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Running Head: ANALYSIS AND INTERPRETATION OF FINANCIAL STATEMENT

ANALYSIS AND INTERPRETATION OF FINANCIAL


STATEMENT
______________________________________________________________________________

June 4, 2016

ZEESHAN KHALID
(13-ARID-2672)

A RESEARCH PROJECT SUBMITTED TO


THE UNIVERSITY INSTITUTE OF MANAGEMENT SCIENCES
UNIVERSITY OF ARID AGRICULTURE RAWALPINDI, PAKISTAN

ANALYSIS AND INTERPRETATION OF FINANCIAL STATEMENT

APPROVAL PAGE
We hereby satisfied that the project by ZEESHAN KHALID with Registration Number 13-ARID2672 is worthy of acceptance in fulfillment of the requirement for the Award of Bachelor of Business
Administration Degree (BBA Hons.)

X
Prof. Dr. M. Khalid Sohail
Supervisor

ANALYSIS AND INTERPRETATION OF FINANCIAL STATEMENT

Table of Contents
Abstract........................................................................................................................................................ 8
Purpose...................................................................................................................................................... 8
Research Design........................................................................................................................................ 8
Findings .................................................................................................................................................... 8
1.0 Introduction ........................................................................................................................................... 9
1.1 History ................................................................................................................................................ 9
1.2 Business Profile .................................................................................................................................. 9
1.3 Geographical Presence ........................................................................................................................ 9
1.4 Founders Philosophy ......................................................................................................................... 9
1.5 Vision & Mission ................................................................................................................................ 9
1.6 Core Values....................................................................................................................................... 10
1.7 Code of Ethics & Business Practices ................................................................................................ 10
1.8 Company Information ....................................................................................................................... 11
1.9 Organizational Chart ......................................................................................................................... 14
1.10 Corporate Social Responsibility...................................................................................................... 14
1.10.1 Aagahi Adult Literacy Program (AALP) ................................................................................. 15
1.10.2 School of Britannica................................................................................................................. 15
1.10.3 Aman Ghar ............................................................................................................................... 15
1.10.4 Iodized & Iron Fortified Salt .................................................................................................... 16
1.10.5 Water Filtration Plants - Access to Safe & Clean Drinking Water .......................................... 16
1.10.6 Saaf Paani Sehatmand Zindagi ................................................................................................ 16
1.10.7 Value Chain Empowerment ..................................................................................................... 16
1.10.8 Pakistan Agriculture Coalition ................................................................................................. 17
1.10.9 Breast Cancer & Anti-Tobacco Awareness ............................................................................. 17
1.10.10 Hepatitis B & C Vaccination & Awareness Drives ............................................................... 17
1.10.11 In-House Clinics .................................................................................................................... 17

ANALYSIS AND INTERPRETATION OF FINANCIAL STATEMENT

1.10.12 Emergency Relief Flood and IDP Assistance ..................................................................... 17


1.11 Products & Services ........................................................................................................................ 18
1.11.1 Desserets .................................................................................................................................. 18
1.11.2 Recipe Masala .......................................................................................................................... 18
1.11.3 Recipe Masala Jars ................................................................................................................... 18
1.11.4 Pickles ...................................................................................................................................... 18
1.11.5 Frozen Meals ............................................................................................................................ 18
1.11.6 Ketchup .................................................................................................................................... 18
1.11.7 Jams.......................................................................................................................................... 18
1.11.8 Rice .......................................................................................................................................... 19
1.11.9 Fruitily...................................................................................................................................... 19
1.11.10 Chinese ................................................................................................................................... 19
1.11.11 Snacks .................................................................................................................................... 19
1.11.12 Basic Spices ........................................................................................................................... 19
1.11.13 Salt ......................................................................................................................................... 19
1.11.14 Chutneys & Sauces ................................................................................................................ 19
1.11.15 Ginger & Garlic Pastes .......................................................................................................... 19
1.11.16 Golden Fried Onions .............................................................................................................. 19
1.11.17 Masala Snax ........................................................................................................................... 20
1.12 SWOT Analysis .............................................................................................................................. 20
1.12.1 Strengths .................................................................................................................................. 20
1.12.2 Weaknesses .............................................................................................................................. 21
1.12.3 Opportunities............................................................................................................................ 21
1.12.4 Threats...................................................................................................................................... 21
1.13 Problem Statement .......................................................................................................................... 22
1.14 Objective of the Study .................................................................................................................... 22
1.15 Significance of the Study ................................................................................................................ 22

