CREDIT RISK ANALYSIS

5 YEARS FINANCIAL ANALYSIS

INDUSTRY

Food & Beverages Industry
Introduction
The Food and its allied products industry is considered Pakistan largest industry, and is believed to account for 27% of it value added production. Trade sector estimate the sector total value of production is Rs. 46 Billion (RS.58.00 equal USD 1.00 at the current exchange rate). Pakistan Food industry produces cooking oil, Hydrogenated vegetable oil, sugar, flour, dairy products such as milk, butter, yogurt, cheese and ice-cream, biscuits, breads and confectionary, fruit juices and fruit juice drink, Carbonated beverages, snacks , potatoes, corn and pulses. Fish, meat, fruit and vegetable sector are underdeveloped partly for lack of adequate infrastructure including storage and transportation facilities. Government policies and plans are expected to greatly increase the development of food industry. According to the Census of Manufacturing Industries there were 822 units engaged in the manufacture of Food and Beverages. According to the UNIDO it is the largest manufacturing industries of the country. Value of production stood at Rs.46.170 billion and manufacturing value added (MVA) stood at Rs.12.187 billion. Food processing is a relatively capital intensive industry. The share of food in the manufacturing industry is declining. It was 22.66 per cent in 1981-82 declined to 15.95 per cent in 1987-88. Figures for 1993-94 are not available. The growth rate in the food industry has been estimated at 7.46 per cent per annum. The most rapidly.

Nestle International
Ever since Nestlé was established, it has been committed to nurturing people worldwide. Today, as the worlds leading Food and Beverages Company, and leaders in health and wellness, Nestle try to cater to all family’s nutritional needs, no matter where in the world you live. Nestle story begins in 1867, when Henri Nestlé developed a baby formula that saved a child's life and marked the beginning of Nestlé's decades-old commitment to nutrition. In the 140 years since then, it had expanded around the world and developed a range of products designed to suit every taste, need and cultural preference. It distinctive seal is recognized everywhere as a guarantee of quality and healthfulness. Nutrition, quality and convenience remain the keystones of Nestle products and even as we confront the new century's challenges, we feel it is our duty to adapt to the changing needs of our consumers. Nestle responsibility does not simply lie in perfecting the products it develop R&D centers spanning four continents, but the role of products play in making lives better - both for their consumers and for communities in the countries it serve. Thus, along with old favorites such as NESTLÉ™ KITKAT® chocolates and NESCAFÉ®, the world's most popular coffee, it keep on introducing new, exciting options worldwide. Understanding that people in every country have different tastes and needs, we have developed a range of food and lifestyle products. In India consumers enjoy healthy and convenient MAGGI® Noodles Atta Noodles, in Pakistan you can find NESTLÉ® Raita and in China, flavored water is strengthened with Prebio1™ dietary fiber and traditional Chinese ingredients such as Aloe Vera and Chrysanthemum. Our popularity has come not just from acquisition and corporate expansion, but also from a care for the ever-evolving needs of customers at every point in their lives.

You can take advantage of the best nutrition in a way that is suitable for your tastes and lifestyle. . All our key brands are equipped with the Nutritional Compass that ensures all the nutritional information about the product is accessible thanks to our user-friendly nutritional labeling and guidelines. and leaders in developing and uplifting the communities in which they operate. the Switzerland-based Nestlé SA. NESTLÉ® Raita. consumer empowerment surges. Nestlé brands are designed to suit your lifestyle and your needs. Consumers can avail many of our products with branded active benefits that no competitor product offers. first acquired a share in Milkpak Ltd. Convenience is at the heart of the Nestlé philosophy. We continue to play our part in facilitating this revolution by launching valueadded products such as NESTLÉ® CERELAC®. and are recognized as producers of safe. Today they are fully integrated in Pakistani life.NESTLE PAKISTAN Nestlé has been serving Pakistani consumers since 1988. nutritious and tasty food. For instance. Nestlé Pakistan ensures that their products are made available to consumers wherever in the country they might be. you can purchase NESTLÉ® Juices in several different sizes depending on your needs: a personal-sized 200 ml for on-the-go consumption. As consumers get more health and quality conscious. or a liter pack for your fridge. food products have evolved from mere commodities to a statement of lifestyle. NESTLÉ® NESVITA® and NESTLÉ® NIDO® NNS and many other dairy and non-dairy products. MARKETING AND SALES Nutritional value and quality remain the most essential ingredients in all our brands. when their parent company. and their aim is to bring products to people's doorsteps. Over the years.

