FM Assignment (5 Companies) PDF

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FINANCIAL ANALYSIS OF 5 COMPANY (FOOD AND BEVERAGES)1. NESTLE MALAYSIANo .Ratio 2017 (RM ‘000) 2018 (RM ‘000) Liquidity ratio – Current Ratio = Current asset/current liabilities =1,073,111/ 1,651,=0.؞ Nestle has $0 in current assets for every $ in current liabilities=1,215,416/ 1,782,=0.Nestle has $...

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FINANCIAL ANALYSIS OF 5 COMPANY (FOOD AND BEVERAGES)

1. NESTLE MALAYSIA No . 1.

Ratio Liquidity ratio – Current Ratio = Current asset/current liabilities

2.

Liquidity ratio – Quick Ratio =Current Asset – Inventory / current liabilities

3.

Activity ratio – Inventory Turnover = COGS/Inventory

4.

Activity ratio – Total Assets Turnover =Sales/Total Asset

5.

Profitability ratio -Profit Margin =Net income /sales

6.

Profitability ratio -Return On Assets =Net income/total asset

7.

Leverage ratio- Total Debt Ratio =Total asset-total equity /total asset

8.

Leverage ratio- Debtequity Ratio =Total debt/total equity

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2017 (RM ‘000)

2018 (RM ‘000)

=1,073,111/ 1,651,110 =0.650 ‫ ؞‬Nestle has $0.650 in current assets for every $1 in current liabilities =1,073,111 - 467,316 / 1,651,110 =0.367 ‫ ؞‬Nestle has $0.367 of liquid assets available to cover each $1 of its current liabilities =3,309,386 / 467,316 =7.082 ‫؞‬Nestle sold off the entire inventory 7.082 times =5,260,490 / 2,616,823 =2.010 ‫؞‬For every dollars in assets , Nestle generated $2.010 in sales =642,550 / 5,260,490 =0.122 ‫؞‬Nestle generates a little less than 13 cents in profit for every dollar in sales =642,550 /2,616,823 =0.246 ‫ ؞‬Nestle generates 24.6 cents of profit per dollar of assets =2,616,823 - 635,894/ 2,616,823 =0.757 ‫ ؞‬Nestle has $0.757 in debt for every $1 in assets =1,980,929/635,894 =3.115 ‫؞‬Nestle has $3.115 in debt for every $1 in equity.

=1,215,416/ 1,782,079 =0.682 Nestle has $0.682 in current assets for every $1 in current liabilities =1,215,416 - 530,378 / 1,782,079 =0.384 ‫ ؞‬Nestle has $0.384 of liquid assets available to cover each $1 of its current liabilities =3,381,380 / 530,378 =6.375 ‫؞‬Nestle sold off the entire inventory 6.375 times =5,519,045 / 2,847,282 =1.938 ‫؞‬For every dollars in assets , Nestle generated $1.938 in sales =658,882 / 5,519,045 =0.119 ‫؞‬Nestle generates a little less than 12 cents in profit for every dollar in sales =658,882/2,847,282 =0.231 ‫ ؞‬Nestle generates 23.1 cents of profit per dollar of assets =2,847,282 - 654,333/ 2,847,282 =0.770 ‫ ؞‬Nestle has $0.770 in debt for every $1 in assets =2,192,949/654,333 =3.351 ‫؞‬Nestle has $3.351 in debt for every $1 in equity

Common Size Balance sheet

Items Total Non current asset Total Current asset Total equity attributable to owners of the company Total Non-current liabilities Total current liabilities

2018 (RM ‘000) 1 631 866/2 847 282 x 100 =57.31% 1 215 416/ 2 847 282 x 100 =42.69% 654 333/2 847 282 x 100 =22.98% 410 870/2 847 282 x 100 =14.43% 1 782 079/2 847 282 x 100 =62.59%

Common Size Income statement

Items Cost of sales Gross profit Other income Selling and distribution expense Administrative expense Profit before tax Income tax expense Total comprehensive income

