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8/9/2019 Business Finance Report Project VVVVVVVVVVVVVVV

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Project: Ratio Analysis on Unilever Pakistan

SUBMITTED TO:

Prof. Ch. MUZHAR HUSSAIN

SUBMITTED BY:

Sagheer Abbas Awan (Reg. No. 4090)

Taskeen Haider Khan (Reg. No. 4070)

Nasir Wali Muhammad (Reg. No. 4089)

FACULTY OF MANAGEMENT SCIENCES

INTERNATIONAL ISLAMIC UNIVERISTY

ISLAMABAD

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Sr.No

Table of Contents Page No

1 Acknowledgement 03

2 Introduction to Unilever 04

3 Vision 05

4 History of Unilever 06

5 Unilever Pakistan 08

6 Financial Ratio Review 08

7 Types of Ratio 09

8 Ratio Analysis 10

9 Caclculation of Ratio of Unilever 14

10 Ratios of Unilever for Four Years 18

11 Competitors(Colgate Palmolive) Financial Ratio 19

12 Internal Analysis 20

13 Comparision 24

14 External Analysis 26

15 Common Size Analysis 32

16 Index Analysis 36

17 Conclusion 37


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Acknowledgement

Our deepest thanks to Prof. Ch Muzhar Hussain in the Guide of the

project for guiding and correcting various problems of us with attention and

care. He has taken pain to go through the project and make necessary

correction as

and when needed. We have spent many of days working on it. We have put

a bit of "heart and soul" into it. Therefore, We hope that you will very much

enjoy this work as well as find it immensely educative!

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Introduction to Unilever160 million times a day, someone somewhere chooses a Unilever product. From feeding your

family to keeping your home clean and fresh, our brands are part of everyday life.

With 400 brands spanning 14 categories of home, personal care and foods products, no other

company touches so many people's lives in so many different ways.

Our brand portfolio has made us leaders in every field in which we work. It ranges from much-

loved world favorites including Lipton, Knorr, Dove and Omo, to trusted local brands such as

Blue Band and Suave.

From comforting soups to warm a winter's day, to sensuous soaps that make you feel fabulous,

our products help people get more out of life.

We're constantly enhancing our brands to deliver more intense, rewarding product experiences.

We invest nearly 1 billion every year in cutting-edge research and development, and have five

laboratories around the world that explore new thinking and techniques to help develop our

products.

Continuous development

Consumer research plays a vital role in our brands' development. We're constantly developing

new products and developing tried and tested brands to meet changing tastes, lifestyles and

expectations. And our strong roots in local markets also mean we can respond to consumers at

a local level.

By helping improve people's diets and daily lives, we can help them keep healthier for longer,

look good and give their children the best start in life.

We also believe that the very business of conducting business in a responsible way has a

positive social impact. We create and share wealth, invest in local economies and develop

people's skills both inside our organisation and in the communities around us.

Today Unilever employs 163 000 people, sells products in 170 countries worldwide, and

supports the jobs of many thousands of distributors, contractors and suppliers.

Our vision

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Unilever products touch the lives of over 2 billion people every day whether that's through

feeling great because they've got shiny hair and a brilliant smile, keeping their homes fresh and

clean, or by enjoying a great cup of tea, satisfying meal or healthy snack.

A clear direction

The four pillars of our vision set out the long term direction for the company where we want to

go and how we are going to get there:

We work to create a better future every day

We help people feel good, look good and get more out of life with brands and services

that are good for them and good for others.

We will inspire people to take small everyday actions that can add up to a big difference

for the world.

We will develop new ways of doing business with the aim of doubling the size of our

company while reducing our environmental impact.

We've always believed in the power of our brands to improve the quality of peoples lives and in

doing the right thing. As our business grows, so do our responsibilities. We recognise that

global challenges such as climate change concern us all. Considering the wider impact of our

actions is embedded in our values and is a fundamental part of who we are.

Purpose & principles

Our corporate purpose states that to succeed requires "the highest standards of corporatebehavior towards everyone we work with, the communities we touch, and the environment on

which we have an impact."

Always working with integrity

Conducting our operations with integrity and with respect for the many people, organisations

and environments our business touches has always been at the heart of our corporate

responsibility.

Positive impactWe aim to make a positive impact in many ways: through our brands, our commercial

operations and relationships, through voluntary contributions, and through the various other

ways in which we engage with society.

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Continuous commitment

We're also committed to continuously improving the way we manage our environmental impacts

and are working towards our longer-term goal of developing a sustainable business.

Setting out our aspirations

Our corporate purpose sets out our aspirations in running our business. It's underpinned by our

code of business Principles which describes the operational standards that everyone at

Unilever follows, wherever they are in the world. The code also supports our approach to

governance and corporate responsibility.

Working with others

We want to work with suppliers who have values similar to our own and work to the same

standards we do. Our Business partner code, aligned to our own Code of business principles,

comprises ten principles covering business integrity and responsibilities relating to employees,consumers and the environment.