giving us a strong competitive edge. Our widespread global network presents opportunities to learn from innovative techniques used in faraway countries. We focus especially on Pakistan's smaller towns. We have developed an intensive distribution strategy that brings our products to your door. distribution drives and intensive distributor training ensure that products are easily accessible and visible. through effective communication. Pakistan has contributed in a big way towards this by introducing Nestlé PURE LIFE™ to the world. where activities such as town storming. offering programmed catering to better child nutrition and good parenting.We're proud to be among the only companies in Pakistan to venture outside the commercial mode of communication. door-to-door sampling. Pakistan’s favorite water is now available all around the world! . and exciting consumer promotions.

In particular. and Wellness Company in the world. economic.from infancy to old age. Deliver shareholder value through profitable long-term growth. and environment sectors of the country. through an innovative portfolio of branded food and beverage products of the highest quality. while continuing to play a significant and responsible role in the social. motivated and professional workforce. Good Life . health.proud of its heritage and bullish about the future. we envision to. Lead a dynamic.Nestle’ Pakistan Limited NESTLE PRODUCTS VISION The Nestle global vision is to be the leading nutrition. Good Food. from nutrition to pleasure. Meet the nutrition needs of consumers of all age groups.

Nestle Philosophy .

771 2.338 249.42 8 0 971.053 21.112 5.31 4 34.518.30 6 344.897 858.087.022.175.670 6.020 66.222 Total Current Assets Total Assets 5684078 16684176 Good Food. deposits.036 804.573 2.298 3.627.36 4.351.693.47 5 5.225 5.717 1.279 2.774 49.658 47.78 0 2.281 0 824.876 45.852 1.036 261.573 456.346 1.941.088 329.33 2 44.813 26.30 0 238.611.382 80.98 3 47.074.82 3 1 5.05 2 8. plant and equipment Assets subject to finance lease Capital Work-in-progress Total Intangible Assets long term investments long term loans and advances long term security deposits Current Assets Stores and spares Stock in trade Trade debts Current portion of long term loans and advances Advances.57 4 6.647 2.846.544 5.045.088 436.995 3.382.297 93.109.595 3. Good Life .848.327 9.90 2 3.488.37 5 177.393.71 8 8.911 20.61 1 92.492.907.401 10.183 1 0.806 3.291 8.036 281.921 1.107.68 5 1 2.88 0 20 1.093.744 98.623.008 6.663 4.38 7 406.615 1.927.624 865.691 5.FIVE YEAR BALANCE SHEET (Rupees in '000s') Assets Tangible Fixed Assets Property.287 5. prepayments and other receivables Cash and bank balances 2008 2007 2006 2005 2004 9.488.783 30.103 419.836.10 1 135.338 2.298.464.373 0 1.788.

