Profitability Ratios 2011 2012 Interpretation

Return of Equity(ROE) =

net profit

average owne r ' sequity ×

100

=9804

[ (58274+62598 )÷2]× 100

=16.22%

=net profit

average owne r ' sequity ×

100

=11060

[ (58274+62604 )÷2 ] × 100

= 18.30%

During the period 2011 to 2012, the ROE has increase from 16.22% to 18.30%. This means that the owner is getting a higher return of his capital this year.

Net Profit Margin(NPM) =

net profitnet sales

×100

=980483642

×100

=11.72%

=net profitnet sales

×100

=1106092186

×100

= 11.99

During the period 2011 to 2012, the NPM has increase from 11.72% to 11.99%. This means that the business is getting better at controlling expenses.

Gross Profit Margin(GPM) =

gross profitnet sales

×100

=2500983642

×100

=29.90%

=gross profitnet sales

×100

=2794492186

×100

= 30.31%

During the period 2011 to 2012, the GPM has increase from 29.90% to 30.31%. This means that the business is getting better at controlling its COGS.

Selling Exp. Ratio(SER) =

total selling expensenet sales

×100

=1321083642

×100

15.79%

= total selling expense

net sales×100

=1423592186

×100

15.44%

During the period 2011 to 2012, the SER has decrease from 15.79% to 15.44%. This means that the business is getting better at controlling its selling expenses.

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Ratio Analysis on the Business Based on the Year 2011 & 2012

General Exp. Ratio(GER)

=total general expense

net sales×100

=1321082642

×100

=15.79%

=total general expense

net sales×100

=1423592186

×100

=15.44%

During the period 2011 to 2012, the GER has decrease from 15.79% to 15.44%. This means that the business is getting better at controlling its general expenses.

Stability Ratios 2011 2012 Interpretation

Working Capital(WCR) =

totalcurrent assettotal liabilities

=3332435232

=0.94:1

=totalcurrent assettotal liabilities

=3520538753

=0.91:1

During the year 2011 to 2012, the working capital has decrease from 0.94:1 to 0.91:1. This means that the business ability to pay off its current liabilities with using current asset is getting better.

Total Debt=total liabilitiestotal asset

×100

=55817114091

×100

=48.92%

=total liabilitiestotal asset

×100

=63625126229

×100

=50.40%

During the year 2011 to 2012, the total debt has increase from 48.92% to 50.40%. This means that the total debt has getting worse.

Stock Turnover(ICR)= 365÷( COGS

average inventory )=365÷ ¿=71.05 days

= 365÷( COGSaverage inventory )

=365÷ ¿= 69.30 days

During the year 2011 to 2012, the stock turnover has decrease from 71.05 days to 69.30 days. This means that the business has been selling its stock faster.

Debtor Turnover(DTR) =365÷( credit sales

average deptors )=365÷ ¿=55.47 days

=365÷( credit salesaverage deptors )

=365÷ ¿= 52.94 days

During the year 2011 to 2012, the debtor turnover has decrease from 55.47 days to 52.94 days. This means that the business is getting faster in getting its debt.

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Interest Coverage(ICR)

=interest expense+net profit

interest expense

=527+9804527

=19.60 times

=interest expense+net profit

interest expense

=825+11060

825=14.40 times

During the year 2011 to 2012, the interest coverage has decrease from 19.60 times to 14.40 times. This means that the business its ability to pay back the interest expenses is worse.

Appendix 1

P/E Ratio

= current share priceEarnings per share

=68.653.26

=21.06

The high P/E Ratio for this company will not have any investors because they have to wait for such a long time to claim back their original principal.

Appendix 2: investment Recommendation

Profitability:

Based on our calculations, we found out that the business we chose, Nestle is doing well at controlling its profitability ratios. In 2011, Nestle was listed number 1 in the fortune global 500 as the world’s most profitable co-operation. With a market capitalization of $ two hundred and

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thirty three billion, Nestle ranked number 9 in the fortune global 500 of 2013.

Stability:

Based on our calculations, we found out that the business we chose, Nestle is doing slightly bad on controlling its total dept and interest coverage. Not only that, it is doing good on its working capital, stock turnover and deptor turnover.

Price:

Based on the company’s P/E Ratio, it is 21.06, it means that an investor needs to wait for a long time claim back his original principal. We would say that, we would not invest on it.

APPENDIX

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P & L Statement for the year 2011

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Balance Sheet for the year 2011

P & L for the year 2012

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Balance Sheet for the year 2012

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Reference

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Bursamalaysia.com.

NESTLE (MALAYSIA) BERHAD [S] (4707) | Bursa Malaysia Market

In-text: (Bursamalaysia.com, 2014)

Bibliography: Bursamalaysia.com. 2014. NESTLE (MALAYSIA) BERHAD [S] (4707) |

Bursa Malaysia Market. [online] Available at:

http://www.bursamalaysia.com/market/listed-companies/list-of-companies/plc-

profile.html?stock_code=4707 [Accessed: 22 Jan 2014].

Businesscasestudies.co.uk.

Introduction - Nutrition, Health & Wellness - New Product Development at Nestlé -

Nestlé | Nestlé case studies, videos, social media and information | The Times 100

In-text: (Businesscasestudies.co.uk, 2014)

Bibliography: Businesscasestudies.co.uk. 2014. Introduction - Nutrition, Health &

Wellness - New Product Development at Nestlé - Nestlé | Nestlé case studies,

videos, social media and information | The Times 100. [online] Available at:

http://businesscasestudies.co.uk/nestle/nutrition-health-wellness-new-product-

development-at-nestle/introduction.html#axzz2r7ENaBtn [Accessed: 22 Jan 2014].

Nestle

History

In-text: (http://www.nestle.com, 1866)

Bibliography: http://www.nestle.com. 1866. History. [online] Available at:

http://www.nestle.com/aboutus/history [Accessed: 22 Jan 2014].

Nestle.

Consolidated Financial Statement of the Nestle Group 2012

In-text: (Nestle, 2012)

Bibliography: Nestle. 2012. Consolidated Financial Statement of the Nestle Group

2012. [online] Available at:

http://www.nestle.com/asset-library/Documents/Library/Documents/Financial_State

ments/2012-Financial-Statements-EN.pdf [Accessed: 22 Jan 2014].

Nestle.

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Consolidated Financial Statement of the Nestle Group 2011

In-text: (Nestle, 2011)

Bibliography: Nestle. 2011. Consolidated Financial Statement of the Nestle Group

2011. [online] Available at:

http://www.nestle.com/asset-library/documents/library/documents/financial_stateme

nts/2011-financial-statements-en.pdf [Accessed: 22 Jan 2014].

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