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2018 (RM ‘000) 3 381 380/5 519 045 x 100 =61.27% 2 137 665/5 519 045 x 100 =38.73% 16 819/5 519 045 x 100 =0.30% 1 023 305/5 519 045 x 100 =18.54% 177 990/5 519 045 x 100 =3.23% 875 890/5 519 045 x 100 =15.87% 217 008/5 519 045 x 100 =3.93% 670 269/5 519 045 x 100 =12.14%

COMPANY BACKGROUND Nestlé S.A. is the world's leading nutrition, health and wellness company based in Switzerland. It is the largest food and beverage company in the world. Nestlé sells 2000 different brands over 7 food and beverage categories. The company’s main products are powdered and liquid beverages, milk products, ice cream, confectionary and pet care products.It owns several major consumer brands such as Nescafé, Nestea, Nestle, Purina, KitKat and Vittel, including many other prominent brands. Nestle maintains its prominent position in market by carefully analyzing and reviewing the SWOT analysis. SWOT analysis an immensely interactive process and requires effective coordination among various departments within the firm such as marketing, finance, operations, management information systems and strategic planning.

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Strength Reliable suppliers – It has a strong base of reliable supplier of raw material thus enabling the company to overcome any supply chain bottlenecks. Highly skilled workforce through successful training and learning programs. Nestle is investing huge resources in training and development of its employees resulting in a workforce that is not only highly skilled but also motivated to achieve more. Weakness Need more investment in new technologies. Given the scale of expansion and different geographies the company is planning to expand into, Nestle needs to put more money in technology to integrate the processes across the board. Right now the investment in technologies is not at par with the vision of the company. Financial planning is not done properly and efficiently. The current asset ratio and liquid asset ratios suggest that the company can use the cash more efficiently than what it is doing at present. Opportunities Economic uptick and increase in customer spending, after years of recession and slow growth rate in the industry, is an opportunity for Nestle to capture new customers and increase its market share. Organization’s core competencies can be a success in similar other products field. A comparative example could be - GE healthcare research helped it in developing better Oil drilling machines. Threat

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Intense competition – Stable profitability has increased the number of players in the industry over last two years which has put downward pressure on not only profitability but also on overall sales. Changing consumer buying behavior from online channel could be a threat to the existing physical infrastructure driven supply chain model.

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TREND ANALYSIS Based on our data, both of liquidity ratio in 2018 shows the good performance compared with 2017 which is value for current ratio in 2018 increase from 0.65 to 0.68.Means for every $1 of current liability, Nestle Malaysia has $0.68 to pay its liability in short term which is more than in 2017.For quick ratio in 2018 also give the same result which is increase from 2017 with 0.38 means for every $1 current liabilities, the company has $0.38 liquid asset to cover its current liabilities and the value is more better compared with 2017 which is 0.37 only. But both of leverage ratio in 2018 more worst compared with 2017.For total debt ratio, the amount increase from 0.76 to 0.77 means the company has more liabilities than asset in 2018 compared with 2017.Performance of debt equity ratio also decreased which is the value of debt equity ratio in 2018 with more than 2017. That means in 2018,the company had $3.35 liabilities for every dollar equity compared with 2017 which is the liabilities only $3.12 for every dollar equity. For activity ratio and profitability ratio,we can see that the value in 2018 is less than 2017.So,I can conclude that the performance for activity and profitability ratio in 2018 is more worst compared 2017.The company cannot control their inventory wisely in 2018,because of that the inventory turnover decreased from 2017.The company maybe used more costs in 2018 compared 2017 and it deducted more the profit for each dollar in income for the year 2018.

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2. F&N HOLDINGS BHD

No Ratio . 1. Liquidity ratio – Current Ratio = Current asset/current liabilities 2.

Liquidity ratio – Quick Ratio =Current Asset – Inventory / current liabilities

3.

Activity ratio – Inventory Turnover = COGS/Inventory

4.

Activity ratio – Total Assets Turnover =Sales/Total Asset

5.

Profitability ratio -Profit Margin =Net income /sales

6.

Profitability ratio -Return On Assets=Net income/total asset

7.

Leverage ratio- Total Debt Ratio=Total asset-total equity /total asset

8.