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10 each Issued.527 280.560.305 1.00 0 175.298 1.572 3.197.946.000 1.34 7 31.769 80.52 2 5.02 7 89.527 280. 230 1.261 300.730 249.402 45.035.527 280.549 2.024 1.025.496 249. 080 453.978.572 55.414 74.602 5.392 700.79 9 124. 505 .450.228 2.711 102.963.531.637.496 4.748.73 8 5139875 1319333 351968 453496 249527 280000 3405824 4388847 453496 249527 280000 3128682 4111705 4.70 0 1.041 200.67 5 238.271 67.000 2007 75 0.000 974.000 1.307 2.000 8.333.172.000 577.028.70 9 12.546. 334 2.302.850 444.00 0 1.529 98.062.548.404 400.000 1.188.85 1 1.370 453.858 234.471 5.Equity And Liabilities Equity Share capital and reserves Authorized capital. 000 3.488 0 54042 300000 1924287 127884 2798185 102173 0 2986 3 1.057 2. 75000000 (2008:75000000) ordinary shares of Rs.258 453.000 1.496 249.121.700 942.817. 141 2008 750.000 31 125.472 177582 6988758 119.224.957. subscribed and paid up capital Share premium General reserve Accumulated profit Total Equity Non current Liabilities Long term finances Deferred taxation Retirement and other benefits customer security deposits-interest free Liabilities against assets subject to finance lease Total Non current liabilities Current Liabilities Current portion of: Long term finances Liabilities against assets subject to finance lease Short term borrowings – secured Running finance under markup arrangementssecured Customer security deposits –interest free Trade and other payables Interest and mark-up accrued Dividend payable Total current liabilities Contingencies and Commitments 16 68 41 76 5306571 5.973 1.064.000 2006 750.371. 047 452.000 2004 750. 000 2005 750 .758.

9 58 15.544 1.805.932 34.060 25.252.611.66 9 894.29 0 2005 17.60 0 481878 1.309 3.0 79 4.545.142.28 4 2.816 2.381.734 1.732 2.82 1 1.577.630.33 22 .030.549.242.71 4 59.12 3 3.914 1.24 39.392 989.165 1.100 1.024 105.59 0 33.528 1.785.434 442.3 55 9.53 4 3.45 5 642.108 356.3 93 20.921 711.925.151 1.14 5 584.08 5 180.2 70 7.511.41 8 447.235.3 63 12.538.558.48 4 401.695 76.774 263.72 2 2004 12.81 30.093.027.114.21 2 2006 22.75 6 744.32 4 425.11 8 687.357.FIVE YEAR INCOME STATEMENT (Rupees in '000s') Net Sales Cost of goods sold Gross Profit Distribution and selling expenses Administration expenses Operating Profit Finance cost Other operating expenses Total Operating Profit Other operating income Profit before taxation Taxation Profit after taxation Earnings per share – basic and diluted (Rupees) 2008 341838 47 252315 32 895231 5 389035 2 956816 410514 7 557325 138213 8 193946 3 61800 222748 4 674590 155289 4 2007 28.291.34 8 65.44 9 53.62 8 2.640.944.959 2.38 3 577.092 2.363.623 1.801.415.3 30 6.778.148.005.

54% 0.30% 0.70% 56.59% 0.29% 65.82% 0.74% 0.51% 0.58% 0.00% 37.56% 62.92% 2.57% 2.06% 0.75% 15.35% 8.00% 2.48% 100.00% 6.60% 0.00% 4.01% 0.04% 9.00% 57.07% 100.00% 0.92% 2.00% 0.03% 0.55% 0. prepayments and other receivables Cash and bank balances Total Current Assets Total Assets 56.32% 0.05% 5.69% 0.04% 0.67% 30.75% 1.83% 16.80% 100.84% 0.80% 9.76% 2.00% 4.COMMON SIZE ANALYSIS (BALANCE SHEET) (Amount in '%') Assets Tangible Fixed Assets Property.17% 0.13% 100.38% 0.00% 2.07% 16.54% 0.55% 14.09% 0.00% 20.90% 0.05% 0. plant and equipment Assets subject to finance lease Capital Work-in-progress Total Intangible Assets long term investments long term loans and advances long term security deposits Current Assets Stores and spares Stock in trade Trade debts Current portion of long term loans and advances Advances.24% 57.00 % 2008 2007 2006 2005 2004 .56% 35.66% 42.01% 1.82% 100.27% 35.00% 53.36% 0.00% 0.82% 14. deposits.00% 2.13% 12.90% 0.26% 0.00% 0.00 % 41.72% 39.13% 63.00% 14.19% 0.00% 0.04% 0.16% 8.51% 34.60% 1.33% 0.73% 0.01% 0.51% 0.00% 8.10% 2.

