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Quice Foods – Financial Ratios

Company and Industry Analysis

Shershah Adnan
(19U03037)
Section C

Financial Statements Analysis (ACC 504)

Submitted to: Ma’am Seeham Yousaf
May 13th, 2022
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Contents
Ratio Analysis..................................................................................................................................4
Liquidity...........................................................................................................................................4
Current Ratio...........................................................................................................................4
Quick Ratio..............................................................................................................................4
ITO............................................................................................................................................4
Days Sales in Inventory...........................................................................................................4
RTO..........................................................................................................................................4
Days Sales in Receivables.......................................................................................................4
Receivables collection period.................................................................................................5
Days to sell inventory.............................................................................................................5
A/P Turnover...........................................................................................................................5
Profitability......................................................................................................................................5
Return on Sales.......................................................................................................................5
Gross Profit Margin.................................................................................................................5
Operating Profit Margin..........................................................................................................5
EBITDA to Sales.......................................................................................................................6
ROA..........................................................................................................................................6
ROE..........................................................................................................................................6
RNOA.......................................................................................................................................6
Solvency...........................................................................................................................................6
Liabilities to Equity ratio.........................................................................................................6
Total Leverage.........................................................................................................................7
TIE............................................................................................................................................7
Asset Utilization and Efficiency......................................................................................................7
Sales to Asset ratio..................................................................................................................7
Sales to Avg NWC....................................................................................................................7
Sales to Fixed Assets turnover................................................................................................7
Market Value...................................................................................................................................8
EPS...........................................................................................................................................8
P/E Ratio..................................................................................................................................8
Market to Book Value.............................................................................................................8
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Industrial Analysis...........................................................................................................................8
Liquidity Ratios..........................................................................................................................11
Profitability Ratios....................................................................................................................11
Solvency Ratios.........................................................................................................................11
Asset Utilization and Efficiency Ratios.....................................................................................11
Market Value Ratios.................................................................................................................11
Additional Data.............................................................................................................................12
LEV.........................................................................................................................................12
SPREAD..................................................................................................................................12
RNOA.....................................................................................................................................12
ROCE......................................................................................................................................12
Appendix.......................................................................................................................................13
Liquidity Graphs............................................................................................................................13
Profitability Graphs.......................................................................................................................18
Solvency Graphs............................................................................................................................22
Efficiency Graphs...........................................................................................................................23
Market Value Graphs....................................................................................................................25

Ratio Analysis
Liquidity
Current Ratio
From 2016 until 2018, current ratio saw a consistent decline, with 2019 being a year where it
saw a significant rise upwards, owing to a larger proportion of current assets, and a decrease in
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current liabilities. This trend would go back to nearly the same amount as in 2018 by 2020
because of a decrease in CA and increase in CL.
Compared to the industry average however, the average of 3.83 that Quice holds is still above
the 1.73, so overall Quice is better at paying its short-term obligations at least hypothetically.
Quick Ratio
Consistent fall in each year, except for a minor increase in 2019, owing to less CL, the fall being
due to larger values of stock in trade. This is proof that the company is not very liquid at all, in
isolation, even if its average of 1.29 out performs the industry average of 0.82.
ITO
Mostly downwards trend except for 2020. Industry wide its still far below the average
Days Sales in Inventory
Mostly increasing at a diminishing rate each year except for 2020 where it came to be the
second lowest of all years seen (0.005). Compared to industry average, Quice is far behind,
showing that it takes much more time to sell inventory
RTO
One of the few accounts that saw consistent rises every year, topping at in 2020, however its
still next to nothing compared to industry average, in isolation Quice collects receivables fine,
but nothing compared to other companies.