ANALYSIS AND INTERPRETATION OF FINANCIAL STATEMENT

2.0 Literature Review ............................................................................................................................... 23


2.1 Introduction ....................................................................................................................................... 23
2.2 What is Financial Statement? ............................................................................................................ 23
2.2.1 Objective of a Financial Statement Analysis ............................................................................. 24
2.3 Uses and Users of Financial Statements ........................................................................................... 24
2.4 Classification of Financial Statement ............................................................................................... 25
2.4.1 Income Statement ....................................................................................................................... 25
2.4.2 Balance Sheet ............................................................................................................................. 25
2.4.3 Statement of Cash Flows............................................................................................................ 25
2.4.4 The Statement of Retained Earnings .......................................................................................... 26
3.0 Research Design .................................................................................................................................. 27
3.1 Sources and Method of Data Collection ........................................................................................... 27
3.2 Research Instrument.......................................................................................................................... 27
3.3 Reliability/Validity of Research Instrument ..................................................................................... 27
3.4 Population ......................................................................................................................................... 27
3.5 Sample Size....................................................................................................................................... 27
3.6 Selection of Company and Period..................................................................................................... 28
3.7 Methodology ..................................................................................................................................... 28
3.8 Tools Used for Analysis.................................................................................................................... 28
4.0 Results & Discussions ......................................................................................................................... 29
4.1 Profitability Ratio.............................................................................................................................. 29
4.1.1 Gross Profit Margin ................................................................................................................... 29
4.1.2 Net Profit Margin ....................................................................................................................... 29
4.1.3 Operating Profit Margin ............................................................................................................. 29
4.1.4 Total Assets Turnover ................................................................................................................ 30
4.1.5 Return on Assets ........................................................................................................................ 30
4.1.6 DuPont Analysis of Return on Assets ........................................................................................ 31

ANALYSIS AND INTERPRETATION OF FINANCIAL STATEMENT

4.1.7 Sales to Fixed Assets Turnover .................................................................................................. 31


4.2 Testing of Financial Position ............................................................................................................ 32
4.2.1 Days Sales in Receivables ........................................................................................................ 32
4.2.2 Account Receivable Turnover ................................................................................................... 32
4.2.3 Account Receivable Turnover in Days ...................................................................................... 32
4.2.4 Working Capital ......................................................................................................................... 33
4.2.5 Current Ratio .............................................................................................................................. 33
5.0 Conclusion ........................................................................................................................................... 34
5.1 Findings............................................................................................................................................. 34
5.2 Limitations ........................................................................................................................................ 34
5.3 Recommendations ............................................................................................................................. 34
References .................................................................................................................................................. 35
Appendix .................................................................................................................................................... 36
Annual Reports of Nestle Pakistan Limited ............................................................................................ 36
Annual Reports of 2010 & 2011 ......................................................................................................... 36
Annual Reports of 2012 & 2013 ......................................................................................................... 43
Annual Reports of 2014 & 2015 ......................................................................................................... 49
Annual Reports of National Foods Limited ............................................................................................ 55
Annual Reports of 2011 & 2012 ......................................................................................................... 55
Annual Reports of 2012 & 2013 ......................................................................................................... 59
Annual Reports of 2014 & 2015 ......................................................................................................... 63

ANALYSIS AND INTERPRETATION OF FINANCIAL STATEMENT

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ANALYSIS AND INTERPRETATION OF FINANCIAL STATEMENT

Abstract
Purpose
Financial Statement Analysis and its Interpretation is a very important tool of good management
decision-making in business firms. Accurate decisions ensure business survival, profitability, and growth.
without financial statement analysis in investment decisions, an enterprise is likely to make decisions,
which could spell its doom. Poor or lack of qualitative financial statement analysis could lead to low
investment returns, low profitability and even failure to identify viable investment opportunities. The main
objective of this project is, therefore, was to determine how investors could use financial statement analysis
and interpretation to aid their decisions and to avert the problems highlighted above.