00% 2.06% 41.56% 0.11% 0.Equity And Liabilities Equity Share capital and reserves Authorized capital.32 % 0.00% 0.45% 4.00% 0.51% 0.80% 11.28 % % % 0.57% 1.66 % 7.00% 40.17% 11.00% 25.82% 3.15 % 0.33 % 0.41% 5.00% 0.00% 100.00 % % % COMMON SIZE ANALYSIS (BALANCE SHEET) .24% 40.00% 18.69 0.75% 36.15 % 0.00% 17.00% 4.00% 0.00% 3.02 % 22.00% 0.76 18.81% 0. 10 each Issued.13% 2.94 % 0.00% 31.06% 5.00% 30.84 % 3.00% 22. 75000000 (2008:75000000) ordinary shares of Rs.79% 0.91% 0.97 % 19.86% 1.74 % 25.50% 1.85% 0.30 % 27.76% 0.51% 1.93% 2.91% 2.89 % 0.31 % 0.17% 11.61% 0.77 % 0.03% 0.41 49.50% 0.00% 0.22% 0.20% 0.00% 37.41% 8.00% 0.03 % 5.00 100.00% 28.00% 0.00% 0.53% 10.29% 1.81 % 0.81 % 0.99% 0.00% 0.00% 100.42 % 8.77% 19.00 % 2.00% 100.00% 25.79% 19.04 41.06 12.53% 0.00 24.72% 1.33 % 0.19% 6.01 % 0.00% 0.58 % 0.53 % 0.12% 1.00% 31.07% 4.00% 5. subscribed and paid up capital Share premium General reserve Accumulated profit Total Equity Non current Liabilities Long term finances Deferred taxation Retirement and other benefits customer security deposits-interest free Liabilities against assets subject to finance lease 2.32% 1.56% 0.99% 10.81 % 7.41 % 26.00% % % 0.68% 20.00 100.77% 16.00% 0.72 % 0.32% 0.00% 0.65% 1.04 % % % 0.13% 0.00% 1.00% 0.82 % 0.00% 30.00% 1.00 % 3.98 % Total Non-current liabilities Current Liabilities Current portion of: Long term finances Liabilities against assets subject to finance lease Short term borrowings – secured Running finance under markup arrangements-secured Customer security deposits –interest free Trade and other payables Interest and mark-up accrued Dividend payable Total current liabilities Contingencies and Commitments Total Equity and Liabilities 14.

03% 1.54% 0.26% 11.33% 1.80% 12.000172 % COMMON SIZE ANALYSIS (INCOME STATEMENT) .14% 12.23% 0.19% 0.79% 0.00% 71.20% 3.28% 3.000136 % 2005 100.81% 6.10% 2.46% 0.86% 28.35% 9.97% 4.08% 9.63% 4.91% 6.59% 3.38% 13.21% 3.64% 6.04% 5.37% 12.38% 2.17% 12.(Rupees in '%') Net Sales Cost of goods sold Gross Profit Distribution and selling expenses Administration expenses Operating Profit Finance cost Other operating expenses Total Operating Profit Other operating income Profit before taxation Taxation Profit after taxation Earnings per share – basic and diluted (Rupees) 2008 100.57% 3.20% 27.05% 2.00% 72.07% 1.000141 % 2006 100.32% 7.99% 2.64% 0.000100 % 2007 100.03% 2.06% 3.23% 9.82% 10.73% 0.52% 1.19% 11.81% 26.00% 71.44% 2.67% 0.14% 12.39% 0.62% 28.00% 72.01% 1.53% 3.80% 12.70% 0.20% 0.07% 0.91% 12.09% 27.31% 9.00% 73.18% 6.000148 % 2004 100.51% 2.12% 11.

