Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
LIQUIDITY RATIOS
o Current ratio
current _ ratio
2014
2013
2012
2011
2010
current _ assets(CA)
curren _ liabilities (CL )
CA
5356129
5719972
3739135
4319757
3702988
CL
5527426
5385435
4079847
5017792
3488095
Current Ratio
0.96
1.06
0.91
0.86
1.06
The current ratio is a liquidity and efficiency ratio that measures a firm's ability to pay off its shortterm liabilities with its current assets. Normally a ratio should be 2:1. So the company is not in a
good position in that status throughout the years. 2014 ratio is higher compare to 2012 & 2012 but
less than 2013. So it reduction of current ratio can be seen.
o Quick ratio
Quick _ assets
Current _ Liabilities
CA Inventories
Quick _ ratio
CL
Quick _ ratio
2014
2013
2012
2011
2010
CA
5356129
5719972
3739135
4319757
3702988
CL
5527426
5385435
4079847
5017792
3488095
Inventories
2952545
2603655
1872334
2340914
2131493
Quick Ratio
0.43
1.06
0.92
0.86
1.06
The quick ratio or acid test ratio is a liquidity ratio that measures the ability of a company to pay its
current liabilities when they come due with only quick assets. Normally the ratio should be 1:1. So
when data was analysed from 2010 to 2014 ratio is varied from 1.06 to 0.43. 2010 and 2013 ratios
are closed to 1 compare to other years. In 2014 there is less ability to the company to pay their dues
with their quick assets.
Reduction for ratio can be caused the increased of inventories compare to other years. Also there is a
reduction in current assets as well in 2014. In 2013 current assets have the highest value from 2000
to 2014. Also in that year inventories was also rather in lower side. In 2013 it has the highest ratio
compare to 2014.
So increasing inventories will be benefitted the companys future plans. But taking a wrong decision
will affect the future plans of the company.
CAPITALIZATION RATIOS
o Debt / Equity Ratio
Total Liability
6683138
6314455
4874266
5612505
4010831
2014
2013
2012
2011
2010
Equity
4087928
4215858
3769023
3343308
2567065
Ratio
1.63
1.50
1.29
1.68
1.56
The debt-equity ratio is another leverage ratio that compares a company's total liabilities to its
total shareholders' equity. This is a measurement of how much suppliers, lenders, creditors and
obligors have committed to the company versus what the shareholders have committed.
For a company debt/equity ratio should be in a safe side when it is 1.5:1. Increase of the ratio will be
affects the companys financial ability. So company doesnt show any profit loss. So it will be safer
side
in
2014
as
well.
But
2013,
2012
were
much
safer
years.
2014
2013
2012
2011
2010
Compare
Ratio
62.05%
59.97%
56.39%
62.67%
60.97%
debts can be seen in 2014. But ratio percentage doesnt show
any significance difference throughout years. So it is better if the company can reduce the percentage
as much as possible.
o Equity ratio
current _ ratio
2014
2013
2012
2011
2010
Earnings
4765797
4083211
3506814
3444267
2827877
Expenses
978904
766466
529146
814497
926762
Ratio
4.87
5.33
6.63
4.23
3.05
The times interest earned ratio, sometimes called the interest coverage ratio, is a coverage ratio that
measures the proportionate amount of income that can be used to cover interest expenses in the
future.
If the ratio is higher than 1 it is in good shape. Then the company has the ability pay their debts
Or interest. 2012 was the best year for company that provided the best ratio. But when comes to 2014
it has gradually reduced.
Indicates the velocity of a company's debt collection, the number of times average receivables are
turned over during a year. This ratio determines how quickly a company collects outstanding cash
balances from its customers during an accounting period.
Higher the ratio better to company. So throughout years company performance are lowered. So
company might be needed to increase the ratio as soon as possible. Because ratio is going down from
25.09 to 16.80 since 2011.