Days Sales in Receivables

Similar to other trends, its downwards outside of a minor rise in 2019 and in 2020 due to a rise
in A/R. Industry wide, Quice vastly outperforms the average of its competition, meaning that
this is their primary way of getting cash in hand

Receivables collection period

RCP supports the above argument by having similar trends and a similar outperforming
average, Quice puts a lot of emphasis on its receivables.
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Days to sell inventory

Due to the sheer size of Quice’s inventory, which has been one of its main issues in liquidity
terms, its days to sell is far more than the industry average, going as far as being triple the value
in ratios. Trend wise we can see that from 2016 until 2019, it kept steadily growing, with it only
falling in 2020, due to a higher inventory turnover, from a higher cost of sales.
A/P Turnover
Consistent falling rate until 2020 which saw a slight increase causing the average to arrive at a
value of 0.57, far below the industry rate of 4.87. This means that Quice is significantly later in
paying off its payables than its contemporaries.

Profitability
Return on Sales
Trend is a constant decrease, except for 2020 which sees a minor rise, however considering that
the values are all negative, it shows that Quice is sustaining major losses, and its sales are far
below what is required the break even, even with the low industry average of 0.014 kept in
context because its NI is so low.
Gross Profit Margin
Gross profit margin is consistent with other factors, in that aside from a rise in a single year
(2019 in this case) its all downwards, meaning its gross profits are too low against its sales. This
is further supported by the fact that it falls well below the industrial average.

Operating Profit Margin

Aside from a small rise in 2020, much like the return on sales, the factors are all negative,
indicative of the company’s net losses, so much so that in that case, it shows that by pretax
earnings, it remains in loss, due to overhead operating expenses such as administrative
expenses being so high and any operating income being too little to make a substantial
difference, even if OI increased in 2020. This is supported by Quice not being able to reach the
industry average’s low bar at only 0.039.
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EBITDA to Sales
Quice is less damaged in this area, due to its value at average being somewhat comparable to
the industry average owing to its steadily rising values of depreciation making a notable
contribution. This in mind, even if 2019 is the only year where the downward trend is strayed
from, (mainly due to an already existing higher EBIT beforehand) the average comes out at
0.15, which is slightly higher than industry average of 0.13, meaning that Quice actually
generates more cash for each value of sales revenue, pre interest, taxes and depreciation.
ROA
ROA is mostly stagnant at -0.05 for most years due to interest expense not changing much.
However, it being negative means that assets are not proving profitable for the company, unlike
most of the rest of the industry which stay at a low, yet positive 0.13
ROE
We see a similar trend as ROA here, the values each year being between -0.06 and -0.07
outside of the 2015 value (-0.01), showing that the equity is nowhere near enough to cover the
net loss of Quice, when the average is at 0.86 for the rest of the industry at large. This is due to
both the loss at NI and the total equity by 2020 actually being lower than years previous.
RNOA
Return on Net Operating Assets of Quice fell from the 2016 value of -0.01 to the 2020 value of -
0.07, which indicates that on average, the company has become less equipped at using its fixed,
and current assets as well as its current liabilities to profitably function.

Solvency
Liabilities to Equity ratio
The Liabilities to Equity ratio of Quice Food Limited rose from the 2016 value of 0.07 up to 0.41
in 2020, which proves that there has been an increase in the PKR of Total Liabilities, per each
PKR of Equity, which means that the debt-to-equity ratio is getting worse, i.e. Quice is
increasingly becoming more and more reliant on debt financing.
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Total Leverage
The Total Leverage of Quice Food Limited rose from the 2016 value of 0.03 to the 2020 value of
0.66, indicating that total debt has only risen in PKR, for each PRK of EBIT, so the company
gearing is worse off and the dependency on debt financing is even clearer.
TIE
The Times Interest Earned ratio of Quice Foods Limited has seen a decrease from the 2016
value of -34.17 to the 2020 value of -177.61. Leaving aside the implications of these values
being negative in the first place, the fact that it means Quice is out and out unable to pay off its
interest earnings with pretax values, it also shows that the company has taken on a lot more
risk, and that it should not take on any further debts or loans.