Our history

Unilever's corporate mission to add vitality to life shows how clearly the business

understands 21st century-consumers and their lives. But the spirit of this mission forms a

thread that runs throughout our history.

Helping people get more out of life

In the 1890s, William Hesketh Lever, founder of Lever Bros, wrote down his ideas for Sunlight

Soap his revolutionary new product that helped popularise cleanliness and hygiene in

Victorian England. It was 'to make cleanliness commonplace; to lessen work for women; to

foster health and contribute to personal attractiveness, that life may be more enjoyable and

rewarding for the people who use our products'.

This was long before the phrase 'Corporate Mission' had been invented, but these ideas have

stayed at the heart of our business. Even if their language - and the notion of only women doing

housework has become outdated.

In a history that now crosses three centuries, Unilever's success has been influenced by themajor events of the day economic boom, depression, world wars, changing consumer

lifestyles and advances in technology. And throughout we've created products that help people

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get more out of life cutting the time spent on household chores, improving nutrition, enabling

people to enjoy food and take care of their homes, their clothes and themselves.

Balancing profit with responsible corporate behaviour

In the late 19th century the businesses that would later become Unilever were among the most

philanthropic of their time. They set up projects to improve the lot of their workers and created

products with a positive social impact, making hygiene and personal care commonplace and

improving nutrition through adding vitamins to foods that were already daily staples.

Today, Unilever still believes that success means acting with the highest standards of corporate

behaviour towards our employees, consumers and the societies and world in which we

live. Over the years we've launched or participated in an ever-growing range of initiatives to

source sustainable supplies of raw materials, protect environments, support local communities

and much more.

Through this timeline you'll see how our brand portfolio has evolved. At the beginning of the

21st century, our Path to Growth strategy focused us on global high-potential brands and our

Vitality mission is taking us into a new phase of development. More than ever, our brands are

helping people feel good, look good and get more out of life a sentiment close to Lord

Leverhulme's heart over a hundred years ago.

UNILEVER PAKISTANUnilever Pakistan limited is a largest consumer products company in Pakistan. It was born

out of dream to Set-up in Pakistan an industry of excellence in 1948 as Lever Brothers

Pakistan Limited. Unilever Pakistan Limited is Manufacturing & Marketing its Detergents,

Personal Products, Tea, SCC Products & Ice Cream over 50 brands.

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In line with global alignment strategy and in order to leverage the synergies of Unilevers

International brand strength, market edge and corporate image, Lever Brothers Pakistan

Limited has change its name to Unilever Pakistan Limited, in August 2002.

Financial Ratio Review

Financial ratio analysis is the calculation and comparison of ratios which are derived from

the information in a company's financial statements. The level and historical trends of these

ratios can be used to make inferences about a company's financial condition, its operations

and attractiveness as an investment.

Any successful business owner is constantly evaluating the performance of his or her company,

comparing it with the company's historical figures, with its industry competitors, and even withsuccessful businesses from other industries. To complete a thorough examination of your

company's effectiveness, however, you need to look at more than just easily attainable

numbers like sales, profits, and total assets. You must be able to read between the lines of your

financial statements and make the seemingly inconsequential numbers accessible and

comprehensible.

Financial ratios are calculated from one or more pieces of information from a company's

financial statements. For example, the "gross margin" is the gross profit from operations divided

by the total sales or revenues of a company, expressed in percentage terms. In isolation, a

financial ratio is a useless piece of information. In context, however, a financial ratio can give a

financial analyst an excellent picture of a company's situation and the trends that are

developing.

TYPE OF RATIOS

Leverage Ratios which show the extent that debt is used in a company's capitalstructure.

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Liquidity Ratios which give a picture of a company's short term financial situation orsolvency.

Operational Ratios which use turnover measures to show how efficient a company is inits operations and use of assets.

Profitability Ratios which use margin analysis and show the return on sales and capitalemployed.

Solvency Ratios which give a picture of a company's ability to generate cash flow andpay it financial obligations.

Year of analysis:

We take four year financial statements of Unilever & Colgate palmolive. The year begin

from 2006 & ends in year 2009.

Sources of Data:

We have taken the data from the annual reports of Unilever from the website of Unilever

Pakistan. Then we take the financial statements for the annual reports. We also take the

financial statements Colgate Palmolive.

Assumptions:

We assume Sales as net Sales and credit sales. Then we assume other receivables

taken from Balance Sheet as Account Receivable. Non-current liabilities are assumed as Long

term debts.

Ratio Analysis:

Liquidity Ratios.

Liquidity ratios measure the firms ability to meet current obligations; i.e. the ability to pay its

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obligations as and when they become due. They show whether the firm can pay its short term

obligations out of short term resources or not. They establish a relationship between cash and

other current assets to current liabilities. If a firm has sufficient net working capital it is assumed

to have enough liquidity. The most common ratios which indicate the extent of liquidity are

current ratio and quick ratio.