Research Design
This study is conducted via secondary data collected from the firms annual reports. A detail ratio
analysis has carried out to determine the National Foods Limited profitability and financial position in the
comparison of Nestle Pakistan Limited.

Findings
It can be concluded that the performance of National Foods Limited (NFL) is satisfactory in the
comparison with Nestle Pakistan Limited (NPL), NFL is bad in recovering their receivables with respect to
NPL, but NFL is good in managing its overall working capital as compared to NPL and NFL is more liquid
than NPL.

ANALYSIS AND INTERPRETATION OF FINANCIAL STATEMENT

1.0 Introduction
1.1 History
The company was incorporated in Pakistan on mid of February 19, 1970, as a private limited
company under the Companies Act, 1913 and subsequently converted into a public limited company under
the Companies Ordinance, 1984 by a special resolution passed at the extraordinary general meeting held
on March 30, 1988. The company is principally engaged in the manufacture and sale of convenience-based
food products. It is listed on Karachi, Lahore, and Islamabad Stock Exchanges. The registered office of the
company is situated at 12 / CL - 6, Claremont Road, Civil Lines, Karachi.

1.2 Business Profile


National Food Limited (NFL) has successfully established itself as a multinational foods company
with an independent subsidiary, National Foods DMCC, in 2013, catering to the Middle Eastern market in
Dubai. This structure was further expanded with two more subsidiaries in Canada, (National Epicure
Limited) and the United Kingdom, (National Foods Pakistan-UK Limited) catering to the North American
and European markets respectively.

1.3 Geographical Presence


NFL continues to expand its horizon across the borders, with Holland, Taiwan, Nigeria and Iraq
being the recent most additions to NFLs international consumer base.

1.4 Founders Philosophy


National Foods must focus on customer needs and serve them with quality products at affordable
prices. Products must be pure and should conform to international standards. Research must continuously
produce new and adventurous products that are scientifically tested and hygienically wrapped in safe and
attractive packaging. They must create an environment in our offices and factories where talent is groomed,
and people have every opportunity to advance in their careers. They must provide us to be good corporate
citizens, support charitable causes and bear our fair share of taxes. Reserves must be built, new factories
created, sound profits made and fair dividend should be paid to our stockholders. Through building a
reliable brand, NFL must get itself recognized as a leader in Pakistan and abroad. With the help of Almighty
God, the company can achieve its targets in times to come.

1.5 Vision & Mission


Our vision is to be a Rs. 50 billion food company by the year 2020 in the convenience food
segment by launching products and services in the domestic and international markets that enhance lifestyle
and value for our customers through management excellence at all levels.

ANALYSIS AND INTERPRETATION OF FINANCIAL STATEMENT

1.6 Core Values

They act with intense positive energy and are not afraid to take risks. They challenge themselves
continuously; they are good at what they do, and they take pride in who they are.

They put their people first. They treat them with respect and actively contribute towards their
development.

They see the world through the eyes of their customers. They do everything possible to make them
happy.

They are part of the solution, never the problem. They act like owners and have a positive influence
on others.

Their roles are defined, not their responsibilities. They believe in going the further to accomplish
their goals. They coach and support each other to ensure everyone wins. They have a WE versus
I mindset.

They do not run their business at the cost of human or ethical values.

They say. They do. They deliver. They talk about their actions. They strive for nothing but the best.
Execution is the key to winning!

They see. They act. They take responsibility for their actions. They do not blame others for their
mistakes; they analyze them and correct them.

1.7 Code of Ethics & Business Practices


NFL believes in conducting its operations with strong ethical and moral standards. NFLs
Statement of Code of Ethics & Business Practices aims to provide guidance on carrying out its business
related decisions and activities. We wish to achieve excellence in all spheres of our operations for which
business ethics form the basis. Any party entering any form of contract with NFL is bound to comply with
the given guidelines. NFLs Statement of Code of Ethics & Business Practices, has the following seven
guidelines:

Unfair Means: Any use of bribery, kickbacks or any form of payment in cash/kind to obtain
business-related or otherwise gainful benefit for the company is strictly prohibited. Excessive
business gifts and entertainment also hold the same meaning and NFL does not approve of such
payments.

