502 100
100
Sales 0
RM5,518,076 0 RM5,412,180 0
=37.58% = 36.32%

Operating
Profit Margin Operating Profit OPM = OPM
Margin = RM875,725 100 RM724,769 100
Operating Profit RM5,518,076 0 RM5,412,180 0
Sales 100 = 15.87% = 13.39%
0
Net Profit
Margin Net Profit Margin= Net Profit Margin = Net Profit Margin =
EAT RM667,191 100 RM548,812
100
Sales 0 RM5,518,076 0 RM5,412,180 100
= 12.09% = 10.14% 0

Return On
Assets ROA= ROA = ROA =
EAT 100 RM667,191 100 RM548,812 100
Total Assets 0 RM2,726,538 0 RM2,861,371 0
= 24.47% = 19.18%

Return On
Equity ROE= ROE= ROE =
 EAT 100
RM667,191 RM548,812 100
100
Total Equity 0 RM664,924 0 RM557,136 0
= 100.34% = 98.51%

In 2019, the gross profit margin of Nestle Company is 37.58% and decrease in
2020 which is 36.32%. This mean that the gross profit margin for the both year is
decreases by 1.26%. In 2019 have higher ratio than in the year of 2020. This indicates
that Nestle Company have higher remaining cash after the firm paying its trade credit
than 2020.

From the table above, operating profit margin for Nestle Company in 2019 is
15.87% while in 2020 is 13.39%. It shows that operating profit margin for Nestle
Company for both year is decreases by 2.48%. This means that Nestle Company
earning more money from its operations in 2019 than 2020.

As for net profit margin, it measure how much net income of Nestle Company
is generated as a percentages of revenue. From the calculation data, net profit margin
for Nestle Company is 12.09% while in 2020 is 10.14%. This can be seen that there
are decreases between 2 years. In the year of 2019 have higher ratio which indicates
that Nestle Company have better income to shareholder.

For the return on assets which is how efficiency Nestle Company to generate
profit with all its assets. In 2019, the return on assets for Nestle Company is 24.47%
and in 2020 it decreases to 19.18%. This means that in 2019, Nestle Company have
higher return on firm’s investment than in 2020.

Lastly, according to the calculation above, return on equity of Nestle

Company of 2019 have the higher ratio than in 2020. In 2019, the return on equity for
Nestle Company is 100.34% while in 2020 is 98.51%. This shows that return on
equity for both year are decreases by 1.83%. Nestle Company have the higher return
to shareholders in 2019 than in 2020.