Finance Assignment – Nestlé Pakistan
Submitted by: [Your Name] Course: [Your Course] Date: [Submission Date]
Introduction
Nestlé Pakistan Limited, a subsidiary of Nestlé S.A. Switzerland, is one of the
largest food and beverage companies in Pakistan. Founded in 1988, Nestlé
Pakistan produces and markets dairy products, beverages, confectionery,
bottled water, and infant nutrition products. The company’s mission is to
provide high-quality nutrition products to consumers while maintaining
sustainable practices and strong corporate governance.
This assignment analyzes Nestlé Pakistan’s financial performance through
vertical and horizontal analysis, ratio analysis, dividend policy, net working
capital, cash conversion cycles, inventory management, and evaluation of
convertibles and warrants.
1. Financial Analysis
1.1 Vertical Analysis (Common-Size Statements)
Item (% of
Sales) 2022 2023 2024
Sales 100% 100% 100%
Revenue
Cost of Goods 64% 63% 64%
Sold
Gross Profit 36% 37% 36%
Operating 20% 21% 21%
Expenses
Operating 16% 16% 15%
Profit
Finance Cost 2% 3% 3%
Net Profit 9% 8.2% 7.7%
Formulas: - Gross Profit Margin (%) = (Gross Profit ÷ Sales) × 100 -
Operating Profit Margin (%) = (Operating Profit ÷ Sales) × 100 - Net Profit
Margin (%) = (Net Profit ÷ Sales) × 100
1.2 Horizontal Analysis (Trend Analysis)
% Change
Metric 2022 2023 2024 (22→24)
Sales (PKR 162.5 200.6 193.2 +18.9%
B)
Net Profit 15.0 16.5 14.8 –1.3%
(PKR B)
EPS (Rs) 331.86 363.68 326.53 –1.6%
Dividend/ 140 193 166 +18.5%
Share (Rs)
Formula: % Change = [(This Year – Base Year) ÷ Base Year] × 100
1.3 Ratio Analysis
Liquidity Ratios
Ratio Formula 2023 2024
Current Ratio Current 0.90 0.87
Assets ÷ CL
Quick Ratio (CA – 0.32 0.30
Inventory) ÷
CL
Cash Ratio Cash ÷ CL 0.08 0.07
Profitability Ratios
Ratio Formula 2023 2024
Gross Margin GP ÷ Sales 37% 36%
Operating OP ÷ Sales 16% 15%
Margin
Net Profit NP ÷ Sales 8.2% 7.7%
Margin
ROA NP ÷ Total 23% 22%
Assets
ROE NP ÷ Equity 91% 87%
Efficiency Ratios
Ratio Formula 2023 2024
Inventory Turnover COGS ÷ Avg Inventory 3.75x 3.63x
Asset Turnover Sales ÷ Total Assets 2.20x 2.15x
Receivable Days (Accounts Receivable ÷ Sales) × 3–4 d 3–4 d
365
2. Dividends
Dividend/ Payout Ratio
Year EPS (Rs) Share (Rs) (%)
2022 331.86 140 42%
2023 363.68 193 53%
2024 326.53 166 51%
Formula: Dividend Payout Ratio (%) = (Dividend ÷ EPS) × 100
Taxation on Dividends:
Tax Category Rate
Filer 15%
Non-Filer 30%
Dividend Policy: - Stable, consistent dividend history - Cash-only dividends,
no DRIP
3. Stock Dividends & Splits
Event Status Details
Stock Dividend No Not issued
Stock Split No None since 1999
DRIP (Reinvestment No Cash dividends only
Plan)
4. Net Working Capital (NWC)
Item Amount
Current Assets Low
Current Liabilities High
NWC ≈ –8.1 billion (Negative)
Formula: NWC = Current Assets – Current Liabilities
5. Cash Conversion Cycle (CCC) & Operating Cycle (OC)
Component Value Days
DIO (Inventory Moderate 80–90
Days)
DSO (Receivable Very Low 3–4
Days)
DPO (Payable Days) High 50–55
Formulas: - CCC = DIO + DSO – DPO ≈ 40 days - Operating Cycle = DIO +
DSO ≈ 92 days
6. Inventory Management Techniques
Technique Used?
JIT (Just-in-Time) Yes
Demand Forecasting Yes
FIFO Valuation Yes
Safety Stock Yes
Batch Production Planning Yes
7. Accounts Receivable Analysis
Area Notes
Bad Debts Very low; ECL under IFRS 9
applied
Credit Monitoring Aging, limits, ERP blocking,
follow-up
8. Convertibles & Warrants
Issued by
Instrument Nestlé? Notes
Convertible Bonds No Never issued
Convertible Preferred No Not used
Shares
Stock Warrants No Not part of capital structure
ESOP / Options No No formal employee stock
plan
9. Graphs to Include
Sales & Net Profit Trend – Line chart
EPS vs Dividend Trend – Combo chart (Column + Line)
Liquidity & Profitability Ratios – Clustered bar chart
Instructions: Copy chart data into Excel → Insert Chart → Customize → Paste
into Word.