2014
2013
2012
2011
2010
360
Debtors _ turnover _ ratio
Period
19.88
24.47
15.80
16.57
14.46
The numerator of the average collection period formula shown at the top of the page is 365 days. For
many situations, an annual review of the average collection period is considered. However, if the
receivables turnover is evaluated for a different time period, then the numerator should reflect this
same time period.
Compare to 2013, 2014 has a good value. But from 2010 to 2012 the values are in better shape than
the 2014. 2013 was the worst year.
2014
2013
2012
2011
Average creditors
360
Purchases
Average Creditors
3369803
2633601
2714662
2554143
Purchases
20767394
20251656
19131496
17211025
Ratio
58.41
46.81
51.08
53.42
Average payment period means the average period taken by the company in making payments to its
creditors. So longer the time taken means company cash is within the company. So in 2014 ratio is
better compare to 2013. 2013 had the lowest ratio.
Cost of Good
20767394
20251656
19131496
17211025
2014
2013
2012
2011
Inventory
2778100
2237994
2106624
2340914
Turnover
7.47
9.04
9.08
7.35
The inventory turnover ratio is an efficiency ratio that shows how effectively inventory is managed
by comparing cost of goods sold with average inventory for a period. This ratio is important because
total turnover depends on two main components of performance. The first component is stock
purchasing. If larger amounts of inventory are purchased during the year, the company will have to
sell greater amounts of inventory to improve its turnover. If the company can't sell these greater
amounts of inventory, it will incur storage costs and other holding costs.
The company had a good run in 2013 & 2012. 2011 & 2014 have a lower ratio compare to other
years. Slight increment of sales in 2014 may cause the lower ratio. Also inventory is higher than
2013 as well.
2014
2013
2012
2011
2010
Gross _ profit
Sales
Gross Profit
12135491
10661757
9439992
8364755
7381641
Sales
32902885
30913413
28571488
25575780
21439008
Margin
36.88%
34.49%
33.04%
32.71%
34.43%
What remains from sales after a company pays out the cost of goods sold. To obtain gross
profit margin, divide gross profit by sales. Gross profit margin is expressed as a percentage.
Gross profit margin has slightly increased from 2011 to 2014. So Nestle is a company with a good
gross profit margin. Without this company cannot pay out other expenses. Company is in a stable
stage
with
2014
2013
2012
2011
2010
this
profit
margin.
Net _ profit
Sales
Net Income
3786893
3316745
2977668
2629770
1901115
Net Sales
32902885
30913413
28571488
25575780
21439008
Margin
11.51%
10.73%
10.42%
10.28%
8.87%
Net profit margin is the percentage of revenue remaining after all operating expenses, interest, taxes
and preferred stock dividends (but not common stock dividends) have been deducted from a
company's total revenue. Throughout the years slight increment can be seen.
2014
2013
2012
2011
Sales
Average _ assets
Sales
32902885
30913413
28571488
25575780
Average Assets
10650589
9586701
8799551
7766854
Turnover Ratio
3.09
3.22
3.25
3.29
The ratio of the value of a companys sales or revenues generated relative to the value of its assets.
The Asset Turnover ratio can often be used as an indicator of the efficiency with which a company is
deploying
its
assets
in
generating
revenue.
Generally speaking, the higher the asset turnover ratio, the better the company is performing, since
higher ratios imply that the company is generating more revenue per dollar of assets. Turnover ratio
is gradually reducing since 2011. It is a not a good sign for the company. Nestle is have a low profit
margin. It is the reason for the higher assets turn over ration compare to other companies.
o Earning Power
Earning _ power
2014
2013
2012
2011
Earning
4765797
4083211
3506814
3444267
Average Assets
10650589
9586701
8799551
7766854
Earning Power
45%
43%
40%
44%
A business's ability to generate profit from conducting its operations. Earnings power is used to
analyse stocks to assess whether the underlying company is worthy of investment. Possessing greater
long-term earnings power is one indication that a stock may be a good investment. 2012 report the
lowest earning power value. Also in 2014 earning power is in slightly higher value compare to 2014.
