• Submitted By: engysameh
  • Date Submitted: 12/14/2012 2:07 PM
  • Category: Business
  • Words: 321
  • Page: 2
  • Views: 134

Financial Ratios (in millions)

Liquidity Ratio
* Current Ratio=Current Asset/Current Liabilities

2011: 33324/35232=0.945 2010: 38997/30146=1.29

Current ratio measures the liquidity position of the company and how it can easily convert its assets into cash without significant losses of its original value, as obvious liquidity ratio in 2010 is higher than 2011.

Asset Management Ratio
* Inventory Turnover=Cost of goods sold/ Inventory

2011: 44127/9255=4.77 2010: 45849/7925=5.78
76 days on hand 63 days on hand

Inventory turnover ratio measures how many days inventory is on hand so in 2010 it was 63 days lower than 2011 which was 76 days, the lower the better as nestle is operating in fast moving goods.

* Total Asset turnover Ratio=Sales/Total assets

2011:83642/114091=0.733 2010:93015/111641=0.833

As liquidity ratio is higher in 2010 so asset turnover rate will be higher in 2010 than 2011 which means current asset can be easily converted into cash.

Debt Management Ratio
* Debt Ratio=Total Debt/Total Assets

2011:16100+6207/114091=0.196 2010:12617+7483/111641=0.18

Debt ratio is a good indicator on the percentage of firm assets financed by debt the lower this percentage the better is the firm position, 2010 is lower than 2011.

Profitability Ratio
* Net profit margin on sales=Net Income/Sales

2011:9804/83642=0.117 2010:35384/93015=0.38

* Return on total asset (ROA) = Net Income/Total Assets

2011:9804/114091=0.086 2010:35384/111641=0.317

* Return on equity (ROE) = Net Income/ Total Equity

2011:9804/58274=0.173 2010:35384/62598=0.565

Profitability ratio shows the effect of liquidity ratio and asset management ratio as well as debt ratio on the operating results, calculations show that nestle profitability ratio in 2010 is much higher than 2011.

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