1. NESTLE & UNILEVER
FINANCIAL RATIO
ANALYSIS
FINANCIAL MANAGEMENT
BY: M. HASEEB MIR
SUBMITTED TO: MR. ZEESHAN
GHAFOOR

2. NESTLE RATIO ANALYSIS:
In millions 2010 2009
Current Asset 38997 39870
Non Current Assets 72644 71091
110961
Total Assets 111641
36083
Current Liabilities 30146
Non Current Liabilities 18897 21202
Total Liabilities 49043 57285
Equity 62598 53631
7734
Inventory 7925
2734
Cash 8057
Net income 34233 10428
Long term debt 18897 21202
Working Capital 8851 3787
Total Receivables 12083 12309
Sales 109722 107618
CGS (Cost of Goods Sold) (45849) (45208)
Total Debt 49043 57285

3. Short-term solvency , or liquidity ratios: 2010 2009
Current ratio 1.29 1.10
Quick ratio 1.03 0.89
Cash ratio 0.27 0.07
Net working ratio 0.07 0.03
Long-term solvency, or financial leverage ratios:
Total debt ratio 0.439 0.516
Debt-equity ratio 0.78 1.068
Equity multiplier 1.78 2.068
Long term debt ratio 0.23 0.28
Asset management or turnover ratios:
Inventory turnover 5.785 5.845
Days sales in inventory 63.04 days 62.39 days
Receivables turnover 9.08 8.74
Days sales in receivables 40.19 days 41.76 days
NWC turnover 12.39 28.41
Fixed asset turnover 1.51 1.51
Total asset turnover 0.98 0.97
Profitability ratios:
Profit margin 31.19% 9.4%
Return on asset 0.306 0.094
Return on equity 0.546 0.194

4. LIQUIDITY RATIOS: Tells the short term paying ability of the firm.
 Current Ratio
The rule of thumb for current ratio is 2:1that is varying with the different industries it
depends on the nature of current assets and liabilities, company meets 2 times its current
liabilities by its current assets.
Formula = Current assets/ Current liabilities
Current asset has ability to meet 1.29 times of their current liability in 2010 which is greater than
2009 which is 1.10, which is more than satisfactory.
 Acid test / Quick Ratio
The rule of thumb for quick ratio is 1:1.company meets its current liabilities with its most
liquid assets.
Formulae = Current Asset- Inventories/Current liabilities
Quick ratio shows that after removing inventories from current asset, 1.03times ability to meet its
current liabilities in 2010 while it was less in 2009 which is 0.8.
 Cash Ratio
Formulae = cash/current liabilities
In 2010, only cash can meet 0.27times of its current liabilities but in 2009 it was less 0.07
times.
 Net Working Capital to Total Assets
Formulae = Current Assets – Current Liabilities/Total assets
An increasing trend from 2009 to 2010 of NWC to asset which is 0.03 & 0.07 respectively.
Long Term Solvency, or financial leverage, ratios:
Basic measure of the creditors claim is represented by debt ratio it states total liabilities as a percentage of
total assets.
 Total Debt Ratio
Formulae = Total Assets-Total equity/Total Assets
Decreasing trend from 2009 to 2010 of total debt’s portion from total asset which is, 0.516 times
& 0.439 respectively.

5.  Debt-equity ratio
Formulae = Total Debt /Total Equity
In 2009 debt-equity ratio was 1.068 times but reduced in 2010 which is 0.78 times.
 Long-term debt ratio
Formulae = long term debt/long term debt + total equity
5% reduction in Long term debts from capital structures in 2010 which is 23% in
comparison with 2009’s 28%.
Asset management or turnover ratios:
How efficiently current assets are utilized by the company
 Inventory Turnover Ratio
Show the effectiveness of inventory management practices of the firm.
Formulae = cost of goods sold/Total inventory
ITR is 5.78 times in 2010 & 5.84 times in 2009
 Days sales in inventory
Formulae = 365 days/inventory turnover
63.04 days are required to clear inventory of 2010 while 62.39 days were required for previous
year of 2009.
 Receivables Turnover Ratio
Indicates quality of receivables and how successful the firm is in its collections.
Formulae = Net Sales / A/R
9.08 times sales are on credit in 2010 while a previous year reveals that 8.74 time’s sales were on
credit.
 Days sales in receivables
Formulae = 365 days/receivables turnover
2010 required 40.19 days to collect money from debtors while 2009 required 41.76 days
for collection.
 Total Assets Turnover
Indicates the overall effectiveness of the firm in utilizing its assets to generate sales
Formulae = Income/ Total Assets