Asset Utilization and Efficiency

Sales to Asset ratio
Sales to Asset ratio of Quice Foods Limited has declined from 2016, where it went from 0.32 all
the way to 0.25 by 2020, meaning the company has become less efficient, less able to generate
sales from the use of all of its Assets.
Sales to Avg NWC
The Sales to Average Net Working Capital Ratio of Quice Foods Limited has indeed risen, but
arguably to an insignificant amount, from 2016s 0.72 to 2020s 0.77, which only means that the
company’s ability to utilize its current assets and liabilities to generate sales has improved,
however the fact that its still below 1 does mean that it is not in good shape, just in less bad
shape
Sales to Fixed Assets turnover
The Sales to Fixed Assets Ratio of Quice Foods Limited has fallen from 2016s value of 0.63 till
2020s value of 0.52, which goes to show that Quice is getting more and more unable to
generate significant Sales from its Fixed Assets.
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Market Value
It should be stated that due to Quice’s inability to pay dividends, or record them, the dividend
yield section will be left out altogether, alongside the 2016 and 2017 values of Market Values,
as such Market to Book Value will be analyzed using the 2018 to 2020 values.
EPS
In line with all of the arguments so far, EPS of Quice fell further from -0.04 in 2016 to -0.40 in
2020. This means that each share effectively represents a loss.
P/E Ratio
P/E ratio of Quice rose significantly from the 2016 value of -81.08 to -12.26 in 2020, which
means that investors are willing to pay more for each share relative to EPS, which doesn’t
necessarily mean they will, the value being negative still means a loss, but this could be due to
an increase in Quice’s stock price.
Market to Book Value
The Market to Book Value Ratio of Quice Foods Limited has risen from 0.76 in 2018 to 0.92 in
2020, meaning their market price per share has improved, relative to their book value per
share. However, it’s still less than 1, meaning that investors would end up paying more for the
company than its net assets are actually worth, so they are ready to pay for premiums.

Industrial Analysis
To get a better view of where Quice stands, we will compare the ratios of the following
companies within the food industry
1. Quice Food Industries Ltd.
2. Nestle Pakistan Ltd.
3. Punjab Oils Ltd.
4. Unilever Pakistan Food Ltd.

Punjab Industry
    Unilever Oils Nestle Quice Average

Liquidity
Ratios Current Ratio 0.77 1.70 0.6 3.83 1.73
  Quick Ratio 0.48 1.30 0.2 1.29 0.82
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  Inventory TO 4.64 26.60 5.8 0.53 9.41

  Days Sales in Inventory 56.42 28.80 81.8 0.006 41.76
  Receivables TO 26.80 8.60 120.6 7.87 40.98
Days Sales in
  Receivables 15.13 50.10 5.1 59.40453 17.58
Receivables collection
  period 13.08 50.10 4.7 82.34 37.79
  Days to sell inventory 80.29 27.70 72.7 694.50 209.412
Days Purchases in
  Accounts Payable 170.46 44.70 121.2 0.00 84.08
Accounts Payable
  Turnover 2.23 13.60 3.1 0.57 4.87
  Accounts Payable      
 
Profitability
Ratios Return on Sales 17% 3% 9.1% -0.23 0.014
  Gross Profit Margin 44% 16% 32.6% 0.15 0.267
Operating Profit
  Margin 21% 5% 13.1% -0.23 0.039
  EBITDA to Sales 21% 5% 16.0% 0.15 0.13
  Return on Assets (ROA) 38% 7% 16.6% -0.04 0.13
  Return on Equity (ROE) 130% 12% 208.4% -0.06 0.86
Return on net
operating Assets
  (RNOA) 0% 22% 49.7% -0.06 0.17
   
Solvency Liabilities to Equity
Ratios ratio 6.42 0.83 13.0 0.25 5.12
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  Total Leverage 0.13 0.47 3.0 0.34 1.44

  Times Interest Earned 63.82 51.76 12.6 -210.37 92.31
 
Efficiency Sales to Asset ratio
Ratios (turnover) 2.12 2.34 2.0 0.22 1.66
  Sales to Avg NWC 32.08 8.54 -9.2 0.62 9
Sales to Fixed Assets
  turnover 4.40 7.77 4.1 0.44 4.17
   
Market Value
Ratios Earnings per share 0.34 22.64 239.4 -0.33 65.501
  Price Earning Ratio 22619.83 12.08 37.8 -25.67 5661.01
  Market to Book Value 674.80 884.3 0.72 390
  Dividend Yield 4.14 0.03 0.9 1.27
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Liquidity Ratios
Purely in terms of liquidity, we can see with the calculations above, that by far the best
company is Punjab Oils Ltd., because of its consistent ability to keep turnover ratios relatively
higher to its competition, alongside being able to keep its day-based ratios lower, which is for
the better within a liquid context.

