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FIN619 VU Final Project on Activity Ratios Analysis of Nestle,Unilever,Rafhan 2014 and 2015
In the very beginning,
All of praises for Almighty ALLAH who bestowed potentially upon me to accomplish this report successfully. He gave me the power and devotion to make it possible to make the project
Secondly, I am also very thankful of my beloved parents who supported me in every way of life including to present the project. They help me and save me from any hurdle of life
Then, last but not the least; I am thankful of Dr. Imran Khalid (The project management teacher the institute of cost and management accountant of Pakistan Karachi (ICMAP) for their guidance and the finance manager of lucky cement Karachi for providing the financial statements of last few years.
In the last, I am thankful of Virtual University of Pakistan to know my capabilities and assigning me the duty to compile a project report on the financial statement analysis of two companies of the same industry and for inspiring me to learn more and more and to groom me for the future tasks.
The current study was conducted on activity ratio analysis on Neslte, Unilever and Rafhan. Activity ratios measure the company efficiency with which a business uses its own assets, these asset may include, inventories, accounts receivable fixed or capital assets. Shortly we can say activity ratio always assist the investors to evaluate any firm ability to effectively efficiently control its operation assets. Thus this study has used inventory turnover, accounts receivable turnover, accounts payable turnover, the cash cycle and asset turnover ratios and other remaining ratio which are done in the next coming page.
The study had completed its analysis with the help of secondary data that was taken from three company’s websites; result of mentioned ratios was displayed in one table. During analysis some true facts were recorded regarding to three companies. As per accounts receivable turnover findings, the ratio of Nestle is higher than Unilever and Rafhan. While doing average collection period ratio analysis, it has been concluded that Rafhan average collection period ratio is higher than other two companies. Other findings related to accounts payable turnover also indicating that Rafhan ratio is higher than other. Hence study concluded that in overall findings, Rafhan activity ratio is better than Neslte and Unilever.
Chapter 1 Introduction of the Project
As pr requirement of University, we have given range of topics for making business analysis report such as Analysis of Activity Ratios, Analysis of Profitability Ratios, Analysis of Cash Flow Ratios, Analysis of Activity Ratios, Analysis of Leverage Ratios and Analysis of Market Ratios.
I have selected Analysis of Activity Ratios for my final project. The reason behind the selection of Activity Ratios analysis is these ratios are very important for management in taking prudent business decisions for the betterment of business cycle. “Activity Ratios” are mainly concerned to measures that how efficiently a firm converts its materials or assets into sales and cash. Activity Ratios provide help to firm’s management to find out inefficient areas of overall business process. We can also say that activity ratios identify the firm’s ability to convert assets in realization of cash. Prudent management always utilizes their resources to optimum level. If any company has better activity ratio, it means the company is utilizing its recourses effectively and properly. This ratio will simply indicate firm’s productivity efficiency because positive indications of activities ratio leads to higher level of profitability.
For submission of project, I have selected three listed companies Unilever, Nestle, and Rafhan Maize for analysis. All these three companies are FMCGs leaders in Pakistan and they are setting benchmark for other likewise companies. As we know that conversion of assets into realization of cash is very important to any industry. The FMCGs organizations produce their product concerned to end users or in other words retail customers.
These retail customers are major factor to FMCGs business and are the source of firm’s business / sales. Therefore I hope that this study of Activity Ratios will help us to gauge efficiency of these companies that how these companies are putting their investments into profitable business cycle. As per requirement of University, I have gathered financial data for the last three years of companies mentioned above that would be helpful for me in fulfillment of assigned task.
1.1 Financial period under consideration for analysis (2013, 2014, 2015)
1.2 Introduction to Companies
Unilever Pakistan is most renowned consumer goods company in the country. Its brands are trusted everywhere in the world. Unilever claims the 150 million times in a day, someone somewhere chooses its product. Unilever provides various solutions to customers like in Foods, Homecare, Personal Care, Nutrition, Health Hygiene and Beauty etc. its products are being sold in 80 countries around the world. It also spent Euro 928 million in research & development in year 2013. In 2013 it had turnover of PKR.23.3 billion and it has got 19.68% growth in year 2010, the company’s growth accelerated to 22.3% in 2011 in very challenging business environment. Blue Band Margarine, Lipton Tea, Walls Ice Creams, Surf Excel detergent, Clear Shampoo, Lifebuoy Soap, Lux Soap, Fair & Lovely Cream, Pond’s Cream, Close-up Toothpaste are the very famous brands are here in Pakistan.
Nestle is Pakistan’s leading consumer goods company with sales of around CHF 108 billion in 2008. Nestle has been running business in Pakistan since 1988 under the license of parent company Nestle Switzerland. Its head quarter situated in Lahore. Nestle is providing various products like MilkPak, Nesvita, Nido, Everyday, Baby Cerelac Bottled drinking water, Maggi noodles, Nescafe, Polo and Kit-Kats etc. Nestle Pakistan has five production amenities in different region of Pakistan, two multi-product factories in Sheikhupura and Kabirwala, respectively, and three bottled water plants, one in Islamabad and two more in Karachi.
About Rafhan Maize
Rafhan Maize Products Company Ltd., an affiliate of Corn Products International, Inc., USA is located at Faisalabad, about 1100 kilometers north of Karachi, in Pakistan. The Company processes thousands of tons of corn every year to produce high quality food ingredients and industrial products. Rafhan Maize is the pioneer in producing diversified type of starches and sweeteners for multiple applications in more than 50 types of industries. It also produces liquid and powder glues, maltose syrup, liquid caramel colors, dextrose monohydrates etc. The products of Rafhan Maize are used in paper industry, mosquito coil manufacturing industry, textile industry, pharmaceutical, food and other many industries.