Current Ratio:

It is calculated by dividing the Current Assets by Current Liabilities.

Current Asset

Current ratio =

Current Liabilities.

Current assets include cash, securities, debtors B/R, stock etc and current liabilities include

creditors/P, accrued expense, short term loan etc. Current ratio is a measure of the firms short

term solvency. It indicates the availability of a current asset in rupees for every one rupee of

current liability. A ratio greater than1 means that the firm has more current assets than current

claims against them.

Quick Ratio (Acid Test Ratio):This ratio establishes a relationship between quick or liquid assets and current liabilities. An

asset is liquid, if it can be converted in to cash immediately or reasonably soon without a loss of

value. Cash is the most Liquid asset. QA also include debtors, B/R and securities. Inventories

are considered less liquid. They normally require some time for realizing in to cash.

Quick assetsQuick Ratio =

Current Liabilities..

Quick assets = Current Assets Inventories or stock

Generally a QR of 1:1 is considered to represent satisfactory current financial position.

Financial Leverage / debt Ratio:

Debt Equity Ratio:

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The relationship between borrowed funds and owners capital is a popular measure of the long

term

Financial solvency of the firm. This relationship is shown by the debt equity ratio.

Debt

Debt Equity Ratio =

Equity

The term debt refers to the total outside liabilities. It includes all current liabilities and other

outside liabilities

Like loan debenture etc. The term equity refers to net worth or shareholders fund.

Debt-Asset Ratio:

=

Total Liabilities

Total Assets

Indicates what proportions of the companys assets are being financed through debt.

This ratio is very similar to the debt-equity ratio.

A ratio under 1 means a majority of assets are financed through equity,

above 1 means they are financed more by debt. Furthermore you can

interpret a high ratio as a "highly debt leveraged firm".

Long-Term Debt to Capitalization Ratio:

A ratio showing the financial leverage of a firm, calculated by dividing long-term debt by the

amount of capital available:

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A variation of the traditional debt-to-equity ratio, this value computes the proportion of a

company's long-term debt compared to its available capital. By using this ratio, investors can

identify the amount of leverage utilized by a specific company and compare it to others to help

analyze the company's risk exposure. Generally, companies that finance a greater portion of

their capital via debt are considered riskier than those with lower leverage ratios.

Receivables Turnover Ratio:

An accounting measure used to quantify a firm's effectiveness in extending credit as well as

collecting debts. The receivables turnover ratio is an activity ratio, measuring how efficiently a

firm uses its assets.

Some companies' reports will only show sales - this can affect the ratio depending on the size

of cash sales.

By maintaining accounts receivable, firms are indirectly extending interest-free loans to their

clients. A high ratio implies either that a company operates on a cash basis or that its extension

of credit and collection of accounts receivable is efficient.

A low ratio implies the company should re-assess its credit policies in order to ensure the timely

collection of imparted credit that is not earning interest for the firm.

Accounts Payable Turnover Ratio:

Account Payable Turnover = Net Credit Purchase / Account Payable

A short-term liquidity measure used to quantify the rate at which a company pays off its

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suppliers. Accounts payable turnover ratio is calculated by taking the total purchases made

from suppliers and dividing it by the average accounts payable amount during the same period.

If the turnover ratio is falling from one period to another, this is a sign that the company is takinglonger to pay off its suppliers than it was before. The opposite is true when the turnover ratio is

increasing, which means that the company is paying of suppliers at a faster rate.

Inventory Turnover:

A ratio showing how many times a company's inventory is sold and replaced over a period.

Inventory Turnover = Cost of Goods Sold

Inventory

This ratio should be compared against industry averages. A low turnover implies poor salesand, therefore, excess inventory. A high ratio implies either strong sales or ineffective buying .

Asset Turnover

=

Revenue

Total Assets

Indicates the relationship between assets and revenue.

Companies with low profit margins tend to have high asset turnover,

those with high profit margins have low asset turnover - it indicates

pricing strategy.

This ratio is more useful for growth companies to check if in fact they

are growing revenue in proportion to sales.

Profit Margin :

=

Net Income

Revenue

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Indicates what portions of sales contribute to the income of a company.

This ratio is not useful for companies losing money, since they have no

profit.

A low profit margin can indicate pricing strategy and/or the impact

competition has on margins.

CALUCATION OF RATIOS OF UNILEVER FOR THE YEAR OF

2009

Liquidity Ratio:

Current Ratio = Current Assets / Current Liabilities

= 5912394 / 7101678

= 0.83253

Interpretation:

A generally acceptable current ratio is 2 to 1. But whether or not a specific ratio is satisfactory

depends on the nature of the business and the characteristics of its current assets and

liabilities. The minimum acceptable current ratio is obviously 1:1, but this ratio is low than 1

which is .83 so current assets of unlived is lesser than current liabilities.