Leverage ratio- Debtequity Ratio=Total debt/total equity

2017 (RM ‘000)

2018 (RM ‘000)

=1738398/1193498 = 1.46% ‫ ؞‬F&N has $1.46 in current assets for every $1 in current liabilities =(1738398-247085)/1193498 = 1.25% ‫؞‬The F&N has $1.25 of liquid assets available to cover each $1 of its current liabilities =1236660/247085 =5.0 times ‫؞‬F&N sold off the entire inventory 5 times which is in 72 days =1897959/ (1738398+3152754) =0.39 times ‫؞‬For every dollars in assets , F&N generated $0.39 in sales =1325601/1897959 =69.84% ‫؞‬F&N generates a little less than 70 cents in profit for every dollar in sales =1325601/ (1738398+3152754) =0.27 @ 27.1% ‫ ؞‬F&N generates 27.1 cents of profit per dollar of assets =(48911523132107)/4891152 =0.36 ‫ ؞‬F&N has $0.36 in debt for every $1 in assets =(1193498+565547)/3132107 =0.56 ‫؞‬F&N has $0.56 in debt for every $1 in equity.

=1106621/775847 =1.43% ‫ ؞‬F&N has $1.43% in current asset for every $1 in current liabilities =(1106621-242512)/775847 =1.11% ‫؞‬F&N has $1.11 of liquid assets available to cover each $1 of its current liabilities

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=1254191/242512 =5.17 times ‫ ؞‬F&N sold off the entire inventory 5.17 times which is in 69 days =1926537/(1106621+3384129) =0.43 times ‫؞‬For every dollar in assets , F&N generated $0.43 in sales =179057/1926537 =9.29% ‫؞‬F&N generates less than 10 cents in profit for every dollar in sales =179057/(1106621 + 3384129) =0.04 @ 4% ‫ ؞‬F&N generates 4 cents profit per dollar of assets. =(4490750-3169820)/4490750 =0.29 ‫؞‬F&N has $0.29 in debt for every $1 in assets = (775847 + 545083)/3169820 =0.42 ‫ ؞‬F&N has $0.42 in debt for every $1 in equity

F&N HOLDINGS BHD COMMON SIZE INCOME STATEMENT(2018)

Item Revenue Cost of sales

(RM ‘000) 100% =(1 254 191/1 926 537) X100 =65.101% =(672 346/1 926 537) X100 =34.899% =(5 264/1 926 537 )X100 =0.273% =(181 212/1 926 537) X100 =9.406% =(126 165/1 926 537) X100 =6.549% =(198 625/1 926 537 )X100 =10.310% =(19 568/1 926 537) X100 1.016% =(179 057/1 926 537) X100 9.294%

Gross Profit Other income Distribution expenses Administration expenses Profit Before Taxation Taxation Profit After Taxation

F&N HOLDINGS BHD COMMON SIZE BALANCE SHEET(2018)

Item Total current assets Total Non-current assets Total Assets Total Current Liabilities Total Non- current Liabilities Total liabilities Total Equity Total Liabilities and Equity shares

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(RM ‘000) =(1 106 621/4 490 750) X100 =24.642% =(3 384 129/4 490 750) X100 =75.358% 100.0% =(775 847/4 490 750) X100 =17.277% =(545 083/4 490 750)X100 =12.138% =(1 320 930/4 490 750)X100 =29.414% =(3 169 820/4 490 750)X100 =70.586% =(4 490 750/4 490 750)X100 =100.0%

COMPANY BACKGROUND F&N Holdings Bhd (F&NHB) or Fraser & Neave Holdings Bhd is one of the oldest and most established food and beverage companies which was founded by John Fraser and David Chalmers Neave in 1883, which is now synonym with high quality, close to the consumers, trusted and halal-compliant products. F&NHB Group is a syariah compliant company which has been listed on Bursa Malaysia’s Main Board. The business operation of F&N is organized according to products and services , Food & Beverage Malaysia , Food & Beverage Thailand and Property and others. They operates in several country which is Malaysia,Brunei. Thailand and Indochina. Their products is exported to more than 68 countries across the globe and will continue expanding while focusing on halal markets and consumers.