Respect and Integrity: NFL believes in giving respect to individuals. We aim to operate in a
manner that discourages discrimination, harassment, and/or influence. Discrimination refers to
favoritism based on a particular aspect of an individuals personality. Harassment includes gender
harassment creating an intimidation, hostile or offensive work environment causing interference

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with work performance. Influence could be an abuse of authority or the wish to alter personal
beliefs.

Conflict of Interest: NFL prohibits actions that are in conflict with the companys business
interests. This may include but is not limited to:
o

Providing assistance to the competition or holding ownership interests in a customer,


supplier, distributor or competitor.

Making personal gains at the companys expense.

Confidentiality: NFL believes in confidentiality of information related to companys business


activities. The company expects employees not to disclose or divulge by any means the confidential
and commercially sensitive information except to the authoritative personnel requiring it.
Furthermore, they should use their best endeavors to prevent the disclosure of such information by
other people. The obligation of confidentiality shall survive the expiration or the cessation of
contacts with NFL and is equally applicable to intellectual property.

Statutory Compliance: NFL believes in providing total support and cooperation to all the
governmental and regulatory bodies irrespective of the extent of prevalent enforcement.

Financial Integrity: NFL believes in complete compliance with the accepted accounting rules and
procedures. This includes but is not limited to:
o

Transparency: NFL discourages any illegal activity for the purpose of any benefit to the
company or others. All information supplied to the stakeholders and/or auditors must be
authentic and transparent.

Disclosure: All transactions must be fully disclosed and must be for the purpose stated for.

Health, Safety and Community Responsibility: NFL is fully committed to health, safety and
responsibility towards environment and community. All activities of NFL must portray
responsibility towards the community and nation as a whole. NFL seeks to employ procedures that
are safe, healthy and environment-friendly.

1.8 Company Information


Board of Directors
Mr. Abdul Majeed

Chairman

Mr. Abrar Hassan

CEO

Mr. Waqar Hassan

Director

Mr. Khuwaja Munir Mashooqullah

Director

Mr. Zahid Majeed

Director

Mr. Ebrahim Qassim

Director

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ANALYSIS AND INTERPRETATION OF FINANCIAL STATEMENT

Mr. Iqbal Alimuhammed

Director
Audit Committee

Mr. Khuwaja Munir Mashooqullah

Chairman

Mr. Abdul Majeed

Member

Mr. Zahid Majeed

Member

Mr. Ebrahim Qasim

Member

Mr. Iqbal Alimohammed

Member
Human Resource and Remuneration Committee

Mr. Khuwaja Munir Mashooqullah

Chairman

Mr. Zahid Majeed

Member

Mr. Abdul Majeed

Member

Mr. Ebrahim Qasim

Member

Mr. Iqbal Alimohammed

Member
Company Secretory & Acting CFO

Mr. Farhan Latif


Head of Internal Audit and Secretory Audit Committee
Mr. Shahid Hussain
Internal Auditor
Messrs. Ernst & Young Ford Rhodes Sidat Hyder Chartered Accountant
& Co.
Company Management
Mr. Abrar Hassan

CEO

Mr. Shakaib Arif

Chief Operating Officer

Mr. Farhan Latif

Company Secretory & Acting CFO

Mr. Kamal Baig

Chief Operating Officer International Division

Ms. Saira A. Khan

General Manager HR, Admin & IR


Auditors

Messrs. A.F. Ferguson & Co.