Profitability Ratios
From the above calculations we can find that Unilever outperforms its competition on almost
every basis, with its gross profit margin return on assets having the highest disparity which sets
it apart in that it has the most profitable assets, and a greater degree of control on its direct
and operating expense. Nestle on the other hand shows that it makes the best usage out of its
equity and gains much more its operating assets

Solvency Ratios
As we can find from the above calculations, we can find that Quice has the lowest ratios of debt
to equity and gearing, with Punjab Oils being the furthest equipped to deal with financial costs,
making it a lower risk company which opens to door for additional debt to add to its debt
shelter.

Asset Utilization and Efficiency Ratios

According to the above calculations Unilever beats out the rest of its competition overall in
terms of its asset utilization. Whilst it may have a sale to asset ratio that is only slightly lower
than Punjab Oils, the rest of its assets classifications heavily outweigh the others, making
Unilever the ones with the industry’s highest profitability.

Market Value Ratios

In terms of generating substantial profits or dividends per share, we deduce that Nestle is by far
the best equipped, however for a factor like investor confidence, with which we use the price to
earnings ratio, Unilever is far greater than any of its competition, being more than a 1000%
higher, but, having such a low EPS means that it is unable to claim the highest market to book
value, instead that relies on Nestle, at 884.3
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Additional Data
Of all additional data, we will be closely analyzing the following
1. LEV
2. SPREAD
3. ROE
4. ROCE
The analysis of the previously mentioned additional data as can be seen above for Quice Food
Industries LTD. Are as follows
LEV
LEV of Quice has steadily risen from 2016 which was -0.09 to 0.07 in 2020 which means that
company equity are actively over that of the total liability
SPREAD
The Spread of Quice Limited has risen from -10.72% up to -3.56%, due to the proportionally
lesser fall of NBC as compared to RNOA which fell even further, which means that the company
is actually unable to pay on its net financial obligation in the first place since it is negative.
RNOA
Return on Net Operating Assets of Quice fell from the 2016 value of -0.85%to the 2020 value of
-7.16%, which indicates that on average, the company has become less equipped at using its
fixed, and current assets as well as its current liabilities to profitably function.
ROCE
Return on Common Equity of Quice Limited has fallen from 0.07% in 2016 to -7.42 by 2020,
which shows that Common Equity is failing in terms of profitability, due to the fact that 1 of
ROCE’s factors RNOA is far worse off, which is the most important piece of the equation.
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Appendix

Liquidity Graphs

Current Ratio
9

0
2020 2019 2018 2017 2016

Series1 CA / CL

Quick Ratio
5.00

4.50

4.00

3.50

3.00

2.50

2.00

1.50

1.00

0.50

0.00
1 2 3 4 5
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ITO
0.70

0.60

0.50

0.40

0.30

0.20

0.10

0.00
1 2 3 4 5

Series1

RTO
14.00

12.00

10.00

8.00

6.00

4.00

2.00

0.00
1 2 3 4 5

Series1
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DSI
0.010

0.009

0.008

0.007

0.006

0.005

0.004

0.003

0.002

0.001

0.000
2020 2019 2018 2017 2016

RCP
200.00

180.00

160.00

140.00

120.00

100.00

80.00

60.00

40.00

20.00

0.00
1 2 3 4 5
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DSIR
180.00000

160.00000

140.00000

120.00000

100.00000

80.00000

60.00000

40.00000

20.00000

0.00000
2020 2019 2018 2017 2016

Days to sell inventory

900.00

800.00

700.00

600.00

500.00

400.00

300.00

200.00

100.00

0.00
1 2 3 4 5 6
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A/P Turnover
1.80