3934 % 11.8042 -6.1353 % 12.3904 % 22.4478% 17.6692 Coverage Ratio Interest Coverage Ratio (Times Interest Earned) 7.1711 0.7369 13.0266 0.4478% 35.8856% 63.5394 0.7406 11.4675 2004 61261 1.3811 % 11.3904 % 28.0746% 7.9407 0.4250 % 58.2911 Profitability Ratios Gross Profit Margin Operating Income Margin Net Profit Margin (Return on Sales) Return on Assets(ROA) Return on Investment(ROI) Return on Equity(ROE) DUPONT ANALYSIS Du Pont Return on Equity Du Pont Return on Assets 26.0078 5.3581 1.6967 % 58.5207 2005 -814510 0.4817 0.3076% 16.1759 % 43.5453 % 27.9150 % 12.7785 -2.5660 0.9798 0.1887% 12.7219 23.9850 % 6.7011% 12.9042 % 43.2970% 35.3076% 63.5453 % 20.4987 0.3827% 9.3325 % 6.5 YEAR RATIOS (Rupees in '000s') Liquidity Ratios Working Capital Current Ratio Acid Test (Quick Ratio) Cash Ratio Cash Conversion Cycle 2008 377507 1.9042 % 11.5428% 9.8858 0.9948 0.4949 0.1881 % 10.6153 0.3658 6.9905 % 53.6967 % 12.5404 2006 -596803 0.0711 0.6416 0.1879 .6022 2007 -354699 0.4353 % 6.8620 % 53.8620 % 10.9993 % 29.6420% Financial Leverage Ratio Debt to Equity Capitalization Ratio Total Debts to Assets LTD to Net Working Capital 1.3827% 28.3902 0.6420% 32.8003% 12.7379 26.8120 0.6103 0.8968 11.7330% 17.0090% 4.9993 % 27.9294 0.

9352 5.8270 53.8097 24 9.0462 0.2042 4.1970 0.0157 36 Market Ratios Earnings Per Share (EPS) Dividend Per Share (DPS) Price Earnings (PE) Ratio Dividend Payout Ratio Dividend Yield Dividend Cover Ratio Book Value Per Share Market to Book Ratio 34.8718 29.0199 1.3696 4.3368 34.2205 1.2409 3.2814 Z-Score 6.1197 0.0489 -0.6668 19.5582 1.2416 24.531 3 2.8428 22 14 23.6893 47 137.7617 0.5068 59.1256 0.0269 1.2392 5.8126 18.0028 7.6017 2.Debt service coverage Ratio 5.7841 39.1950 50 19.0109 0.5158 1.7906 63.8185 6.2215 6.8529 30.6503 Activity/Efficiency Ratios Cash Turnover Sales to Working Capital (Net Working Capital Turnover) Total Asset Turnover Fixed Asset Turnover Current Asset Turnover Accounts Receivable Turnover Accounts Receivable Turnover in Days Inventory Turnover Inventory Turnover in Days Operating Cycle Payables Turnover Payables Turnover in Days 81.0207 13.6677 26 9.9867 39.9563 -45.4202 58.9135 32.8066 5 45.3983 0.2806 38.2253 5.0922 0.1499 64.4661 7.8491 6 10.4149 59.8107 5.3120 8.7739 0.0239 1.5 10.0518 10.7222 4.7041 2.2461 4.5 38.2755 5.0489 3.9399 0.9399 3.3304 5 30.7816 2.0757 1.4627 15.8857 12 7.1030 0.1547 17.1102 0.0888 Altman Z-Score Working Capital to Total Assets X1 Retained Earnings to total Assets X2 EBIT to Total assets (Basic Earning Power) X3 M.0140 19.2922 96.7234 25.2041 0.0751 43.1505 -26.7816 -0.7041 -0.8213 2.9203 2.0065 5.8309 0.4894 7.0618 24.1260 6.5207 2997.0019 10.4365 38.2035 55.V of Equity to Total Liabilities X4 Net Sales to Total Assets X5 0.7160 47 635.0990 7.1515 6.9550 1.0308 5.0224 0.1974 0.2427 26.2814 4.9762 4.7781 13.9572 0.6111 42 69.6399 0.7814 0.0226 0.9613 90.9786 34.2187 0.7607 14.5628 34.575 6 31.8405 .7552 46.4753 18.3491 1.