Quick Ratio = Current Assets-inventory / Current Liabilities

= 5912394-3649070 / 7101678

= 0.318702

Interpretation:

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A 1:1 ratio is usually considered to be satisfactory but the asset test ratio of unlevel is

unsatisfactory because the company immediate cash resources are not sufficient to meet its

current obligation. The ratio is particularly important for bank.

Financial Leverage / Debt Ratio:Debt to Equity Ratio = Total Debt / Shareholder Equity

= 1019952 /3291120

= 0.31

Interpretation:

In this ratio we find how much amount is debt is covered by shareholder equity. In this we can

find that if 100 is taken as loan then 31 is covered by shareholder and remaining is taken from

debts.

Debt to Total Assets = Total Debt / Total Assets

= 1019952 / 11425715

= 0.08926

Interpretation:

This ratio is an indicator of the financial stability of the enterprise. The lower is the debt ratio

more comfortable the creditor will feel as regards security of their debts. Too excessive debt to

total may expose an entity to insolvency. The debt to assets ratio is very lower so there is no

risk of insolvency of the company.

Long Term Debt Ratio = Long term Debt / Capitalization

= 1019952 /4311072

= 0.2365

Interpretation:

This value computes the proportion of a company's long-term debt compared to its available

capital. Companies that finance a greater portion of their capital via debt are considered riskier

than those with lower leverage ratios.

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Activity Ratio:

Receivables Turnover = Net Credit Sale / Account Receivables

= 38187582 / 82141

= 464.9028

Average Collection Period = Days in Year / Receivables Turnover

= 365 / 464.9028

= 78 days

Interpretation:

The lower the average collection period the higher will be return on investment. It depends

upon the credit policy of the company.

Payable Turnover = Net credit Purchase / Account Payable

=20593398/5785776

= 3.56

Payable Turnover in Days = Days in Year / Payable Turnover

= 365 /3.56

= 102 days

Interpretation:

In this ratio we find in how many days they pay to creditors. The unilever

company pays back the creditor in 102 days the amount they lend. These days are extended

due to financial crises in the world.

Inventory Turnover Ratio:

Inventory Turnover = Cost of Goods Sold / Inventory

= 24852625 / 3649070

= 6.81067

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Inventory Turnover in Days = Days in Year / Inventory Turnover

= 365 / 6.81067

= 53 days

Interpretation:

In this ratio we find in how many days company order the inventory. The unilever company

gives order for inventory in 53 days.

Asset Turnover = Total Sales / Total Asset

= 38187582 / 11425715

= 3.34224

Interpretation:

Asset turnover ratio has a significant impact on return on investment. In this ratio sales is

greater than assets and the ratio is 3.3. this is the basic ratio to measure profitability.

Gross Profit Margin = Gross Profit / Net Sale

= 13334957 / 38187582

= 0.34919 or 34.919%

Interpretation:

The ratio indicates the margin of safety as to reduction of selling price of products of a company

without incurring loss. The ratio of gross profit margin is increase little bit from previous year

which is .33 %.

Net Profit Margin = Net Income after Tax / Net Credit Sale

= 3055740 / 38187582

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= 8.00 %

Interpretation:

The ratio indicates the effectiveness and efficiency with which the entitys resources have been

used by the management. No norms can be set. The profit margin of company is 8 %.

Return on Investment or Earning Power = Net Income after Tax / Total Assets

= 3055740 / 11425715

= 26.74 %

Interpretation:

In this ratio we find return on investment. The company gets 26.74% return on investment.

Return on Equity = Net Income after Tax / Shareholder Equity

= 3055740 / 3291120

= 93%

Interpretation:

In this ratio how much they earn from shareholders investment. The unilever gets 93% from the

shareholder investment.

Ratios of Unilever for Last Four Years

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Competitors (Colgate Palmolive) financial ratios

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Particulars 2009 2008 2007 2006

Current Ratio 0.83253 0.70714 0.73235 0.86989

Quick Ratio 0.318702 0.205163 0.244477 0.36094

Debt to Equity

Ratio

0.03099 0.03099 0.2537 0.1899

Debt to Total

Asset

0.08926 0.060315 0.06215 0.05407

Long term Debt

Ratio

0.2365 0.2366 0.2024 0.1596

Average

Collection

Period

78 days 26 days 39 days 16 days

Payable

turnover in

Days


Inventory

turnover in

Days


Asset Turnover 3.34 2.72 2.88 3.26

Gross Profit

Margin

34.9% 34.7% 38.9% 36.9%

Net Profit

Margin

8% 6% 7% 7%

Return on

Investment

.27 .17 .21 .25

Return on

Equity

0.89 0.85 0.89 0.93


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INTERNAL ANALYSIS:

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Particulars 2009 2008 2007 2006

