Free Samples
AC4410 Accounting And Finance
.cms-body-content table{width:100%!important;} #subhidecontent{ position: relative;
overflow-x: auto;
width: 100%;}
AC4410 Accounting And Finance
0 Download6 Pages / 1,467 Words
Course Code: AC4410
University: University Of Central Lancashire
MyAssignmentHelp.com is not sponsored or endorsed by this college or university
Country: United Kingdom
Question:
In accounting, a ratio is a coefficient or a percentage usually calculated through two functional masses of the balance sheet or the income statement. The ratios are used to measure profitability, the structure of costs, the productivity, the solvency, the liquidity,and financial stability.
Fundamentals of Financial Management Cengage Learning.
Comparing the development of two communication technology companies using financial statement analysis.
The Fundamentals of Financial Statement Analysis as Applied to the Coca-Cola Company.
Essentials of Corporate Finance, Fourth Edition. McGraw-Hill Education Australia.
Ratio Analysis Fundamentals: How 17 Financial Ratios Can Allow You to Analyse Any Business on the Planet. Ratio Analysis.
Answer:
Company overview
Nestlé SA is a Swiss multinational food and beverage company based in Vevey Switzerland. It is currently considered as the largest food company in the world according to the revenue realised within the financial years 2014-2016. It has obtained 72nd rank in Fortune Global 500 in 2014 and also got 33rd place in the 2016 edition of Forbes Global 2000. This list was developed for recognition of the largest public companies in the world (J. Chris Leach, 2016).
Nestlé’s products include baby food, medical food, bottled water, breakfast cereals, coffee and tea, confectionery, dairy products, ice cream, frozen foods, pet food and snacks. Twenty-nine of Nestlé’s brands have annual sales of over 1 billion Swiss francs (about $ 1.1 billion). The list of most popular Nestle brands includes Maggi, Nescafe, Kit Kat, Smarties,Nesquik, Stouffer’s, Vittel and Nespresso. Nestlé is currently operating in 194 countries with 447 factories.It is currently employing about 339,000 people. It is also one of the major shareholders of L’Oréal, the largest cosmetics company in the world.
Ratio and analysis
The main aim of ratio and analysis
In accounting, a ratio is a coefficient or a percentage usually calculated through two functional masses of the balance sheet or the income statement. The ratios are used to measure profitability, the structure of costs, productivity, solvency, liquidity and the financial stability.(Timothy R. Mayes, 2016).
Benefits of ratio analysis
There are more than a hundred ratios used by companies all over the world. These ratios are very beneficial as they make it possible to evaluate the financial situation of a company. It aids management in evaluating the financial progress from one year to another. Moreover, it also aids in comparing with other companies in the same sector (Stephen A. Ross, 2016).Methods such as DuPont analysis can formalize these estimates. Ratios can also be integrated into different discriminate analysis approaches.These approaches are mostly combined to calculate a single indicator called a score. These scores are very important for assessing the risks and bankruptcy of an institution (Tracy, 2012).
Limitations of ratio analysis
Ratio analysis is mostly based on the historical facts and figures which is not so helpful for predicting the future of any company. This is beacuse the current business environment is very unpredictable and dynamic.
The financial information presented in the balance sheet may not be accurate as the value of financial assets or liabilities will be lowered on account of inflation
It cannot be regarded as adequate method for comparing the financial results of a company with that of another as the entities tend to adopt the use of different accounting practices. Thus, the use of this technique will not prove to be highly effective in comparing the financial results across different entities
Nestle financial statement analysis from year 2013 to 2016
Profitability Ratios
Gross profit
Gross profit ratio represents the difference between revenue and cost of sale before deducting overheads etc.