8 417 0.55 0.47 0.406. 642.41 0.65 283353.79 5. 2.7 479312. 586 1489786.3028 2920 3202 2955 3006 0. 733 732 496 496 . 2. 1.9 156823 5. 5.39 0. 1.4 234927. 331538.0 0.EVA EBIT Tax Finance Cost or Interest Net Income NOPAT Equity Capital Debt Total Capital Employeed Cost of Equity Cost of Debt EBT Tax Rate Total Cost of Capital WACC 3. 6.894 3. 3. 405253.878 .74 .147 67 4. 0. 601 253 207 322 733.494.45 0.903.557 73 3.277.170.093 0.496 8.086 0. 405 780 897 230 0.392 584.766.114.805.998.108 . 1. 0. 2.10 5.545. 909 284 401 500 8.0 86036 0.363.511.068 0.325 1.0 93684 EVA BY USING NOPAT EVA BY USING NET INCOME ROE-Ks * equity ROE 2793016.6 174210 4.066 0. 3. 1.069 0.932 2.9 437 926890.226 9. 447. 938 221221 0.09 684 684 684 3684 254975 200545 2227484 6 5 1630600 1415324 0 0. 1.590 55 7. 1.640. 481 425 544 165 .010.5 062 95 52 62 114 0.52 8.120.024 1. 145 418 085 714 744.148.5 130018 2. 989 212 290 722 .093 0.086 0. 180 59 434 774 .9 1359858.761.730 7.722 0.64 0.43 0.086 0. .55 2.08 036 036 036 6036 0.54 0. 0.093 0.632. 3. 94 908044.07 66907 104 210 763 0519 4.140.496 . 78 1085614.32 0. 733.

9550 1.8213 2.1030 0.2042 4.7041 5.8405 Z-SCORE ANALYSIS All the Altman Z-values are greater than 3.7816 6.1974 0.9203 2.8185 2004 0.Altman Z-Score Working Capital to Total Assets X1 Retained Earnings to total Assets X2 EBIT to Total assets (Basic Earning Power) X3 M. .1102 0.2755 5.0224 0.9399 5.V of Equity to Total Liabilities X4 Net Sales to Total Assets X5 Z-Score 2008 0.0489 6.1260 2007 -0.0757 1.2215 6.5582 1.2814 6.2461 4.2041 0.2253 2005 -0.0462 0.0226 0.0922 0.2392 5.9352 2006 -0.073 so there is no chance of bankruptcy till 2010 according to the standard values for public limited companies.1197 0.0109 0.

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the company managed to mitigate most of the impact at the operating profit level where results declined by only 40% versus 2007. which shows company’s larger profit. From 2004 to 2008 the operating profit keeps on increasing due to increase in sales and net profit. However. through focus on fixed cost control.5 YEAR RATIOS ANALYSIS Gross Profit margin decreased in 2008 as Nestle consumer pricing could not keep up with the significant inflation on virtually all input commoditiesparticularly fresh milk and energy.Net profit margin declined further due to significant increase in the cost of financing. .