1.60

1.40

1.20

1.00

0.80

0.60

0.40

0.20

0.00
2020 2019 2018 2017 2016
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Profitability Graphs
Return On Sales
0.00
2020 2019 2018 2017 2016

-0.05

-0.10

-0.15

-0.20

-0.25

-0.30

-0.35

-0.40

Gross Profit Margin

0.40

0.35

0.30

0.25

0.20

0.15

0.10

0.05

0.00
1 2 3 4 5
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Operating Profit Margin

0.00
2020 2019 2018 2017 2016

-0.05

-0.10

-0.15

-0.20

-0.25

-0.30

-0.35

-0.40

EBITDA to Sales
0.40

0.35

0.30

0.25

0.20

0.15

0.10

0.05

0.00
2020 2019 2018 2017 2016
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Return on Assets (ROA)

0.00
2020 2019 2018 2017 2016

-0.01

-0.02

-0.03

-0.04

-0.05

-0.06

Return on Equity (ROE)

0.00
2020 2019 2018 2017 2016

-0.01

-0.02

-0.03

-0.04

-0.05

-0.06

-0.07

-0.08
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Return on net operating Assets (RNOA)

0.00
2020 2019 2018 2017 2016
-0.01

-0.02

-0.03

-0.04

-0.05

-0.06

-0.07

-0.08

-0.09
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Solvency Graphs

Liabilities to Equity ratio

0.45

0.40

0.35

0.30

0.25

0.20

0.15

0.10

0.05

0.00
2020 2019 2018 2017 2016

Total Leverage
0.90

0.80

0.70

0.60

0.50

0.40

0.30

0.20

0.10

0.00
2020 2019 2018 2017 2016
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Times Interest Earned

0.00
2020 2019 2018 2017 2016

-50.00

-100.00

-150.00

-200.00

-250.00

-300.00

-350.00

-400.00

Efficiency Graphs

Sales to Asset ratio (turnover)

0.35

0.30

0.25

0.20

0.15

0.10

0.05

0.00
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Sales to Avg NWC

0.90

0.80

0.70

0.60

0.50

0.40

0.30

0.20

0.10

0.00

Sales to Fixed Assets turnover

0.70

0.60

0.50

0.40

0.30

0.20

0.10

0.00
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Market Value Graphs

Earnings per share

0.00

-0.05

-0.10

-0.15

-0.20

-0.25

-0.30

-0.35

-0.40

-0.45

-0.50

Price Earning Ratio

0.00

-10.00

-20.00

-30.00

-40.00

-50.00

-60.00

-70.00

-80.00

-90.00
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Market to Book Value

1.00

0.90

0.80

0.70

0.60

0.50

0.40

0.30

0.20

0.10

0.00

Additional Data

Net Financial Obligation (NFO)

60,000,000

40,000,000

20,000,000

0
1 2 3 4 5 6

-20,000,000

-40,000,000

-60,000,000

-80,000,000
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Net Financial Expense (NFE)

0

-1,000,000

-2,000,000

-3,000,000

-4,000,000

-5,000,000

-6,000,000

-7,000,000

-8,000,000

LEV
0.10

0.08

0.06

0.04

0.02

0.00

-0.02

-0.04

-0.06

-0.08

-0.10
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Net Borrowing Cost NBC

25.00%

20.00%

15.00%

10.00%

5.00%

0.00%

-5.00%

Spread
20.00%

10.00%

0.00%

-10.00%

-20.00%

-30.00%

-40.00%
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ROE computed
1.00%

0.00%

-1.00%

-2.00%

-3.00%

-4.00%

-5.00%

-6.00%

-7.00%

-8.00%

NFR
40.00%

30.00%

20.00%

10.00%

0.00%

-10.00%

-20.00%
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ROCE
4.00%

2.00%

0.00%

-2.00%

-4.00%

-6.00%

-8.00%

-10.00%