Chartered Accountants, State Life Building, 1-C,


I.I. Chundrigar Road, Karachi
Share Registration Office

Central Depository Company of Pakistan Limited CDC House, 99-B, Block B, S.M.C.H.S., Main
Shahra-e-Faisal, Karachi-74400. Tel: (92-21) 111-111-500 Fax: (92-21) 34326031

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ANALYSIS AND INTERPRETATION OF FINANCIAL STATEMENT

Principal Bankers
Bank Al-Habib Limited

Main Branch, Karachi


S.I.T.E. Branch, Karachi
New Garden Town Branch, Lahore

Bank Al-Falah Limited (Islamic Banking Group)

Port Qasim Authority Branch, Karachi

BankIslami Pakistan Limited

S.I.T.E. Branch, Karachi

Dubai Islamic Bank Pakistan Limited

Clifton Branch, Karachi

Faysal Bank Limited

16, Abdullah Haroon Road, Karachi

National Bank of Pakistan

PNSC Building Branch, Karachi

Habib Bank Limited

S.I.T.E. Branch, Karachi

Habib Metropolitan Bank Limited

Main Branch, Karachi

MCB Bank Limited

Shaheen Complex Branch, Karachi

Meezan Bank Limited

M.T. Khan Road Branch, Karachi

United Bank Limited

Main Branch, Karachi

REGISTERED OFFICE

12/CL-6 Claremont Road, Civil Lines,


Karachi 75530 P.O. Box No. 15509
Phone: (92-21) 35662687, 35670540, 35670585,
35670793 & 35672268 Fax: (92-21) 35684870

SITE PLANT

F-160/ C, F-133, S.I.T.E., Karachi.


Landline # 021-3257-7707 10
Fax # 021-3257-2217
E-mail Address: info@nfoods.com

PORT QASIM PLANT

A-13, North Western Industrial Zone,


Bin Qasim, Karachi
Landline # 021-3475-0373 7

MURIDKE PLANT

5-A/1, New Muslim Town, Lahore


Factory Address: G.T. Road, Manooabad Meer
Muridke.
Landline # 042-798-1427, 798-0808
Fax # 042-798-1427, 798-0808

GUJRANWALA PLANT

53-KM G.T. Road, Chainwala Mord Amanabad,


Gujranwala Near Gujranwala Kamoki Tool Plaza
Landline # 055-3409560, 3409660

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1.9 Organizational Chart

1.10 Corporate Social Responsibility


At NFL, we are committed to the cause of creating a sustainable positive change by contributing
back to the community we operate in. Our long-term and robust CSR programs seek to impact the lives of
people positively, by targeting the cause of the issues that hinder the possibility of a better future. Our focus
remains on improving the social well-being and quality of life in Pakistan, through identifying initiatives
in 3 key areas, which are (i) Empowering Women Today through Education And Literacy, (ii) Promoting
Healthy Lifestyles through Offering Nutritional Meal Solutions and (iii) Ensuring Sustainable Livelihoods
through Community Development. We, at NFL, feel privileged to be of service to our society. Our CSR
initiatives fall under three focused categories:

Education & Literacy Empowering Women Today

Health & Nutrition Promoting Healthy Lifestyles

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Community Development Ensuring Sustainable Livelihoods

1.10.1 Aagahi Adult Literacy Program (AALP)


NFL believes that an educated woman ensures a brighter future for her family. This makes the role
of a woman altogether very significant and pivotal, thereby embedding education as an integral part of the
familys future. Hence, since 2005 NFL has collaborated with The Citizens Foundation (TCF) in launching
and running a massive campaign called the Aagahi Adult Literacy Program. This unique program aims to
empower women by teaching them basic literacy and numeracy skills within a span of 3 months. NFL and
TCF have successfully sustained this program for over a decade now - reaching across 40 cities nationwide,
transforming the lives of over 38,000 women and 200,000 family members on an average. They look
forward to our continued collaboration with TCF and new partners like Shield Corporation and Bayer Group
to rapidly intensify and accelerate the pace and reach of this program.
Aasmoon Lootfun Primary Girls School NFL along with its international distributor from Mauritius
is sponsoring and managing a school for females in one of the destitute areas of Karachi, called Kati Pahari.
In line with our goal to institutionalize the importance of female literacy, ALPGS has now been successfully
running for over four years. With a gradual increase in the number of students each year, NFL will continue
to scale it up and further expand the scope of this program. NFL, with the help of its distributor, has
accomplished what seemed impossible a few years ago, thus, enabling females to attend school and get
quality education near their homes.