The following formula has been used to calculate the gross profit ratio:
Gross Profit Margin = (Gross Profit X 100)/Net Sales
Years
2013
2014
2015
2016
Sales Revenue
92,158
91,612
88,785
88,469
Cost of Goods Sold
(48,111)
(47,553)
(44730)
(44,199)
Gross Profit
92,158 – (48,111) =44047
91,612 -(47,553) =44059
88,785 – (44730)
= 44028
88,469 – (44,199) = 44270
Workings
(44047/92,158)*100
(44059/91,612)
*100
(44028/88,785)
*100
(44270/88,469)
*100
Gross Profit Ratio
47.80%
48.09%
49.59%
50.04%
The above table shows gross profit percentage of Nestle Plc for year 2013 to 2016 and analysis shows that there was increasing trend in the gross profit percentage. The gross profit ratio shows that the company has scored well in these metrics. This clearly indicates a good profitability. However, the revenue has fallen from 92,158 in 2013 to 88,469 2016. Nestle profit ratio needs a lot of improvement and downfall could have been due to foreign exchange rate or recession in some of the countries.
Operating Profit margin ratio
Operating profit refers to profit left after bearing all expenses except interest and tax expenses. Operating profit margin ratio shows the percentage of operating profit (EBIT) earned by the company on percentage of net revenue (Gong, 2017).
The following calculation below is used:
Operating Profit Margin = (Operating Profit (EBIT) *100) / Net Sales
Years
2016
2015
2014
2013
Total Revenue
90,121,000
89,786,000
89,083,000
91,865,000
Operating Expenses
75464000
75663000
75335000
77313000
Operating Income or Loss
14,657,000
14,123,000
13,748,000
14,552,000
Operating ratio
16.26%
15.73%
15.43%
15.84%
The operating ratio of the company has depicted an increasing trend from the year 2013-2016 which depicts its increasing ability to make profit after meeting the variable costs of production such as wages and raw materials. Thus, it can be said that the efficiency of a company has increased to control its cost and expenses in relation with the business operations.
Liquidity Ratios
Current Ratio
The current ratio is a comparison of current assets (Current Assets) of a company or an individual to its short-term liabilities (Current Liabilities).The general liquidity ratio is an indicator of the liquidity of a company or an individual and its ability to repay short-term debts (Eugene F. Brigham, 2014).
Current Ratio = Current Assets/Current Liabilities
Years
2013
2014
2015
2016
Current Assets
$30,066.00
$33,961.00
$29,434.00
$32,042.00
Current Liabilities
$32,911.00
$32,895.00
$33,321.00
$37,517.00
Current Ratio
0.91
1.03
0.88
0.85
The calculation of current ratio shows that it has increased from the financial year 2013-2014 and has decreased from the year 2014-2016. This indicates that the ability of company to meet its short-term obligations have declined over the year 2013-2016 with a declining current ratio. Also, current ratio over the selected financial period is less that 1 that cannot be regarded as good for the company depicting a financial risk from the perspective of investors as it may not be able to meet its short-term obligations.
Acid Test (or Liquid) Ratio
Formula: Quick Assets/Current Liabilities
Where quick assets is equal to current assets less inventories and prepaid expenses
Years
2013
2014
2015
2016
Current Assets
30 066
33 961
29 434
32 042
Inventories
8382
9172
8153
8401
Current Liabilities
32 917
32 895
33321
37517
Workings
Acid Test Ratio
0.66:1
0.75:1
0.64:1
0.63:1
The liquidity ratio analysis shows that the company has the considerable finance to fulfill its short-term obligations. Acid test ratio is less than 1 from year 2013- 2016. It slightly went up in 2014 and then fell in 2015 and 2016. Nestle would struggle if their creditors wanted payment upfront because they may not have enough cash to pay. In 2014 inventory increased by 790, which shows they have stock which has not sold, however the following year this went down and then up again in 2016.
Activity Ratios
Trade receivables
Trade receivables are money billed by a company to its clients/customers after providing products to them in the normal course of business (James M. Wahlen, 2016). These bills are normally given to the customers on formal invoices
Trade Receivable Turnover in days or average collection period = (Trade Receivable X 365 (Days)) /Sales
Years
2016
2015
2014
2013
Trade Receivables
13,341,000
13,197,000
13,126,000
14,367,000
Sales
90,121,000
89,786,000
89,083,000
91,865,000
Workings
= 13,341,000/90,121,000 x365
= 13,197,000/89,786,000×365
= 13,126,000/89,083,000×365
= 14,367,000/91,865,000×365
Trade Receivable period
54 days
54 days
54 days
57 days
Average collection period is 54 days from 2013-2016, however in 2013 it was 57 days and then the following years it went down, it shows its customers take less time to pay back compared to 2013. Another reason for longer time frame in 2013 is because trade receivable was higher than the other three years.
