Nestle Vs Engro
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Cross Sectional Ratios Analysis Nestle VS Engro Foods Taimur Zaib
BBS/FA13/022/LHR Nov 10, 2014
Submitted to
Mr. Umair Saeed Bhutta
Balance Sheet Analysis of ABBOTT and SANOFI AVENTIS PHARMACEUTICALS The asset side of balance sheet shows the size of the firm so by comparing balance sheet of both companies we analyzed that the fixed asset of the Abbott is greater than Sanofi Aventis pharamceutical which means that Abbott has invested more in the fixed assets than Sanofi Aventis Pharma whether by starting new project or by any other source. Due to high investment in fixed assets long term loan and advances of Abbott are also greater than Sanofi Aventis Pharma and total assets of Abbott are also greater than Sanofi Aventis pharma which shows that the size of Abbott is greater than Sanofi Aventis. Abbott has more cash and bank balance than Sanofi Aventis.
INCOME STATEMENT ANALYSIS OF ABBOTT and SANOFI AVENTIS PHARMACEUTICALS We have made analysis between engro and nestle companies .here we analyze that sales of nestle (64824, 364) is more as compare to engro (29859, 226). Because their investment in fixed asset is more as compare to Engro. Production is also increase due to more investment. And as production increase ultimately their sales is also increase. Nestle have more cost of goods sold that is (48099, 046) whereas engro have (23230, 445). Because engro have only dairy products whereas nestle have broad category of products. As nestle sales is more so their gross profit is also more as compare to engro. Nestle have more distribution and selling expense as compare to engro because engro have their own distribution channels whereas nestle relay on others for distribution. As well as engro products are also less and due to this their distribution expenses are less. Nestle company employee (328000) are more as compare to engro. As well as they uses more advertising companies so that’s why their administrative expenses are more. Nestle Finance cost is also more because their interest expense are more.
Operating expense of nestle (1064233) engro (208902) means they use more directions to run their business. Nestle operating income is also more nestle is a well-known brand and they generate high income. Nestle have more tax because they have more products that is (1834, 507) whereas engro products are limited and their tax is (471,687). Nestle have more no of shares and more earning. so Earning per share of nestle is also more that is 102.94 as compare to engro that is 1.22 So after analysis of income statement we see that nestle have more sales and more profit than engro which shows that nestle company is good than engro.
Financial Ratios Analysis Liquidity Analysis
Current Ratio Current ratio tells us the short term solvency of the firm and tells the ability of the firm to repay its short term obligations. In nestle the firm has 0.80 ability to repay against the $ 1 loan and Engro has 1.83 so this implies that Engro food has more ability to repay its short term obligations.
Quick Ratio Quick ratio measures the firm’s ability to pay off short term obligations without relying on the sale of inventory. Nestle has the quick ratio of 0.38 whereas Engro foods has 0.95 chances of paying off its short term obligations without relying on the level or sales of inventory.
1.2 Profitability Analysis
Return on Investment How much a firm is returning to its stockholder only in the case if the firm is earning profit? Nestle have return on investment ratio 0.13 or 13% whereas Engro foods has 0.05 or 5% means nestle is returning more than Engro foods so it is better to invest in nestle.
Net Profit Margin Ratio Net profit margin is calculated by dividing the net profit after taxes by the sales means after paying the taxes you are earning some of the profit it means firm is doing its business well. Nestle is earning 0.01 or 1% against $ 1 and Engro food is earning 0.03 or 3% it shows in the profitability ratios Nestle is earning more than Engro foods.
Gross Profit Margin Ratio It tells that how much a firm will receive against $ 1 sales. Nestle has 0.26 gross profit margin ratio and Engro has 0.22. So in this case nestle is earning more profit than Engro foods.
12.3Activity Analysis
Asset Turnover Ratio This ratio measures the turnover of the entire firm’s asset. It is calculated by dividing the sales by total assets of the firm. If firm shouldn’t increase its sales so there is a possibility that a firm will sale its some assets. There is 1.84 chances of asset turnover in nestle and 1.79 in Engro foods against every $ 1.