1.10.2 School of Britannica


Education is for everyone - following this notion, NFL has partnered with School of Britannica to
support and endorse education for children hailing from economically unstable backgrounds through
sponsoring their school copies and notebooks for free. This has encouraged many school-going children to
acquire education, who were initially reluctant to attend school because they lacked bare necessities. NFL
and School of Britannica together, have made it easier for the less privileged to gain knowledge and enhance
their learning.

1.10.3 Aman Ghar


As a foods company, NFL truly understands the importance of health & nutrition as an essential
need for the optimal physical growth and mental development of our children. In the wake of such crisis,
where over 40% of our children are malnourished, NFL partnered with Aman Foundation through the
platform of Aman Ghar to provide nourishing meals to the school-going children of Khuda ki Basti. To
date, NFL and Aman Ghar together have served over 3,000,000 meals completely free of cost. NFL
supports this program by donating in-kind, where more than 3,500 meals are hygienically prepared in over
ten schools every day. Moreover, NFL has also recently launched NFL Goody Bags, where a delightful
mix of different NFL products are distributed amongst the students before the onset of their vacations and

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Ramadan. Looking forward to rejoining school, these children enjoy their vacations while munching on
Nationals Goodies!

1.10.4 Iodized & Iron Fortified Salt


NFL pioneered the use of Iodized Salt through a public-private partnership with UNICEF to tackle
the grave issue of Micronutrient Malnutrition in Pakistan. NFL, as an active social citizen, took the initiative
to promote awareness regarding the benefits of consuming and maintaining adequate Iodine levels along
with launching Iodized Salt and Iron Fortified Salt to address and alleviate Iron Deficiency Anemia (IDA)
a condition that can result in multiple disorders ranging from cretinism, goiter to mild mental and physical
retardation. In future, NFL aims to extend its product range by offering more nutritional meal solutions
through continuous research, development, and innovation.

1.10.5 Water Filtration Plants - Access to Safe & Clean Drinking Water
NFL recognizes that one of the biggest challenges in Pakistan is accessibility to safe & clean
drinking water. As a result, NFL has embarked on a mission to install water filtration plants in all the rural
communities it operates in within Pakistan, along with providing this facilitation to its workforce. As part
of NFLs strategic vision, our efforts are focused on providing access to clean drinking water by installing
water filtration plants in the Chili growing areas of Sindh as well as other rural areas that are deprived of
water accessibility. At present, there are three water filtration plants providing safe & clean drinking water
to over 15,000 people free of cost. Furthermore, NFL is now partnering with TCF to expand further and
install two more water filtration plants in the rural community and believes that this collaboration will
ensure the long-term sustainability of our vision.

1.10.6 Saaf Paani Sehatmand Zindagi


Saaf Paani Sehatmand Zindagi the tagline reinforces the basic fact that clean water is fundamental
to a healthy life! To embed this change in our people and ensure the sustainability of this initiative, we have
provided all our factory workers the opportunity to take clean drinking water to their homes on a daily basis
without any cost. In addition to this, NFL partnered with Aman Health Foundation to help spread awareness
regarding the importance and benefits of consuming clean drinking water. This awareness drive was
conducted at all NFL facilities nationwide including SITE, Port Qasim, and Muridke.

1.10.7 Value Chain Empowerment


Chilies are one of NFLs major ingredients grown primarily in Tharparkar, Sindh. Therefore, NFL
has set up its Chili collection center in Kunri to engage sustainably with the Chili farming communities of
this impoverished area. The aim of NFLs Chili collection center is to improve the quality of Chilies
predominantly by eliminating the hazards of Aflatoxin and pesticide residue. NFL encourages
sharecroppers and farmers to provide these Chilies by offering a premium price in return. This ensures that
the Chilies supplied by NFL are in compliance with the international standards, as well as benefitting the

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farming communities through improved livelihoods. NFL currently sources almost half of its requirement
directly from these farmers, with the aim of sourcing it 100% in the future. Linked to this Value Chain
Initiative is our long term goal of ensuring process improvement, enhancing the quality of Chilies and
increasing crop yields. Thus, we have also installed multiple water filtration plants in the Tharparkar district
to help provide the Chili growing communities accessibility to safe & clean water.