Trade Payable
Trade payable is also known as accounts payable. This is the amount payable to a supplier for raw material delivered to the company. The due amount is billed by the supplier on the given credit terms.
Trade Payable Turnover in days = (Trade Payable * 365 (Days)) / Cost of Goods Sold
Years
2013
2014
2015
2016
Trade payable
16072
17473
17038
18629
Cost of goods sold
(48,111)
(47,553)
(44730)
(44,199)
Workings
16072/(48,111)*365
17473/(47,553)*365
17038/(44730)*365
18629/(44,199)*365
Trade payable Period
121.93
134.16
139.03
153.84
Trade payable has gone up slightly each year from 2013-2016, the reason for trade payable has gone could be due to cost of goods has fallen.
Conclusion
Nestle company must reduce its expenses to increase its overall profitability.It must also improve its revenue model to generate more sales through its sales teams. Nestle must also increase its product line by using cross-selling strategies. Nestle has to switch to a relationship based model through which it can easily attract its lost customers. It can also improve its and profitability through incentivizing new customers to try its new and latest products with short-term giveaways, specials deals, and discounts.
References
Eugene F. Brigham, J. F. (2014). Fundamentals of Financial Management. Cengage Learning.
Gong, Z. (2017). Comparing the development of two communication technology companies using financial statement analysis. GRIN Verlag.
Chris Leach, R. W. (2016). Entrepreneurial Finance.Cengage Learning.
James M. Wahlen, J. P. (2016). Intermediate Accounting: Reporting and Analysis. Cengage Learning.
McGowan, C. (2014). The Fundamentals of Financial Statement Analysis as Applied to the Coca-Cola Company. Business Expert Press.
Stephen A. Ross, R. M. (2016). Essentials of Corporate Finance, Fourth Edition. McGraw-Hill Education Australia.
Timothy R. Mayes, T. M. (2016). Financial Analysis with Microsoft Excel 2016. Cengage Learning.
Tracy, A. (2012). Ratio Analysis Fundamentals: How 17 Financial Ratios Can Allow You to Analyse Any Business on the Planet. Ratio Analysis.
Free Membership to World’s Largest Sample Bank
To View this & another 50000+ free samples. Please put
your valid email id.
Yes, alert me for offers and important updates
Submit
Download Sample Now
Earn back the money you have spent on the downloaded sample by uploading a unique assignment/study material/research material you have. After we assess the authenticity of the uploaded content, you will get 100% money back in your wallet within 7 days.
UploadUnique Document
DocumentUnder Evaluation
Get Moneyinto Your Wallet
Total 6 pages
PAY 4 USD TO DOWNLOAD
*The content must not be available online or in our existing Database to qualify as
unique.
Cite This Work
To export a reference to this article please select a referencing stye below:
APA
MLA
Harvard
OSCOLA
Vancouver
My Assignment Help. (2021). Accounting And Finance. Retrieved from https://myassignmenthelp.com/free-samples/ac4410-accounting-and-finance/fundamentals-of-financial-management.html.
“Accounting And Finance.” My Assignment Help, 2021, https://myassignmenthelp.com/free-samples/ac4410-accounting-and-finance/fundamentals-of-financial-management.html.
My Assignment Help (2021) Accounting And Finance [Online]. Available from: https://myassignmenthelp.com/free-samples/ac4410-accounting-and-finance/fundamentals-of-financial-management.html[Accessed 18 December 2021].
My Assignment Help. ‘Accounting And Finance’ (My Assignment Help, 2021)
My Assignment Help. Accounting And Finance [Internet]. My Assignment Help. 2021 [cited 18 December 2021]. Available from: https://myassignmenthelp.com/free-samples/ac4410-accounting-and-finance/fundamentals-of-financial-management.html.
×
.close{position: absolute;right: 5px;z-index: 999;opacity: 1;color: #ff8b00;}
×
Thank you for your interest
The respective sample has been mail to your register email id
×
CONGRATS!