Inventory Turnover Ratio Inventory turnover is calculated by dividing the CGS by inventory. The inventory turnover of nestle is 6.83 times and of Engro foods is 7.62 times. Here the best ratio is of Engro foods that is much more than nestle.
12.4Capital Structure Analysis
Debt to Equity Ratio Debt to equity ratio shows the comparison to equity this ratio tells that how much firm has ability to pay its debt and if equity is more than the total debt of the firm so firm will face low risk. In nestle the firm has 3.62 against $ 1 to pay debt whereas Engro food has 1.30 to pay against $ 1 debt. Here Nestle has more ability to pay its debt.
Debt to Asset Ratio Debt to asset ratio shows if the firms have more assets regardless of total debt than that firm will easily pay off its debts. The debt to asset ratio in nestle is 0.08 whereas 0.57 in Engro foods. So Engro foods will pay off its debt more easily than nestle.
Interest Coverage Ratio Interest coverage ratio measures the extent to which the operating income of the firm can decline before the firm is unable to meet its annual interest cost. Nestle has 78.31 times interest coverage ratio whereas Engro foods has 53.88 times interest coverage ratio so Engro foods has less chances of failure and facing bankruptcy than nestle.
Conclusion After all the findings, it is concluded that financial ratios are the basic and most important part of any business. It describes the firm’s financial position. As the data indicates that NESTLE is an international brand and has expanded its business on the large geographical area and also offers the large range of products, but on the other side ENGRO food offers the limited range of the products and most of them are dairy products. From the financial statements it is clear that the financial position of the NESTLE is far better than ENGRO as it is more preferred by the customers and also an internationally distributed. It also has less risk. It gives more return because it gains more profit than ENGRO. On the other hand ENGRO deals with the limited products in a limited geographical area but on the basis of financial ratios ENGRO has a better financial position and also has an opportunity to expand its business. Both the companies have some opportunities and threads and they need to work on it.
References 1. 2. 3. 4.
NESTLE annual report 2011 ENGRO FOODS annual report 2011 www.nestle.pk www.engrofoods.com
BBS/FA13/022/LHR Nov 10, 2014
Submitted to
Mr. Umair Saeed Bhutta
Balance Sheet Analysis of ABBOTT and SANOFI AVENTIS PHARMACEUTICALS The asset side of balance sheet shows the size of the firm so by comparing balance sheet of both companies we analyzed that the fixed asset of the Abbott is greater than Sanofi Aventis pharamceutical which means that Abbott has invested more in the fixed assets than Sanofi Aventis Pharma whether by starting new project or by any other source. Due to high investment in fixed assets long term loan and advances of Abbott are also greater than Sanofi Aventis Pharma and total assets of Abbott are also greater than Sanofi Aventis pharma which shows that the size of Abbott is greater than Sanofi Aventis. Abbott has more cash and bank balance than Sanofi Aventis.
INCOME STATEMENT ANALYSIS OF ABBOTT and SANOFI AVENTIS PHARMACEUTICALS We have made analysis between engro and nestle companies .here we analyze that sales of nestle (64824, 364) is more as compare to engro (29859, 226). Because their investment in fixed asset is more as compare to Engro. Production is also increase due to more investment. And as production increase ultimately their sales is also increase. Nestle have more cost of goods sold that is (48099, 046) whereas engro have (23230, 445). Because engro have only dairy products whereas nestle have broad category of products. As nestle sales is more so their gross profit is also more as compare to engro. Nestle have more distribution and selling expense as compare to engro because engro have their own distribution channels whereas nestle relay on others for distribution. As well as engro products are also less and due to this their distribution expenses are less. Nestle company employee (328000) are more as compare to engro. As well as they uses more advertising companies so that’s why their administrative expenses are more. Nestle Finance cost is also more because their interest expense are more.