6. 9.8% sales are generated from total asset of 2010 while 9.7% sales were generated from
total asset of 2009.
Profitability ratios:
A class of financial metrics that are used to assess a business's ability to generate earnings as compared
to its expenses and other relevant costs incurred during a specific period of time.
 Profit margin
Formulae = net income/sales
Profit margin is 31.19% in 2010 and very low 9.4% in 2009.
 Return on assets
Formulae = net income/total assets
ROA is 30.6% in 2010 and again very low in 2009 which is 9.4%.
 Return on equity
Formulae = net income/total equity
Increasing trend of ROE from 2009 to 2010, which is 19.4% & 54.6% respectively.

7. UNILEVER RATIO ANALYSIS:
In 000’s 2010 2009
Current Asset
704,825.00 600,683.00
Non Current Assets
83,922.00 374,153.00
Total Assets
788,747.00 974,836.00
Current Liabilities
646,896.00 680,683.00
Non Current Liabilities
38,182.00 25,497.00
Total Liabilities
685,078.00 706,180.00
Equity
404,395.00 268,656.00
Inventory
358,094.00 333,840.00
Cash
80,436.00 40,696.00
Gross Profit
1,534,884.00 1,254,367.00
EBIT (Operating Income)
645,859.00 241,656.00
Taxation
(208,396.00) (64,864.00)
Net Income (income for year)
437,463.00 176,792.00
Working Capital
57,929.00 (80,000.00)
Total Receivables
9,638.00 15,287.00
Sales
4,040,887.00 3,376,511.00
CGS (Cost of Goods Sold)
(2,506,003.00) (2,122,144.00)
Total Debt
685,078.00 706,180.00

8. Liquidity Ratios 2010 2009
Current Ratios 1.08954917 0.882470989
Quick Ratio 0.535991875 0.392022425
Cash Ratio 0.124341471 0.059787008
Long term Solvency ratios
Total Debt Ratio 0.49 0.72
Debt to Equity Ratio 1.694081282 2.628565898
Equity Multiplier 1.950437073 3.628565898
Asset Utilization Ratios
Inventory Turnover -6.998170871 -6.35676971
Days Sale in inventory -52.15648585 -57.41910068
Receivables Turnover 419.2661341 220.8746647
Days sale in Receivables 0.870568764 1.652520901
Total Asset turnover 5.123172576 3.463670812
Capital Intensity 0.195191551 0.288711039
Profitability Ratios
Profit Margin 0.108259152 0.052359373
Return on asset 0.554630319 0.181355633
Return on Equity 1.081771535 0.658060866

9. LIQUIDITY RATIOS: Tells the short term paying ability of the firm.
 Current Ratio
The rule of thumb for current ratio is 2:1that is varying with the different industries it
depends on the nature of current assets and liabilities, company meets 2 times its current
liabilities by its current assets.
Formula = Current assets/ Current liabilities
Current asset has ability to meet 1.089 times of their current liability in 2010 which is
greater than 2009 which is 0.882, which is more than satisfactory.
 Acid test / Quick Ratio
The rule of thumb for quick ratio is 1:1.company meets its current liabilities with its most
liquid assets.
Formulae = Current Asset- Inventories/Current liabilities
Quick ratio shows that after removing inventories from current asset, 0.535 times ability to meet
its current liabilities in 2010 while it was less in 2009 which is 0.392.
 Cash Ratio
Formulae = cash/current liabilities
In 2010, only cash can meet 0.124times of its current liabilities but in 2009 it was less
0.059 times.
 Net Working Capital to Total Assets
Formulae = Current Assets – Current Liabilities/Total assets
An increasing trend from 2009 to 2010 of NWC to asset which is 0.181 & 0.073 respectively.
Long Term Solvency, or financial leverage, ratios:
Basic measure of the creditors claim is represented by debt ratio it states total liabilities as a percentage of
total assets.
 Total Debt Ratio
Formulae = Total Assets-Total equity/Total Assets
Decreasing trend from 2009 to 2010 of total debt’s portion from total asset which is, 0.72 times
& 0.49 respectively.
 Debt-equity ratio
Formulae = Total Debt /Total Equity