Current Ratio 2.521 2.564 2.139 1.911

Quick Ratio 1.469 1.357 1.189 1.033

Debt to Equity

Ratio

0.062 0.095 0.096 0.087

Debt to Total

Asset

0.043 0.052 0.047 0.053

Long term Debt

Ratio

0.058 0.087 0.490 0.079

Average

Collection

Period

0.396 days 1.966 days 1.886 days 0.792 days

Payable

turnover in

Days

242.04 325.31

- -

Inventory

turnover in

Days


Asset Turnover 2.839 2.275 2.239 2.371

Gross Profit

Margin

24.16% 29.37% 31.67% 32.23%

Net Profit

Margin

6.71% 9.51% 10.19% 9.17%

Return on

Investment

0.190 0.121 0.228 0.217

Return on

Equity

0.278 0.398 0.466 0.353


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Particulars 2009 2008 2007 2006

Current Ratio 0.83253 0.70714 0.73235 0.86989

Analysis:

Unilever Pakistan Company has weak current ratio to meet short term obligations. Performance

of the company is not consistent as compared to the last four year rations. Unilever should

improve his policies to improve the current ratio to meet its short term obligations. The current

liabilities increases 84% in comparison to 2008.Increase in current liabilities tends to decrease

the current ratio. So the increase in current assets is less than the increase in current liabilities.

Particulars 2009 2008 2007 2006

Quick Ratio 0.318702 0.205163 0.244477 0.36094

Analysis:

Unilever Pakistan quick ratio or acid-test ratio is very poor in last four years. The ratio has

increased from 2007 to 2009 is 77%. But this increase is not sufficient as should be as compare

to 1:1. The decrease in quick ratio for year 2007 & 2006 was due to increase in the inventory

levels. This tends to decrease the quick ratio for the company.

Particulars 2009 2008 2007 2006

Debt to Equity

Ratio

0.043 0.052 0.047 0.053

Analysis:

In 2009 the ratio of debt to equity is 0.043 which is the least in last three years. This ratio give

the information about how much amount is taken from debt and how much is taken from

shareholders. Unilever take 43% from shareholder and 47% from debts in 2009. The ratio of

debt is greater from year 2006 to 2008. The increase in debt is 34% from year 2006 to 2009.

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Period

Analysis:

This ratio shows the quality of the firm receivables and how successful the firm is in its

collections. This ratio shows the number of times receivables turn into cash. The collectionperiod for the company is 16 days in 2006 but this rate is increases from 16 days to 39 days.

This rate decreases in 2008 from 39 to 26 days as compare to 2007. But this rate has

increases from 26 days to 78 days due to financial problems of the dealers. So after the sale of

the goods they have to wait 78 days to collect the amount.

Particulars 2009 2008 2007 2006

Inventoryturnover in

Days


Analysis:

The inventory turnover in days in how many days, on average, before inventory is turned into

accounts receivable through sales. In this case Unilever Pakistan trend of inventory turn over is

increasing from 59 days to 70 days which tends the efficiency of the company increases. This

trend further increases from 70 days to 76 days as compare to 2007 to 2008. But this trenddecreases from 76 days to 53 days. This shows that company progress is very well in the

recent year as compare to previous years.

Particulars 2009 2008 2007 2006

Asset Turnover 3.34 2.72 2.88 3.26

Analysis:

This ratio shows how many times you are getting sales on your assets, the higher the ratio the

higher sales you are generating on your assets. In this case Unilever Pakistan has high asset

turnover ratio that is 3.34 times. They are generating 3.34 times sales on their assets. Trend of

this was good in 2006. But this trend decreases in 2007 & 2008 because sales of the company

decrease due to financial crises in the world. But this matter is settling so the trend of the

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company is again becoming better and their sales in 2009 has increased this cause the

company to increase the assets turnover ratio for year 2009.

Particulars 2009 2008 2007 2006

Gross ProfitMargin

34.9% 34.7% 38.9% 36.9%

Analysis:

This ratio shows how much gross profit is earned on sales. The higher the ratio the higher the

gross profit. This ratio also shows the efficiency of the firm. In this case Unilever Pakistan has

gross profit margin 34.9% then the last years 2007 that is 34.7%. The last four year trend

shows mixed trend in the company gross profit margin. The Company made significant

progress in sales in 2009 which increases 81% as compare to 2008. The company made good

progress in gross profit margin in 2007 which has value of 38.9%. This is due to lesser cost of

good sold which help the company to make good progress in 2007.

Particulars 2009 2008 2007 2006

Net Profit

Margin

8% 6% 7% 7%

Analysis:

This ratio shows how much Net profit is earned on sales. The higher the ratio the higher the net

profit. This ratio also shows the efficiency of the firm. In this case Unilever Pakistan has high

net profit margin shows the more net profit of the company in 2009. Which improves the

position of the company and its share, values in the market? There is decreasing trend in net

profit margin as compared to previous performances of the company in 2008. The Company

made significant progress in volume growth during 2009 delivering a record sales volume of 3.8

billion, an increase of 81% in comparison to 2008.

