Amended - Presentation Ratio Analysis Nestle & Engro Foods
Amended - Presentation Ratio Analysis Nestle & Engro Foods
Amended - Presentation Ratio Analysis Nestle & Engro Foods
Analysis
Nestle Vs Engro Foods
Aim
Nestle Engro
Current Ratio= 13,395,017 / 16,788,455 Current Ratio= 6,369,139 / 3,480,987
= 0.80 = 1.83
Analysis: 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
PART I - LIQUIDITY RATIO
Quick Ratio: Quick ratio measures the firm’s ability to pay off short term
obligations without relying on the sale of inventory
Formula: Quick Ratio = (Current Assets – Inventories) / Current Liabilities
Nestle Engro
Quick Ratio = (13,395,017 – 7,046,126.522) / 16,788,455 Quick Ratio
= 0.38 = = (6,369,139– 3,046,859.795) / 3,480,987
= 0.95
Analysis: 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
PART I - LIQUIDITY RATIO
Net Working Capital Ratio: Quick ratio measures the firm’s ability to pay off
short term obligations without relying on the sale of inventory
Analysis: Nestle has the Net Working Capital Ratio of – 0.10 whereas Engro foods has
0.17
PART II - Financial Leverage Ratio
PART II - Financial Leverage Ratio
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
Analysis: 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
PART II - Financial Leverage Ratio
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
Nestle Engro
Debt to Asset Ratio = 2,756,443 / 35,179,859 Debt to Asset Ratio = 9,402,242/16,639,184
= 0.08 = 0.57
Analysis: 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
PART II - Financial Leverage Ratio
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
Formula: Interest Coverage Ratio = Income Before Interest and Income Tax
Expenses*** / Interest Expense
Nestle Engro
Interest Coverage Ratio = 6,586,973*** / 84,109 Interest Coverage Ratio = 1,388,430 / 25,770
= 78.31 = 53.88
Analysis: 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
PART III - Activity Ratios
PART III - Activity Ratios
Total Assets Turnover Ratio. This ratio measures the efficiency of the firm in utilizing its Assets. A high
ratio represents efficient utilization of total Assets in generating sales.
Formula: (Sales or Cost of Goods Sold)/ Total Assets
Fixed Assets Turnover Ratio. This ratio measures the efficiency of the firm in utilizing its Fixed Assets.
A high ratio represents efficient utilization of Fixed Assets in generating sales.
Formula: (Sales or Cost of Goods Sold)/ Fixed Assets
Current Assets Turnover Ratio. This ratio measures the efficiency of the firm in utilizing its Current
Assets. A high ratio represents efficient utilization of Current Assets in generating sales.
Formula: (Sales or Cost of Goods Sold)/ Current Assets
PART III - Activity Ratios
Working Capital Turnover Ratio. This ratio measures the efficiency of the firm in
utilizing its Working Capital. A high ratio represents efficient utilization of working
Capital in generating sales.
Formula: (Sales or Cost of Goods Sold)/ Working Capital
Stock Turnover ratio. This ratio indicates how fast inventory/ Stock is consumed/ sold. A high ratio
is good for the company
Debtor Turnover ratio. It measures how efficiently the management is managing its accounts
receivable. A high ratio represents better credit policy as compared to a low ratio
Creditors Turnover ratio. It reflects how management is managing its account payable. A high
ratio represents that in the ability of management to finance its credit purchase and vice versa
PART III - ACTIVITY RATIOS
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
Analysis: There is 1.84 chances of asset turnover in nestle and 1.79 in Engro foods
against every $ 1
PART III - ACTIVITY RATIOS
Inventory Turnover Ratio: Inventory turnover is calculated by dividing the CGS
by inventory
Nestle Engro
Inventory Turnover Ratio = 48,099,046 / 7,046,126.522 Inventory Turnover Ratio = 23,230,445 / 3,046,859.795
=6.83 = 7.62
Analysis: 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
PART IV
PROFITABILITY
ANALYSIS RATIOS
PART IV - PROFITABILITY RATIOS
• Profitability ratios are financial metrics used by analysts and investors to
measure and evaluate the ability of a company to generate income (profit)
relative to revenue, balance sheet assets, operating costs, and
shareholders’ equity during a specific period of time.
• Show how well a company utilizes its assets to produce profit and value to
shareholders.
• A higher ratio or value is commonly sought-after by most companies, as
this usually means the business is performing well by generating
revenues, profits, and cash flow.
• Ratios are most useful when they are analyzed in comparison to similar
companies or compared to previous periods.
Margin ratios represent the
Return ratios represent the
company’s ability to convert
company’s ability to generate
sales into profits at various
returns to its shareholders.
degrees of measurement.
PART IV - PROFITABILITY ANALYSIS RATIOS
Gross Profit Margin Ratio: Gross profit margin is a metric analysts use to assess a
company's financial health by calculating the amount of money left over from product sales
after subtracting the cost of goods sold (COGS). It tells that how much a firm will receive
against $ 1 sales (Indicates the efficiency of operations and firm pricing policies)
Nestle Engro
Gross Profit Margin = 16,725,318 / 64,824,364 Gross Profit Margin = 6,628,781 / 29,859, 226
= 0.26 = 0.22
Analysis: . 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
PART IV - PROFITABILITY ANALYSIS RATIOS
Nestle Engro
Return on Assets (ROA) = 4,524,771 / 10,873,970* Return on Assets (ROA) = 890,973 / 14,549,624
= 0.42 = 0.06
Analysis: Nestle have return on assets ratio 0.42 or 42% whereas Engro foods has 0.06
or 6% means nestle is returning more than Engro foods so it is better to invest in nestle
PART IV - PROFITABILITY ANALYSIS RATIOS
Return on Investment: Return on Investment (ROI) is a performance measure used to
evaluate the efficiency of an investment or compare the efficiency of a number of different
investments. ROI tries to directly measure the amount of return on a particular investment,
relative to the investment’s cost.
Analysis: Nestle have return on investment ratio 0.42 or 42% whereas Engro foods has
0.06 or 6% means nestle is returning more than Engro foods so it is better to invest in
nestle
PART IV - PROFITABILITY ANALYSIS RATIOS
Nestle Engro
Return on Equity (ROE) = 4,524,771 / 6,597,144.5 Return on Equity (ROE) = 890,973 / 2,923,870.5
= 0.69 = 0.304