Operating expense of nestle (1064233) engro (208902) means they use more directions to run their business. Nestle operating income is also more nestle is a well-known brand and they generate high income. Nestle have more tax because they have more products that is (1834, 507) whereas engro products are limited and their tax is (471,687). Nestle have more no of shares and more earning. so Earning per share of nestle is also more that is 102.94 as compare to engro that is 1.22 So after analysis of income statement we see that nestle have more sales and more profit than engro which shows that nestle company is good than engro.
Financial Ratios Analysis Liquidity Analysis
Current Ratio Current ratio tells us the short term solvency of the firm and tells the ability of the firm to repay its short term obligations. In nestle the firm has 0.80 ability to repay against the $ 1 loan and Engro has 1.83 so this implies that Engro food has more ability to repay its short term obligations.
Quick Ratio Quick ratio measures the firm’s ability to pay off short term obligations without relying on the sale of inventory. Nestle has the quick ratio of 0.38 whereas Engro foods has 0.95 chances of paying off its short term obligations without relying on the level or sales of inventory.
1.2 Profitability Analysis
Return on Investment How much a firm is returning to its stockholder only in the case if the firm is earning profit? Nestle have return on investment ratio 0.13 or 13% whereas Engro foods has 0.05 or 5% means nestle is returning more than Engro foods so it is better to invest in nestle.
Net Profit Margin Ratio Net profit margin is calculated by dividing the net profit after taxes by the sales means after paying the taxes you are earning some of the profit it means firm is doing its business well. Nestle is earning 0.01 or 1% against $ 1 and Engro food is earning 0.03 or 3% it shows in the profitability ratios Nestle is earning more than Engro foods.
Gross Profit Margin Ratio It tells that how much a firm will receive against $ 1 sales. Nestle has 0.26 gross profit margin ratio and Engro has 0.22. So in this case nestle is earning more profit than Engro foods.
12.3Activity Analysis
Asset Turnover Ratio This ratio measures the turnover of the entire firm’s asset. It is calculated by dividing the sales by total assets of the firm. If firm shouldn’t increase its sales so there is a possibility that a firm will sale its some assets. There is 1.84 chances of asset turnover in nestle and 1.79 in Engro foods against every $ 1.
Inventory Turnover Ratio Inventory turnover is calculated by dividing the CGS by inventory. The inventory turnover of nestle is 6.83 times and of Engro foods is 7.62 times. Here the best ratio is of Engro foods that is much more than nestle.
12.4Capital Structure Analysis
Debt to Equity Ratio Debt to equity ratio shows the comparison to equity this ratio tells that how much firm has ability to pay its debt and if equity is more than the total debt of the firm so firm will face low risk. In nestle the firm has 3.62 against $ 1 to pay debt whereas Engro food has 1.30 to pay against $ 1 debt. Here Nestle has more ability to pay its debt.
Debt to Asset Ratio Debt to asset ratio shows if the firms have more assets regardless of total debt than that firm will easily pay off its debts. The debt to asset ratio in nestle is 0.08 whereas 0.57 in Engro foods. So Engro foods will pay off its debt more easily than nestle.
Interest Coverage Ratio Interest coverage ratio measures the extent to which the operating income of the firm can decline before the firm is unable to meet its annual interest cost. Nestle has 78.31 times interest coverage ratio whereas Engro foods has 53.88 times interest coverage ratio so Engro foods has less chances of failure and facing bankruptcy than nestle.
Conclusion After all the findings, it is concluded that financial ratios are the basic and most important part of any business. It describes the firm’s financial position. As the data indicates that NESTLE is an international brand and has expanded its business on the large geographical area and also offers the large range of products, but on the other side ENGRO food offers the limited range of the products and most of them are dairy products. From the financial statements it is clear that the financial position of the NESTLE is far better than ENGRO as it is more preferred by the customers and also an internationally distributed. It also has less risk. It gives more return because it gains more profit than ENGRO. On the other hand ENGRO deals with the limited products in a limited geographical area but on the basis of financial ratios ENGRO has a better financial position and also has an opportunity to expand its business. Both the companies have some opportunities and threads and they need to work on it.
References 1. 2. 3. 4.
NESTLE annual report 2011 ENGRO FOODS annual report 2011 www.nestle.pk www.engrofoods.com
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