Particulars 2009 2008 2007 2006

Return on 27% 17% 21% 25%

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Investment

Analysis:

This ratio shows how much return is earned on investment. The return on investment in 2006 is

25% which has decreases to 21% in 2007. The decrease in return on investment in 2007 &

2008 is due to decrease in net profit of the company. The total asset of the company is

increases which cause them to decrease the return on investment. The return on investment is

increases in 2009 as compare to 2008. Return on investment is 27% which is increase of 63 %

in 2009. This is due to increase in net profit after tax and total asset decreases which cause

them to increase in ROI.

Particulars 2009 2008 2007 2006

Return on

Equity

89% 85% 89% 93%

Analysis:

This ratio shows the declining trend also in this ratio and return on equity was declined through

the year 2006 and improved in the last year that is 2009. This ratio shows the company

shareholders equity return with every years sale. The company returns on equity declining as

compared to the last four years performance of the company. The return on equity in 2009 is

89% which is better than last year performance.

YEAR WISE COMPARSION OF U.P & C.P

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Ratios 2009 2008 2007 2006

Unilever

Pakistan

Colgate

Palmolive

Unilever

Pakistan

Colgate

Palmolive

Unilever

Pakistan

Colgate

Palmolive

Unilever

Pakistan

Colgate

Palmolive

Current 0.832 2.521 0.707 2.564 0.732 2.139 0.869 1.911

Acid

Test

0.318 1.469 0.205 1.357 0.244 1.189 0.360 1.033

Debt to

equity

0.08926 0.062 0.0603 0.095 0.06215 0.096 0.0540 0.087

Debt to

Asset

0.089 0.043 0.060 0.052 0.062 0.047 0.054 0.053

Long

term

Debt

0.2365 0.058 0.2366 0.087 0.2024 0.490 0.1596 0.079

Average

Collectio

n Period

78 days 0.396

days

26 days 1.966

days

39 days 1.886

days

16days 0.792

days

Payable

turnover

127 days 242.04 145 days 325.31 97 days 235.53 102 days 305.76

Inventor

y Turn

Over

53 days 48 days 76 days 73 days 70 days 70 days 59days 66 days

Total

Assetturn

Over

3.34 2.839 2.72 2.275 2.88 2.239 3.26 2.371

G.P

Margin

%

34.9% 24.16% 34.7% 29.37% 38.9% 31.67% 36.9% 32.23%

N.P

Margin

%

8% 6.71% 6% 9.51% 7% 10.19% 7% 9.17%

ROIRatio %

27% 19% 17% 12.1% 21% 22.8% 25% 21.7%

ROE

Ratio %

89% 27.8% 85% 39.8% 89% 46.6% 93% 35.3%


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EXTERNAL ANALYSIS1. Current Ratio:

Comparison:

Current ratio is used to see the companys ability to meet the short term obligations. By doing

the comparison Between Unilever Pakistan and Colgate Palmolive Company, the current ratio

of Unilever Pakistan is better than the Colgate Palmolive for the year 2009, 2007 & to 2006.

2. Acid Test Ratio:

Comparison:

The comparison between U.P & C.P is that the C.P has the better ratio of quick acid

ratio. The ratio of U.P is not better than the C.P.

3. Debt to equity:

Comparison:

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The debt to equity ratio of U.P is better than C.P for the year 2009. But for

previous 3 years the debt to equity rati of C.P is better than U.P. this ratio shows how

much is financed by a company with debt as compare to shareholder equity.

4. Debt to Asset:

Comparison:

This ratio gives the idea about how much debt can be recovered by total assets. The U.P

ratio for year 2009 is better than C.P. this ratio was also good in year 2008 & 2007. In the

year 2006 C.P has better ratio then U.P.

5. Long term Debt:

Comparison:

The long term debt ratio is better for C.P. because it is lesser than U.P.

This ratio gives the information about the debts of the company and relation of

shareholders equity.

6. Average Collection Period:

Comparison:

The lesser the average collection period the better will be the position of the

company in this ratio. But it depends upon the industry average. In this comparison the U.P

collection Period remains greater than C.P in three years except in year 2008 when it was lower

than C.P.

7. Payable turnover:

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Comparison:

The payable turnover for U.P remains lesser than the C.P. This show that U.P

pays the amount to their creditors earlier than C.P. in this respect lender has more

confidence on U.P

8. Inventory Turn Over:

Comparison:

The inventory turnover ratio is almost same to the compare company C.P. in inventory

turnover companies found after how many days they place they order.

9. Total Asset turn Over

Comparison:

The asset turnover ratio of U.P is better than the C.P. In these four year

comparisons U.P has the edge on asset turnover ratio on C.P.

