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Financial Analysis of Mitchell's Fruit Farm

Mitchell's Fruit Farm was founded in 1933 in Pakistan and produces grocery and confectionary products. A common size analysis of its financial statements from 2015-2019 found that revenue increased while costs decreased, though net income remained negative. A horizontal analysis showed non-current liabilities and sales increased while fixed assets and net profit decreased. A liquidity analysis found the company to have insufficiently liquid assets with a declining current ratio. A solvency analysis showed the debt to equity ratio is increasing, posing high risks of bankruptcy. As an investor and creditor, the analyst has concerns about the company's declining performance, high debt levels, lack of dividends, and need to stabilize its financial condition. S

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Yasir Rahim
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20 views16 pages

Financial Analysis of Mitchell's Fruit Farm

Mitchell's Fruit Farm was founded in 1933 in Pakistan and produces grocery and confectionary products. A common size analysis of its financial statements from 2015-2019 found that revenue increased while costs decreased, though net income remained negative. A horizontal analysis showed non-current liabilities and sales increased while fixed assets and net profit decreased. A liquidity analysis found the company to have insufficiently liquid assets with a declining current ratio. A solvency analysis showed the debt to equity ratio is increasing, posing high risks of bankruptcy. As an investor and creditor, the analyst has concerns about the company's declining performance, high debt levels, lack of dividends, and need to stabilize its financial condition. S

Uploaded by

Yasir Rahim
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd

ANALYSIS OF

FINANACIAL
STATEMENTS
TERM PROJECT
PRESENTATION
MITCHELL’S FRUIT FARM
Introduction to the Firm
‘1933.’ is the year that Mitchell’s was founded by Frances J. Mitchell as Indian Mildura Fruit
Farms Ltd.

In 1958 Syed Maratib Ali, the famed businessman, and the father of Syed Babar Ali purchase the
business for her daughter

The company has divided its product line into two categories: Grocery products and
Confectionary products.

In 1993, Mitchell’s became a public limited company

In 1998, they became the first food processing company in Pakistan to get ISO 9001
accreditation
Insights from Common Size Analysis
Revenue Increased (From Income Statement)

Cost of revenue decreased – Decrease in Variable cost

Gross profit – Increased (Major contribution decrease in cost of sales

Selling, operating expense, overhead – Increase due to increase in Sales

Operating Income Decreased

Net Income increased but still negative in loss from 2016

Non-Current Liabilities at 9.98%.


Insights from Horizontal Analysis
Non-Current Liabilities Increased by 12.02%.

Fixed Assets decreased by 8.26%.

Current Assets Decreased by 11.58%.

Net Sales Increased by 22.08%.

Selling & Distribution Expenses increased by 12.4%.

Net Profit Decreased by 51.8%.


• .
Liquidity Analysis
Current Ratio
• Insufficiently Liquid Assets.
1.24
• Lower Cash & Bank Balances. 1.01 0.96
0.68 0.65
• Negative NWC increasing over the years
Current Ratio
• Major contributors to current liabilities are: 2015 2016 2017 2018 2019

Short Term Borrowing &Trade & Other Payables

• .
Liquidity Analysis
• Current liabilities are persistently increasing

• Inventories make up most of Current Assets.

• Insufficient Cash and Cash to CL still decreasing.

.
Solvency Analysis
• Total Debt to equity Ratio increasing year by year

• More debt acquired by the company.

• Long term Debt to Equity stable doubled in 2019.

• High chances of risk and bankruptcy


ROIC Analysis
Company has less Operating Assets as compared to Non-Operating Assets

Financial Assets are more because of short term and long term investments

Higher Operating Assets as compared to Operating Liabilities.

Consistent increase in both Operating Assets and Operating Liabilities


ROIC Analysis
• Components of RNOA
◦ NOPAT
◦ NOPAT Margin
◦ AVG NOA Turnover
◦ Operating Leverage

• ROE is show significant downward trend from last 5 years


Operating Performance
• Gross Profit Margin Shown an increasing trend after 2018.

• Operating Profit Margin also increased in 2019.

• Net Profit margin showing loss from 2016 .


Asset Utilization Analysis
• Decreasing Trend in A/R Turnover ratio.

• Minor change in Days sale in receivables to 2 days.

• Inventory Turnover is relatively getting better

• Days Sale in Inventory decreased to 85 Days.

• A/P turnover is declining.

• Negative impact on business. (Lost opportunities)


Market Measures Analysis
• Share market value 240 PKR.

• Zero Dividend paid from last 4 year

• Book value is decreasing from last 4 years.

• P/B ratio is decreasing in each year but still the Price of the

share is higher than book value.

• .
My Take as an Investor
Debt to Equity ratio also on the rise.

Market value of share is constantly declining.

Earning Yield also at 2%.

ROE is also lowest of past 5 years.

Zero Dividend paid from last 4 year

Company has not done anything significant to stabilize its condition.


My Take as a Creditor
Company is insufficiently Liquid.

Current Ratio of less than 1

Sufficient amount of cash is not available

Debt Ratio although high .

Net Working Capital is –ve

High Finance Cost


Suggestions to the Firm as an Analyst
Proper utilization of assets.

Increase investments in business portfolios.

Raising capital through equity when the company’s debt lines appear on the verge of exhaustion

Should consider decreasing Financial Liabilities specially Short-Term Borrowing and Long-Term Deposits

Control on Distribution Expenses

Control on Operating Expenses


Thank You

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