Financial Analysis I. Solvency The current ratio of Nestle in the three years was decrease as its current liabilities more than its current assets and the current liabilities were continuing increase. The loan and borrowing were largely increase from RM7,555,000 to RM84,313,000 as we can see in 2013 and 2014 so the debt that company needed to pay was raise (Maybank, 2014). Nestle tend to borrow and apply loan more to expand its business and invest in good quality project. The current assets of Nestle is not able to cover its liabilities, it may unable to meet its obligation in short term compared to Duty Lady Milk. The current ratio of Duty Lady Milk is larger than Nestle, its current assets is able to cover its liabilities as the current ratio …show more content…
Debt/ asset ratio of Nestle was increase in the 3 years. It is a high ratio, means that it has a high level of indebtedness as it total liabilities were rise more than total assets. If liabilities continue rise and reach a very high level, Nestle will not able to meet its obligation as assets cannot cover its debt. It is why some company was become bankruptcy and unable to repay the money they borrow thus this amount becomes bad debts. However, Duty Lady Milk has low indebtedness compared to Nestle. In 2013 and 2014, Duty Lady Milk tries to maintain its indebtedness level. III. Debt Service Times interest earned is a measure at the ability to repay service debt obligation. But, in Nestle and Duty Lady does not have any interest expense because this two company in the food industries not like bank which have interest expense. IV. Asset Management Asset turnover ratio is used to calculate the efficiency to utilizing total asset for the sales. Use your assets in produce your product productivity and rise the sales to earn more profit. The asset turnover ratio of Nestle and Duty Lady Milk are similar in these 3 years. But, the two asset turnover ratio is considered as a low ratio (unproductive capacity). A low ratio means there will be less efficient of firm in total asset for employed. Nestle does not efficient in using firm’s asset to produce more …show more content…
But, in the long run if the project success then they may have more capacity to make both short-term and long-term obligation. Nestle have a certain percentage of gross profit margin and it has a stable profitability so it does not bankrupt easily or make a bad liability. Debt/ asset ratio show that the company has high indebtedness level compared to Duty Lady as they borrow more to expand business. As the profitability of Nestle are still stable and in 2015 the gross profit margin was higher than in past 2 years, it means Nestle may success in expand their business. Indebtedness level of Nestle high due to high cost of initial invest into business expand project. Although the indebtedness level currently is high but after the project become more stable and have sufficient fund then Nestle may reduce borrowing and make
These ratios can be used to determine the most desirable company to grant a loan to between Wendy’s and Bob Evans. Wendy’s has a debt to assets ratio of 34.93% while Bob Evans is 43.68%. When it comes to debt to asset ratios, the company with the lower percentage has the lowest risk. Therefore, Wendy’s is more desirable than Bob Evans. In the area of debt to equity ratios, Wendy’s comes in at 84.31% while Bob Evans comes in at 118.71%. Like debt to assets, a low debt to equity ratio indicates less risk in a company. Again, Wendy’s is the less risky company. Finally, Wendy’s has a times interest earned ratio of 4.86 while Bob Evans owns a 3.78. Unlike the previous two ratios, times interest earned ratio is measured on a scale of 1 to 5. The closer the ratio is to 5, the less risky a company is. From the view of a banker, any ratio over 2.5 is an acceptable risk. Both companies are an acceptable risk, however, Wendy’s is once again more desirable. Based on these findings, Wendy’s is the better choice for banks to loan money to because of the lower level of
DuPont is a very big company with a low debt policy designed to maximize financial flexibility and insulate operations from financial constraints. It is one of the few AAA rated manufacturing companies due its investments are primarily financed from internal sources. However, because prices fell in the 1960’s thus DuPont’s net income fell also. The adverse economic conditions in 1970’s escalated inflation: increase in oil prices increased required inventory investments of the company. 1975 recession negatively affected DuPont’s net income by 33% and returns on capital and earnings per share fell. The company cut dividends in 1974 and working capital investment removed. Proportion of debt increased from 7% in 1972 to 27% in 1975 and interest coverage falls from 38 to 4.6. The company perceived increase in debt temporary but moved quickly to reduce its debt ratio by decreasing capital expenditures. Debt proportion dropped to 20%, interest coverage increased to 11.5 by 1979.
... this. Since 2009 the company has showed to increase its current ratio where it recorded an all-time high of 2.15 assets per 1 current liability. This was a significant point in the company, the high ratio showed the companies conservative strategy where majority of the cash was held back to fund acquisitions and fund its growth. The company remains to have a relatively high current ratio intact, as their main goal right now is to acquire and build new stores and make the whole foods brand more accessible all around the world.
The objective of this report is to give an overall view on research and analysis to regards of two companies, Wm Morrison Supermarkets Plc and Tesco Plc that I have chosen for. In this report, I will be comparing two companies’ financial analysis based on their comprehensive income and balance sheet for one year; and also will be comparing their generating cash ability, cash management and financial adaptability based on statement of cash flows for the past two year and also determine whether the two companies have the ability to repay their debts to their creditors, generating into cash and going concern which related to finance.
