| 2015 |
BUILDING FINANCIAL RELATIONSHIP
[aNALYSIS OF NESTLÉ’S RATIOS] |
Submit for: Mark Paronich Submit by: Tam Nguyen – 001794465 |
Nestlé is the world’s leading multinational company in food and beverage manufacture, with headquarters in Switzerland. Nestlé has a wide range of products such as baby foods and cereals, milked-base products, snack food and health related products. Since it was founded in 1866, Nestlé has been growing and operating through six segments: Zone Europe; ...view middle of the document...
The calculation of: Current ratio = Current assets/Current Liabilities
Quick ratio = (Current assets –Inventories)/Current Liabilities
| NESTLÉ | UNILEVER NV |
| 2014 | 2013 | 2014 | 2013 |
Current Ratio | =33,961/32,895 | =30,006/32,917 | =12,347/19,642 | =12,122/17,382 |
| =1,032 | =0,913 | =0,629 | =0,697 |
Quick Ratio | =(33,961-9,172)/32,985 | =(30,006-8,382)/32,917 | =(12,347-2,151)/19,642 | =(12,122-2,285)/17,382 |
| =0,754 | 0,659 | =0,519 | =0,566 |
* Current Ratio:
From the gained results, I have seen that on 2013 and 2014 had a slight better in Nestlé current ratio. In 2013, it was 0.913 and rose in 2014 to 1,032. This was explained as their liabilities were low and current assets increased from 30,006 to 33,961. It was a properly solidarity.
By contrast, in 2013 Unilever NV current ratio was 0,697 and it dropped dipper in 2014 to 0,629. This was because their liabilities were higher than Nestlé ones at the same period, which was from 17,382 to 19,642.
* The short term financial health of Nestlé is better than Unilever NV because the capital is easily available, which reduces the risk of borrowing. So, investors pay more attention on Nestlé.
* Quick Ratio:
Similar to the current ratio, except it only uses cash, accounts receivable and stocks/bonds, excludes inventory. So, the business “can’t count its inventory or prepaid expenses” that can be easily sold (Investopedia 2015). In 2014, Unilever has the quick ratio of 0,519 whereas Nestlé has 0,754 chances of paying off its short term obligations without relying on the level or sales of inventories. This displays Nestlé can provides the greatest sense of financial stability.
2. Profitability Ratios:
Profitability ratios consist of various categories, and are used to determine how profitable a firm is. Among those, Gross Profit Margin shows the companies’ revenue that remains after the cost of goods is deducted.
The calculation of: Gross Profit Margin = (Sales - Costs of Goods sold)/Sales
NESTLÉ | 2014 | 2013 |
Gross Profit Margin | = (91,612 - 47,553)/91,612 | = (92,158 – 48,111)/92,158 |
| = 1,519 (a) | = 1,522 (b) |
From the results above, from 2013 to 2014, it dropped to 0,003, meaning that Nestlé has been getting less money for every pound generated in sales; they have 0,003 left over for every pound from revenues after accounting for the cost of goods sold. The cause of...