10. In 2009 debt-equity ratio was 2.628 times but reduced in 2010 which is 1.694 times.
 Equity Multiplier
Total assets/Total equity
In 2009 equity multiplier was 3.628 while in 2010 it was 1.950
Asset management or turnover ratios:
How efficiently current assets are utilized by the company
 Inventory Turnover Ratio
Show the effectiveness of inventory management practices of the firm.
Formulae = cost of goods sold/Total inventory
ITR is 6.998 times in 2010 & 6.356 times in 2009
 Days sales in inventory
Formulae = 365 days/inventory turnover
52.1 days are required to clear inventory of 2010 while 57.4 days were required for previous year
of 2009.
 Receivables Turnover Ratio
Indicates quality of receivables and how successful the firm is in its collections.
Formulae = Net Sales / A/R
419.299 times sales are on credit in 2010 while a previous year reveals that 220.874 time’s sales
were on credit.
 Days sales in receivables
Formulae = 365 days/receivables turnover
2010 required 0.87 days to collect money from debtors while 2009 required 1.67 days for
collection.
 Total Assets Turnover
Indicates the overall effectiveness of the firm in utilizing its assets to generate sales
Formulae = Income/ Total Assets
5.12% sales are generated from total asset of 2010 while 3.46% sales were generated
from total asset of 2009.

11. Profitability ratios:
A class of financial metrics that are used to assess a business's ability to generate earnings as compared
to its expenses and other relevant costs incurred during a specific period of time.
 Profit margin
Formulae = net income/sales
Profit margin is 0.108 in 2010 and very low 0.0523 in 2009.
 Return on assets
Formulae = net income/total assets
ROA is 0.554 in 2010 and again very low in 2009 which is 0.181.
 Return on equity
Formulae = net income/total equity
Increasing trend of ROE from 2009 to 2010, which is 0.658 & 1.08 respectively.

12. Comparison report:
Current ratio of nestle shows that nestle has more ability to pay of its liability by its current assets in both
years than unilever. Similarly with the quick ratio/acid ratio that nestle can pay its liability more
significantly than unilever.
Cash ratio shows that nestle’s cash for both year is more than unilever’s cash to pay off its short term
debts.
NWC to assets of unilever is more in 2009 and 2010 but with decreasing trend and Nestlé’s NWC is
frequently increasing but its percentage is low in accordance with unilever.
Total debt ratio trend in both company’s was decreasing but %age of debt ratio was high in 2009 of
unilever than nestle.
Debt to equity ratio trend is reducing for both but unilever debt portion from equity is more than the
nestle.
Decreasing trend for long term debt ratio of nestle
Decreasing trend in equity multiplier of both companies but unilever has more fluctuation than nestle.
Days sale in Inventory, decreasing trend in unileverwhich shows that less days were required in 2010 to
turn over the inventory but nestle has increasing trend in this regards which means more days were
required by nestle in 2010 to finish its inventory.
For receivables trend is same for both companies that less days are required in 2010 to recover payments
from debtors but proportionate days are more in nestle than unilever.
Trend is increasing for total assets turnover ratio but for nestle more sales were generated than unilever.
In profitability ratios profit margin is more effectual of nestle than unilever with an increasing trend.
ROA is good in 2010 of both companies than 2009 which was very low but here unilever’s ROA is more
effectual similarly ROE of unilever is more helful than nestle but trend is increasing of both companies.