Strength  Great Brand Positioning – The brand of F&NHB is already well-known and recognized by majority of the people in each market that they have penetrated. The company name are always understood or synonymous with high quality products, nice and enjoyable taste and also reflects joy and cheerful image.  Customer Loyalty – The customers always make F&N as their first choice when it comes to choosing beverages as it is the brand and products which is they very familiar with and afraid to try other new brand . Weakness  Product popularity – Maybe it seems like F&NHB ‘s product to not be famous is not logic, but F&NHB actually has almost 400 different types of drink. Many of them are unknown and rarely seen in the store for sale which means it has less demand and recognition.  Product ingredients – The beverages produced by F&NHB are mostly not healthy for our body system. For example the F&N Sarsi flavour alone contains 28.3g of Sugar for every 250ml . Opportunities  Advertising products – F&NHB should take an action towards their unpopular product by investing more in advertising activities for the products in order to grab the consumer’s attention. Since F&NHB is a big company with a big amount of income , invest a little bit more in advertising should not be a problem for them.  Take over the competitors - F&NHB is actually capable financially to buy or take over their competitors company so that their penetration rate can increase in a particular market. Threat  Health issues – The world community as a whole are now moving forward to a more healthy living lifestyle. Because of the unhealthy ingredients in F&NHB’s products, this issue might affect their sales in a longer terms if they do not do anything about it. They should actually innovate more or add more healthy products or ingredients.  Environmental issue - Everything that is eco-friendly are now getting more attention from the people. This issue also can give bad impact in terms of sale to F&NHB. F&NHB company should do something to improve their packaging or other operation to be more eco-friendly. 7

F&N HOLDINGS BHD TREND ANALYSIS

Based on the calculation ,for the liquidity ratio , we have chose two of the ratio which is the current and the quick ratio. F&N has a current ratio of 1.46 in 2017 and the ratio decrease to 1.43 in 2018.This shows that F&N has $1.46 in current assets for every $1 in current liabilities while only have $1.43 in current assets for every $1 in current liabilities in 2018. This shows a consistent performance because it means that their current asset can still be used to pay their current liabilities as the ratio is more than 1. The decrease of 0.03 is actually not so bad but it must be take into consideration for upcoming years. F&N has a quick ratio of 1.25 in 2017 and it decreased to 1.11 in 2018. This shows that The F&N has $1.25 of liquid assets available to cover each $1 of its current liabilities while in 2018 , F&N only has $1.11 of liquid assets available to cover each $1 of its current liabilities. The performance is still consistent but it can be dangerous if it still decreasing.

For the first activity ratio which is Inventory turnover ratio where F&N sold off the entire inventory for 5.0 times in 2017 which is in the range of 72 days while sold off the entire inventory for 5.17 times in 2018 which is in the range of 69 days. The changes is basically did not affect the inventory too much and are in the consistent level. While for the total assets turnover ratio, in 2017, F&N generated $0.39 in sales for every dollars in assets , and in 2018, F&N generated $0.43 in sales for every dollar in assets. This shows an improving performance from the year 2017 to the year of 2018 and are suggested to increase it for the future performance.

For both of the profitability ratio which are the profit margin and also the return on assets ratio, shows a bad performance whereby can give bad effect on the company’s reputation. This is because in 2017, F&N generates a little less than 70 cents in profit for every dollar in sales , while in 2018 the F&N only generates less than 10 cents in profit for every dollar in sales. Another reason is ,F&N generates 27.1 cents of profit per dollar of assets in 2017 while the F&N only generates 4 cents profit per dollar of assets.That is a lot of difference between the two years, and both of the ratio shows that the performance of the company in a dangerous state.

Lastly, the both leverage ratio which are total debt ratio and debt-equity ratio shows a positive or good performance as for total debt ratio of F&N in 2017 is 0.36 and for 2018 is 0.29 which means in 2017, F&N has $0.36 in debt for every $1 in assets while in 2018, F&N has $0.29 in debt for every $1 in assets. Next, the debt-equity ratio of F&N improve from 0.56 in 2017 to 0.42 in 2018. That means,in 2017 , F&N has $0.56 in debt for every $1 in equity while in 2018, F&N has $0.42 in debt for every $1 in equity. The debt-equity ratio is more than the total debt ratio also symbolic that F&N is a strong company financially as most of the debt being settled using their total equity instead of just using total assets.