. Whereas the Return on Equity also declined from 2004 to 2008. This ratio is a measure of overall profitability of a company. There is a certain decrease in ratios from the years 2004 to 2008. which decreased in 2005 to 12. this ratio was 17. Nestle Milk Pak Iron fortified and Maggi Lemon Chaska noodles.307% which was definitely a bad turn for Nestle. as it was using fewer assets to generate our net income.6420% which implied that our net income was generated from our assets. In 2004.545% in 2006 while a sudden increase in 2007 to 11. Despite the adversity Nestle enhanced their portfolio with several important new products launches including Everyday Mixed Tea.39%.99% and further declined to 10.From 2004 to 2008 there is an increase in sales because of the increase in production of milk and introduces various new juices in the market. and decline in 2008 to 9.

From 2007-2008 as there is a increase in the market value per share so the Dividend Yield increased. From 2004 to 2005 there was sharp decrease in DPS as the earnings decreased. While it faced a decline in 2007 and in 2008 it rises again. from 2005 to 2006 there was a sharp increase in DPS due to increase in net income. and further it decreased in 2006 and increased in 2007 and approximately remained same in 2008.Debt-to-equity ratio increased from 2004 to 2006 as the long term finances and short term borrowings increased. . Total debt to asset ratio increased in 2005 by slight decrease in current assets. Again from 2006 to 2007 there was a sharp decrease and from 2007-2008 there is a increase in DPS which shows that the company’s net profit has increased.

9572%. From 2004-2005 dividends decreased as the net profit decreased.2817% to 38.From 2004-2007 P/E ratio increased as the company earned more profit by less financed by investments comparatively.7841%. . From 2005-2006 there is a sharp increase in the dividends.8529% to 13. Market to book ratio increased slightly from 2004-2007 and from 2007-2008 it decreased from19. While from 2007-2008 it decreased from 45. From 2006-2007 the dividends given to the shareholders decreased and from 2007-2008 the dividends increased from 226748 to 1201764.

to repay its liabilities from cash generated by operating activities. There is a increase in the current ratio in 2004 as the current liabilities are less as compared to the current assets. . from 2005 to 2008 there is a increase in the current ratio as the current assets keep From 2004-2007 the interest shows the better position to pay its current on increasing. But from 2007-2008 this ratio increased which is good sign.But from 2007-2008 this ratio increased which meant that company is able to repay all of its liabilities from the net cash generated. From 2004-2007 it decreased which was indeed a bad turn for the company. as few cash was generated to repay the liabilities . liabilities out ofpay its interest expense. Acid-test ratio increases from 2004-2008. which shows that company’s liquidity Debt Service Coverage pay portrays a company’s ability power was quite strong toRatioback its immediate liabilities. so the companycoverage ratio declined which is a bad sign for a company to the current assets.This ratio is generally used to evaluate a company’s liquidity position and its ability to pay short term liabilities.

Acid Test/ Quick Ratio: Acid test ratio shows that company has a ability to pay its current liabilities with its most liquid assets and Nestlé’s acid test ratio is less than the industry's ratio so it shows company has less cash and cash equivalents.91 Company 7.60217 Current Ratio: Current ratio of company is less than the industry's current ratio. Company has current assets worth of 1.22 Company 1.07114 to pay liabilities of 1.INDUSTRY RATIO ANALYSIS Liquidity ratios: Industry Current Ratio Acid test/ Quick ratio 1.07113953 0. Coverage Ratio: Industry Interest coverage 0.64 1.36580 .

.91 to pay 1.Interest Coverage Ratio: Interest coverage of company shows negative value so it shows that company is in bad position and is unable to meet its interest charges whereas industry ratio is also not very good but it has 0.

.86 Ratio Company 1.Financial Leverage Ratio: Industry Long term Debt-to Equity 28.171 Long Term Debt-to-Equity Ratio: This ratio should be less but company shows more long term debt than the equity whereas industry's position is too bad because it has 28.86 long term debt and equity showing a greatest difference.