10.G.P Margin %:

Comparison:

The gross profit margin of U.P is greater than the C.P. the reason is that they have

greater sales as compare to C.P in these years. The sale of C.P has decrease in 2009

as compare to 2006.

11.N.P Margin %:

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Comparison:

The net profit margin of C.P is better than the U.P. In last 3 consecutive years

the net profit margin of C.P was greater than U.P. but in year 2009 the U.P show greater profit

than the C.P.

12.ROI Ratio %:

Comparison:

The return on investment of U.P is better than the C.P except the year 2008. In

2008 the return on investment of C.P was good than U.P.

13.ROE Ratio %:

Comparison:

The return on equity of U.P is good as compare to C.P. The Unilever get greater

return from the shareholders investment. These results are reflected in the graph above.

COMMON SIZE ANALYSIS

Common size analysis = Balance sheet items / total assets

Fixed Assets

B/s items 2009 2008 2007 2006

Property, plant 38.89 43.46 33.24

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and equipment 4,736,619/11,425,715*100 =41.45

Longterm

investment

95,202/11,425,715*100 =0.83 0.83 1.17 1.48

Long term

loans

98,117/11,425,715*100 =0.85 1.05 1.43 1.49

Long term

deposits and

prepayments

392,896/11,425,715*100 =3.43 4.74 0.06 0.39

Retirement

benefits

prepayments

188,054/11,425,715*100 =22.64=

..,,,433

1.80 3.10 5.79

Intangibles 2,433/11,425,715*100 =0.02 0.00064 0.0015 0.0026

Current Assets

B/s items 2009 2008 2007 2006

Stock-in-trade 3,649,070/11,425,715*100 =0.3193 0.3734 0.3372 0.3354

Stores and

spares

265,420/11,425,715*100 =0.0232 0.0212 0.0223 0.0320

Trade debts 506,357/11,425,715*100 =0.0443 0.02009 0.0296 0.0272

Loans and

advances

131,852/11,425,715*100 =0.0115 0.0108 0.0150 0.0271

Trade deposits

and short term

prepayments

682,949/11,425,715*100 = 0.0597 0.0453 0.0292 0.0158

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Other

receivables

82,141/11,425,715*100 =0.0071 0.0191 0.0308 0.1497

Cash and bank

balances

239,553/11,425,715*100 =0.0209 0.0093 0.0233 0.0911

Tax refunds

due from

Government

355,052/11,425,715*100 =0.0310 0.0265 0.0183 0.2897

Current Liabilities

B/s items 2009 2008 2007 2006

Accrued

interest / mark-

up

28,892/11,425,715*100 =0.0025 0.0056 0.0005 0.0002

Short term

borrowings

1,037,911/11,425,715*100 =0.0939 0.2838 0.0524 0.0000

Trade and other

payables

5,785,776/11,425,715*100 = 0.5306 0.3994 0.588 0.6201

Current maturityof liabilities a 28,419/11,425,715*100 =0.0024 0.0028 0.0021 0.0181

Provisions 220,680/11,425,715*100 =0.0193 0.0521 0.0459 0.0171

Taxation less

provision - -0.0026 0.0187

Share capital and reserves

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B/s items 2009 2008 2007 2006

Share capital 669,477/11,425,715*100 = 0.0585 0.0587 0.0828 0.1041

Reserves 2,621,643/11,425,715*100 = 0.2294 0.1358 0.1620 0.1805

Surplus on

revaluation of

fixed assets

12,965/11,425,715*100 = 0.0011 0.0011 0.0017 0.0023

Non-Current liability

B/s items 2009 2008 2007 2006

Liabilities against

assets subject to

finance leases

56,762/11,425,715 *100 =0.0049 0.0067 0.0064 0.0022

Deferred taxation 636,130/11,425,715*100 = 0.0556 0.0324 0.0382 0.0316

Retirement

benefits

obligation

327,060/11,425,715*100 = 0.0286 0.0211 0.0173 0.0201

Income Statement Items

I/S Items 2009 2008 2007 2006

Sales 38187582/38187582*100 = 100 100 100 100

Cost of sales 24852625/38187582*100 = 65.08 65.31 61.07 63.10

Gross profit 13334957/38187582*100 = 34.92 34.68 38.93 36.89

Distribution cost 7179694/38187582*100 = 18.80 18.90 21.52 19.79

Admin. Cost 1030478/38187582*100 = 2.70 3.24 4.31 4.30

Other O.P. Exp 373785/38187582*100 = 0.98 0.798 1.00 1.09

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Other O.P.