3. HUP SENG INDUSTRIES BHD 8

No . 1.

Ratio

2017 (RM ‘000)

2018 (RM ‘000)

Liquidity ratio Current Ratio = Current Asset / Current Liabilities

=165,141,426 / 73,219,187 =2.26% ‫ ؞‬Hup Seng has $2.26 in current assets for every $1 in current liabilities

=157,477,699 / 72,281,699 =2.18% ‫ ؞‬Hup Seng has $2.18% in current asset for every $1 in current liabilities

2.

Liquidity ratio Quick Ratio = Current Asset Inventory / Current Liabilities

=(157,477,699 - 25,414,315)/ 72,281,699 =1.83% ‫ ؞‬The Hup Seng has $1.83 of liquid assets available to cover each $1 of its current liabilities

3.

Activity ratio Inventory Turnover = COGS / Inventory

=(165,141,426 - 25,414,315)/ 73,219,187 =1.91% ‫ ؞‬The Hup Seng has $1.91 of liquid assets available to cover each $1 of its current liabilities =186,463,785 / 25,414,315 =7.33 times ‫ ؞‬Hup Seng sold off the entire inventory 7.33 times

4.

Activity ratio - Total Assets Turnover = Sales / Total Asset

5.

Profitability ratio Profit Margin = Net Income / Sales

=299,665,032 / 243,081,251 =1.23 times ‫ ؞‬For every dollars in assets, Hup Seng generated $1.23 in sales =44,446,946 / 299,665,032 =14.83% ‫ ؞‬Hup Seng generates a little less than 15 cents in profit for every dollar in sales

=307,372,915 / 236,464,405 =1.29 times ‫ ؞‬For every dollar in assets, Hup Seng generated $1.29 in sales =42,959,378 / 307,372,915 =13.98% ‫ ؞‬Hup Seng generates less than 14 cents in profit for every dollar in sales

6.

Profitability ratio Return On Assets = Net Income / Total Asset

=42,959,378 / 236,464,405 =0.18 @ 18.2% ‫ ؞‬F&N generates 18.2 cents profit per dollar of assets.

7.

Leverage ratio - Total Debt Ratio = Total Asset - Total Equity / Total Asset

=44,446,946 / 243,081,251 =0.18 @ 18.3% ‫ ؞‬Hup Seng generates 18.3 cents of profit per dollar of assets =(243,081,251 - 163,517,667) / 243,081,251 =0.33 ‫ ؞‬Hup Seng has $0.33 in debt for every $1 in assets

=(236,464,405 - 158,270,493) / 236,464,405 =0.33 ‫ ؞‬Hup Seng has $0.33 in debt for every $1 in assets

8.

Leverage ratio Debt-Equity Ratio =Total Debt / Total Equity

=78,193,912 / 163,517,667 =0.48 ‫ ؞‬Hup Seng has $0.48 in debt for every $1 in equity.

=79,563,584 / 158,270,493 =0.50 ‫ ؞‬Hup Seng has $0.50 in debt for every $1 in equity

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=197,610,952 / 25,414,315 =7.78 times ‫ ؞‬Hup Seng sold off the entire inventory 7.78 times

HUP SENG INDUSTRIES BHD COMMON SIZE BALANCE SHEET (2018)

Items Total Non-Current Asset Total Current Asset Total Non-Current Liabilities Total Current Liabilities Total equity attributable to owners of the company

2018 (RM ‘000) 78,986,706/236,464,405 x 100% = 33.40% 157,477,699/236,464,405 x 100% = 66.59% 5,912,213/236,464,405 x 100% = 2.50% 72,281,699/236,464,405 x 100% = 30.57% 158,270,493/236,464,405 x 100% = 66.93%

HUP SENG INDUSTRIES BHD COMMON SIZE INCOME STATEM...