1015 19. .336 35 Total Asset Turnover Company’s asset turnover is good because sales are double of company's assets but industry shows that it’s less efficient than the company's in utilizing its assets.21 165.1584 1. Industry collects its receivables twice a year while Nestle gets its receivables approximately 19 times a year. So nestle is more efficiently collecting its receivables.22 2.Activity Ratios: Industry Total assets turnover Account receivables turnover Account receivables turn over in days Inventory turnover Inventory turnover in days 0. Account receivables turnover Account receivable shows that company is more efficient than the industry in collecting its money from its debtors. Account receivables turnover in days Nestle collects its receivables after every 19 days and industry collects after 165 days.5 243.475 19 10. Inventory Turnover Company’s inventory turnover value is higher than of industry which shows that its stock is sold within 35 days and industry is less efficient in selling out its stock.33 Company 2.

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6 0.45 which is better than the industry's performance because it is left with only 0.31 while industry has 1.01 4.08 1.17 3.19 12. Nestlé’s assets are generating more revenue in comparison to industry . Again.05 Compan y 26.08.99 1.19 than the industry ratio which is too low. Return on Assets Return on assets shows that how efficiently assets are being used to generate revenue or how much revenue is being generated by utilizing the assets. Net Profit Margin Net profit is an amount which has to be distributed among share holders and ploughed back into business after taking account of interest expenses and income taxes. So company is left with 4.9 1.54 9. Nestlé’s return on assets is 9.31 0. Hence.99.16 35.Profitability Ratios: Industry Gross profit margin Operating income margin Net profit margin Return on assets Return on investment Return on equity 3.40 Gross Profit Margin Gross profit margin shows that how much a firm is earning after covering its cost of goods sold and it indicates the efficiency of operations and firm's pricing policies so nestle is show far better ratio of 26. company's margin is much better than the industry's operating margin. Operating Income Margin Operating income margin shows how much amount is left with the company after covering all the administration and selling expenses.

Return on Investment Industry is generating more revenue through its investments. While Nestle has low ratio which shows that Nestle is generating less revenue through its investments than industry.05 which is too low. Return on Equity It shows profitability to the shareholders of the firm after all expenses so ROE of company is 35. .40 which is good but industry is having just 3.

Nestlé’s net income not returned to shareholders in the form of dividends very well.77 0.020 Price Earnings Ratio It shows how much investors are willing to pay per rupee of earnings.957 0.Market Ratios: Industr Compan y y Price Earnings ratio Dividend Payout ratio Dividend Yield 12.94 0.957 rupees for 1 rupee current earning. .24 38. Industry has more ratio than Nestle which shows that industry pays out more of its earnings in dividends than Nestle. While industry shows lower ratio it means that Nestle is doing better job. Dividend Yield A financial ratio that shows how much a company pays out in dividends each year relative to its share price.8 19. Dividend Payout Ratio The payout ratio provides an idea of how well earnings support the dividend payments. Nestle has comparatively very low ratio than industry’s ratio. Industry's earning is very efficiently supporting the dividend payouts while Nestle is not. Nestlé’s P/E ratio shows that its investors are willing to pay 38.

194 .4530 % 5.REQUIRED RATE OF RETURN Product = nth root Product-1(GM)= Avg Mkt return(monthly) Avg mkt return per year(km) 1.3114 94 1.4356 % Covariance Index Company/Variance Index Beta = Beta = 0.0045 3 0.0045 3 0.

The Nestle sales also increases as it has increase its portfolio.6036% CONCLUSION Company is in a good condition to pay its short term liabilities as the current ratio keep on increasing. .368 4% k=KRF+(KmKRF)*Beta K = 8.KRF 9. The profitability increase over the past 5 years which shows company’s good condition. Quick Ratio also increases over the past 5 years which shows company has the ability to meet its immediate liabilities.

All the Altman Z-values are greater than 3.073 so there is no chance of bankruptcy till 2010 according to the standard values for public limited companies. .

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