$20 Credited
successfully in your wallet.
* $5 to be used on order value more than $50. Valid for
only 1
month.
Account created successfully!
We have sent login details on your registered email.
User:
Password:
MyAssignmenthelp.com can be your one-stop destination, if your aim is to avail remarkable academic writing services. More than often, students face real hardships in selecting remarkable topics like persuasive speech topics, informative speech topics, argumentative essay topics, research paper topics and the likes. Do the task of generating intriguing and remarkable topics seem like an arduous task for you? Instead of worrying, hire the remarkable services of MyAssignmenthelp.com. From selecting remarkable topics, drafting an accurate outline, writing a strong introduction, drafting the main body to writing a strong concluding note, our stalwarts can excel all the steps with absolute accuracy and precision. If your aim is to receive remarkable grades, do not hesitate to give us a call. Visit https://myassignmenthelp.com/ to know more about our services.
Latest Management Samples
div#loaddata .card img {max-width: 100%;
}
MPM755 Building Success In Commerce
Download :
0 | Pages :
9
Course Code: MPM755
University: Deakin University
MyAssignmentHelp.com is not sponsored or endorsed by this college or university
Country: Australia
Answers:
Introduction
The process of developing a successful business entity requires a multidimensional analysis of several factors that relate to the internal and external environment in commerce. The areas covered in this current unit are essential in transforming the business perspective regarding the key commerce factors such as ethics, technology, culture, entrepreneurship, leadership, culture, and globalization (Nzelibe, 1996; Barza, 2…
Read
More
SNM660 Evidence Based Practice
Download :
0 | Pages :
8
Course Code: SNM660
University: The University Of Sheffield
MyAssignmentHelp.com is not sponsored or endorsed by this college or university
Country: United Kingdom
Answers:
Critical reflection on the objective, design, methodology and outcome of the research undertaken Assessment-I
Smoking and tobacco addiction is one of the few among the most basic general restorative issues, particularly to developed nations such as the UK. It has been represented that among all risk segments smoking is the fourth driving purpose behind infections and other several ailments like asthma, breathing and problems in the l…
Read
More
Tags:
Australia Maidstone Management Business management with marketing University of New South Wales Masters in Business Administration
BSBHRM513 Manage Workforce Planning
Download :
0 | Pages :
20
Course Code: BSBHRM513
University: Tafe NSW
MyAssignmentHelp.com is not sponsored or endorsed by this college or university
Country: Australia
Answer:
Task 1
1.0 Data on staff turnover and demographics
That includes the staffing information of JKL industries for the fiscal year of 2014-15, it can be said that the company is having problems related to employee turnover. For the role of Senior Manager in Sydney, the organization needs 4 managers; however, one manager is exiting. It will make one empty position which might hurt the decision making process. On the other hand, In Brisba…
Read
More
MKT2031 Issues In Small Business And Entrepreneurship
Download :
0 | Pages :
5
Course Code: MKT2031
University: University Of Northampton
MyAssignmentHelp.com is not sponsored or endorsed by this college or university
Country: United Kingdom
Answer:
Entrepreneurial ventures
Entrepreneurship is the capacity and willingness to develop, manage, and put in order operations of any business venture with an intention to make profits despite the risks that may be involved in such venture. Small and large businesses have a vital role to play in the overall performance of the economy. It is, therefore, necessary to consider the difference between entrepreneurial ventures, individual, and c…
Read
More
Tags:
Turkey Istanbul Management University of Employee Masters in Business Administration
MN506 System Management
Download :
0 | Pages :
7
Course Code: MN506
University: Melbourne Institute Of Technology
MyAssignmentHelp.com is not sponsored or endorsed by this college or university
Country: Australia
Answer:
Introduction
An operating system (OS) is defined as a system software that is installed in the systems for the management of the hardware along with the other software resources. Every computer system and mobile device requires an operating system for functioning and execution of operations. There is a great use of mobile devices such as tablets and Smartphones that has increased. One of the widely used and implemented operating syste…
Read
More
Tags:
Australia Cheltenham Computer Science Litigation and Dispute Management University of New South Wales Information Technology
Next