So
company
is
in
good
shape
currently
regarding
earning
power.
o Return On Equity
Re turn _ on _ equity
2014
2013
2012
2011
Net _ income
Average _ equity
Net Income
3786893
3316745
2977668
2629770
Average Equity
4151893
3992440
3556165
2955186
Earning Power
91.21%
83.08%
83.73%
88.99%
The amount of net income returned as a percentage of shareholders equity. Return on equity
measures a corporation's profitability by revealing how much profit a company generates with the
money shareholders have invested.
This ratio is important for shareholders for taking decisions about the company. Companys growth is
good from 2011 to 2014. Because value of 2014 is 91.21% it means for 100 it returns 91.21.
2014
2013
2012
2011
2010
Shares
53725.5
53725.5
53725.5
53725.5
53725.5
Net Profit
Earnings per share ratio measures the amount of net income earned per share. It is an indicator of
companys profitability. Higher earnings per share are always better than the lower earnings per share
ratios. Because this means company is more profitable and the company has more profit to distribute
among their shareholders. The company; nestle has shown a significant growth of earnings per share
during past 5 years from 35.4 to 70.5. Thus much more investors are getting attracted and pay more
attention about nestle. This consistent improvement in the earnings per share value year after year is
a better indication of continuous improvement in the earning power of the nestle company.
2014
2013
2012
2011
2010
Dividents
3,852,993
2,890,243
2,540,638
1,843,887
1,124,374
Shares
53725.5
53725.5
53725.5
53725.5
53725.5
Dividend per share is a significant factor which is used to determine companys profitability and
current economic value. It indicates the amount of cash return to its shareholders. Increasing of
dividend per share is favourable for company. Nestle was declared 71.7% of dividends per share in
2014 and when compared with other years it was a huge achievement and also it is gradually
increased during the last 5 years. Maintaining a higher value of DPS will increase the trust on
organization and they tend reinvest in the organization in hope of getting more profits of the future
benefiting organization, thus the more investors will be attracted. But the key problem is that the
ratio lacks a sensible context, because how much the shareholders paid for the shares is not indicated.
In case of higher dividends per share, there might be a risk with the future cash flow due to lack of
cash for future needs of company. NESTs international investor base accounts for 94% of
company shares, thus having higher dividends payments might be the strategy of the company being
transferring its profits to international shareholders by minimizing the tax.
2014
2013
2012
2011
2010
Payout Ratio
101.70%
87.20%
85.38%
70.14%
59.04%
The dividend payout ratio measures the percentage of earnings paid out to shareholders. In other
words the ratio shows the portions profits the company decides to retain to fund the operations. This
ratio is used to determine the ability of business entity to pay dividends, as well as its reliability in
doing so. Maintaining a consistent ratio is important than a high or low ratio.
Nestle has shown a significant growth of dividend payout ratio and in 2014 it passes 100%. Thus the
company shows a forward trend of payout and it has being fulfilled the investors concerns. But
when the ratio is greater than 100% then the company is dipping into its cash reserves to pay
dividends. This situation is not sustainable for the company and it may result in the eventual
termination of all dividends or financial decline of the business. In 2014 the company has not
retained cash for future operations. Thus the reliability of their dividend payment is not sustained.
But when we considered Nestle as a mature company it is okay to pay higher dividends because it is
enough to keep a little amount of profit for growth. Thus the best way of using profits is paying
higher dividend. Maintaining a considerable level of dividend ratio is better than increasing it
drastically.
2014
2013
2012
2011
2010
Ratio
298.58
320.58
208.30
156.24
172.60
Price earnings ratio is a tool which is used for P/E ratios indicated positive future performance and
investors are willing to pay more for this company share. Lower ratios indicated poor current and
future performance of a company. It could prove to be a poor investment. P/E ratios of nestle are
shown a significant growth during last 5 years except 2011. But they have managed that poor
circumstance and achieved a huge progress from 2011 to 2014. Thus the investors are willing to pay
more for nestle and it shows a positive current status and future performance. Clearly the P/E ratios
of Nestle proved that the investing amount per earning has getting increased during last 3 years. It
conclude that nestle has a better current and future achievement.