Income

192313/38187582*100 = 0.50 0.78 0.82 0.97

Restructuring

cost -1.58 1.60 0.52

Profit from O.P 4943313/38187582 *100 = 12.94 10.95 11.31 12.15

Finance cost 427708/38187582*100 = 1.12 1.50 0.47 0.30

Profit before

taxation

4515605/38187582 *100 = 11.82 9.45 10.84 11.84

Taxation 1459865/38187582*100 = 3.82 3.04 3.61 4.06

Profit after

taxation

3055740/ 38187582*100 = 8.00 4.41 7.23 7.78

INDEX ANALYSIS

Index analysis = Current year / Base yearFixed Assets

B/s items 2006 2007 2008 2009

Property, plant

and equipment2137350/2137350 =100.00

164.38 207.18 221.61

Long term

investment

95202/95202 =100.00 100.00 100.00 100.00

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Long term

loans

96417/96417 =100.00 119.67 125.02 101.76

Long term

deposits and

prepayments

25357/25357 =100.00 14.40 2129.69 1549.45

Retirement

benefits

prepayments

372638/372638 =100.00=

..,,,433

67.32 55.10 50.46

Intangibles 17043/17043 =100.00 71.42 42.85 14.27

Current Assets

B/s items 2006 2007 2008 2009

Stock-in-trade 2156472/2156472 =100.00 126.41 197.16 169.21

Stores and

spares

206021/206021 =100.00 87.54 117.34 128.83

Trade debts 174722/174722 =100.00 136.96 130.93 289.81

Loans and

advances

173960/173960 =100.00 70.64 71.22 75.79

Trade deposits

and short term

prepayments

101680/101680 =100.00 232.16 507.91 671.66

Other

receivables

96232/96232 =100.00 258.89 226.87 85.35

Cash and bank

balances

585860/58586 =100.00 32.20 18.22 40.88

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Tax refunds

due from

Government

186287/17 =100.00 79.71 190.59 162.01

Current Liabilities

B/s items 2006 2007 2008 2009

Accrued

interest / mark-

up

1898/1898 = 100.00 193.31 3375.92 1522.23

Short term

borrowings

200/200 =100.00 211778.5 1616261.5 518955.5

Trade and other

payables

3987437/3987437 = 100.00 119.13 114.05 145.10

Current maturity

of liabilities a

16962/16962 = 100.00 101.83 190.55 167.54

Provisions 110000/110000 = 100.00 337.30 539.59 200.62

Share capital and reserves

B/s items 2006 2007 2008 2009

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Share capital 669477/669477 = 100.00 100.00 100.00 100.00

Reserves 1160685/1160685 = 100.00 112.90 133.22 225.87

Surplus on

revaluation of

fixed assets

14909/14909 = 100.00 95.65 91.31 86.55

Non-Current liability

B/s items 2006 2007 2008 2009

Liabilities against

assets subject tofinance leases

14273/14273 =100.00 370.85 541.77 397.68

Deferred taxation 203595/203595 =100.00 151.79 181.56 312.45

Retirement

benefits

obligations

129799/129799 =100.00 108.21 184.74 251.97

Income Statement Items

I/S Items 2006 2007 2008 2009

Sales 20987885/20987885 =100.00 111.16 147.49 181.95

Cost of sales 13244679/1344679 =100.00 107.57 152.65 187.64

Gross profit 7743206/7743206 =100.00 117.30 138.67 172.21

Distribution cost 4153147/4153147 =100.00 120.91 140.80 172.87

Admin. Cost 903646/903646 =100.00 111.50 110.91 114.03

Other O.P. Exp 229664/229664 =100.00 101.82 107.66 162.75

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Other O.P.

Income

202923/202923 =100.00 93.92 118.22 94.77

Restructuring

cost

110000/110000 =100.00 338.39 444.80 -

Profit from O.P 2549672/2549672 =100.00 103.49 132.99 272.32

Finance cost 63946/63946 =100.00 170.78 728.99 668.85

Profit before

taxation

2485726/2485726 =100.00 101.76 117.66 181.66

Taxation 853242/853242 =100.00 98.71 110.22 1343.09

Profit after

taxation

1632484/1632484 =100.00 103.36 121.55 187.18

CONCLUSION

From the ratio analysis of the both companies (Unilever Pakistan and Colgate Palmolive) we

see that the increase in Current ratio of the U.P was not stronger than the previous four years

comparison and continually falling from the 2006 ratio. Acid test ratio is better than the last four

years data.. Net profit margin and return on investment as compared to previous years are

improved. Collection policy of the company is not good and there must be a better policy to

collect the receivables. The inventories turn over and payable turnover ratio increases as

compared to the last performances. C.P have good current and acid test ration as compared to

previous last four years performance. Financial leverage ratios are also good as compared to

the last year performance. Net profit margin and return on investment increases as compare to

last year. The cost of sales to net turnover ratio increases as compared to the last period which

reveals measures taken by the management to improve the efficiency in the business (2008-

2009). In 2009, the sale was Rs.38.1 billion as compared to 30.9 billion last year i.e. increase of

80% in comparison. In line with the increase in sales, the gross profit has also increased by

80% over last year. Due to a moderate increase in marketing and distribution, administrative

and other operating expenses the operating profit, profit before and after tax has increased by

64.93% over last year.

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