“If you live in a free market and a free society, shouldn’t you have the right to know what you’re buying? It’s shocking that we don’t and it’s shocking how much is kept from us” (Kenner). For years, the American public has been in the dark about the conditions under which the meat on their plate was produced. The movie, Food Inc. uncovers the harsh truths about the food industry. This shows that muckraking is still an effective means of creating change as shown by Robert Kenner’s movie, Food Inc. and the reforms to the food industry that followed its release.
Mondelez International Inc. is a global snacking powerhouse with 2012 revenue of $35billion. ("Mondelez international reports," 2013) Mondelez International Inc. is selling its products in 165 countries, and it is a leader in the world in selling candy, coffee, chocolate, biscuits, etc, with brands such as Milka Chocolate, Cadbury Dairy Milk, Cadbury, LU, Jacobs coffee, Oreo biscuits and Nabisco, Trident Gum and Tang. ("Mondelez international reports," 2013)
The ratio of 1.7 for the last two years indicates consistency, although a lower number is preferred. As a company produces high value product, this could be a satisfactory ratio. By comparing it to 2011 when a ratio was 2.9, in the last two years a ratio improved
Rondo is showing steady improvement in its Fixed Assets Turnover ratio. Total Assets Turnover ratio is a measure of all assets measured against sales. Rondo is showing improvement in this area at 1.0, but is still below the industry average of 1.1. Rondo's performance is fair in this ar...
In spite of this, you can find certain circumstances, where ratios are misused which can guide the management to wrong direction. One of the drawbacks includes that ratio analysis is utilized on the basis of financial statements. Amount of constraints of financial statements could have an effect on the precision or quality of ratio analysis .Moreover, ratio analysis intensely depends upon quantitative facts and figures and it ignores qualitative data. In addition to this, it is merely utilized as a tool for assessing the performance of business activities but ratio analysis certainly possesses some latitude for window dressing (Ahmed, 2006).A major limitation is the fact that it makes comparison of ratios between enterprises which happens to be questionable on account of variances in methods of accounting operation and
The return on equity ratio is calculated by dividing the net income minus dividends by the equity. Per the Principles of Accounting textbook, “return on equities ratio enables the comparison of capital utilization among firms…this can help assess of effective the firm is in using borrowed funds”. Kinder Morgan’s return on equity ratio for December 2015 was .59%. In 2013 the ratio was 9.14% and in 2014 it was 3.01%. The return on equity ratio, like the return on assets ratio significantly declined over the past three years. One significant decrease to cause this decline is due to the deterioration of net income. Kinder Morgan’s net income from 2013 to 2015 was $1.19 billion, $1.02 billion, and $240 million successively. This sharp decline in net income can cause misplaced judgment on the decline of the debt ratios. When Kinder Morgan had a much higher income, their debt ratios were much
Barra Airways has an interest coverage ratio (ICR) of 18; this means that Barra Airways is not burdened with a large amount of interest payments on existing debts. Therefore, using debt does appear to be an attractive source of finance. This is because Barra Airways existing interest burden is low, meaning that to increase it would have a reduced effect on the company’s net profit. However, EasyJet has an ICR of 30.88, considerably larger than that of Barra Airways [5]. Lenders may look at this data and conclude that Barra Airways is a riskier company to lend too than others in the same industry; this will result in a higher interest rate on any debt taken out.
Cocoa production is predicted of getting shortage of supply in 2020 (Nelson, 2017). The famous chocolate drink that Malaysian drink daily, Milo contains cocoa. Other than Milo, Koko Krunch, Nestle Crunch Wafer, KitKat are also mainly made from cocoa. Nestle as a company which largely depends on cocoa bean for its products, will become one of the victim of this cocoa supply risk. The biggest cocoa producer in the world, Ivory Coast, is facing the problem of diseases infected in cocoa plant, frequent rain, and buyers forcing producers to sell cocoa at very low price (The Guardian, 2014). In Malaysia and Indonesia, cocoa plantations are threatened by a tiny moth named as cocoa pod borer which eat the seed (Nelson, 2017).. These pests has cost cocoa
This ratio would be the asset turnover. It uses net sales divided by average assets. In 2005, Pepsi Co's asset turnover was at 1.02 while Coca Cola's asset turnover was at 1.06.... ... middle of paper ...
The transnational corporation Nestle Company founded in 1886 based in Vevey, Switzerland, sells its products in 189 countries and has manufacturing plants in 89 countries around the world, boasting an unmatched geographic presence. The company started off as an alternative to breastmilk and initially looked into other countries for an increase in global opportunities. It founded its first out of country offices in London in 1868, and due to the small size and inability of Switzerland to compensate growth manufacturing plants were built in both Britain and the United states in the late nineteenth century. A large portion of Nestlé’s globalization came in the 1900s which was when it first moved into the chocolate business after
From given information, it could be analyzed that Nestle gives priority to only economic prosperity without regards to social and environmental concern. Some Nestle’s actions are not only unfair but also unethical as well as illegal. According to Nestle Corporate Business principle, Nutrition, Health and Wellness, the company tries to give healthier food with good taste in order to enhance consumers’ living quality. But, from the article, I think this is quite immoral action. Since children have to get healthy food with high nutrients for brain and nerve development, but they promote unhealthy food with very high level of sugar, fat, and salt to especially children.