1.10.8 Pakistan Agriculture Coalition


In collaboration with Pakistan Agriculture Coalition (PAC), NFL frequently encourages its farmers
to ensure a better future by further enhancing their skills through vocational training that focus on aligning
the existing farming techniques with modern international practices and progressive methods that ultimately
improve the productivity and quality of yields.

1.10.9 Breast Cancer & Anti-Tobacco Awareness


From time to time, NFL collaborates with its esteemed partners to help build a more well-informed
society through organizing awareness sessions that touch upon an array of different health and safety issues.
Our most recent awareness drive focused on Breast Cancer. According to World Health Organization
(WHO), Breast Cancer affects nearly 40,000 women each year and is found to be present in both female
and male populace. On the other hand, Lung Cancer and Tuberculosis is another escalating health concern
that was highlighted to create awareness. NFL joined hands with Shaukat Khanum Memorial Cancer
Hospital & Research Centre for conducting informative sessions company-wide providing vital information
to all its participants. This included precautionary measures, first stage self-check-up, indications of going
to a doctor and other relevant facts and figures.

1.10.10 Hepatitis B & C Vaccination & Awareness Drives


Every year NFL organizes not only interactive and informative awareness sessions on Hepatitis B
& C, but also provides free vaccination to all its employees across all facilities nationwide, including every
new induction as well.

1.10.11 In-House Clinics


For the purpose of providing the benefit of free medical consultations, first-aid, regular check-ups
and medicines to our employees and workforce, NFL has established three in-house clinics at SITE, Port
Qasim, and Muridke respectively.

1.10.12 Emergency Relief Flood and IDP Assistance


NFL takes great pride in being a Pakistan-based company that stands by its people to promote peace
and stability in the nation. While reiterating our commitment as a company to support our people, NFL
joined hands with Omair Sana Foundation to help the Internally Displaced Persons (IDP) and the Internally
Displaced Families (IDF) present in Bannu and North Waziristan region of Pakistan. Furthermore, NFL
distributed food and medical supplies amongst the victims of floods in interior Sindh and Punjab, where

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numerous internal departments and employees took a personal interest in distributing the much-needed aid
to the affected populace. This project was undertaken in partnership with the National Rural Support
Program (NRSP).

1.11 Products & Services


1.11.1 Desserets
The range has a variety of products and is not only limited to traditional sweets such as kheers and
faloodas but also includes contemporary desserts such as jellies and custards.

1.11.2 Recipe Masala


National Recipes includes a range of over 48 delicious recipes such as biryanis, curries, barbeque
items, kababs and much more. These enriched and flavorsome Recipe masalas are a combination of exotic
herbs, spices, and seasonings that offer the experience of the complete Pakistani cuisine.

1.11.3 Recipe Masala Jars


National Recipe Masalas are also available in larger sizes, packed in jars. Whether used by
households or caterers, these bulk spice jars provide a convenient and economical solution for all.

1.11.4 Pickles
The taste, aroma and flavor of Nationals pickles capture the true essence of Pakistani tradition.
The deliciously spicy and tangy range of pickles is prepared from the best ingredients including flavorsome
oils, freshly picked succulent vegetables and fruits, and the signature spice blend.

1.11.5 Frozen Meals


Rich in aroma, texture and flavor, our frozen meals are seasoned to perfection. Prepared with
authentic National spices and served with the best quality basmati rice, these authentic mouthwatering
meals are available in four delicious flavors. National Authentics meals are microwaveable and ready to
serve in 5 minutes, providing convenient solutions for all meal occasions. Experience the tradition with
National frozen meals, halal certified by IFANCC.

1.11.6 Ketchup
National Ketchup is made with 100% freshest, reddest, plumpest, sun-ripened tomatoes. It is a good
balance of tart and sweet, that turns the simplest of food into healthy and delicious meals.

1.11.7 Jams
National Jams make life more fruitful by bringing you delicious fruit spreads and happiness.
National Jams are now a staple on the breakfast table and are available in a variety of flavors.

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1.11.8 Rice
Beautifully separate, pearl white grains of National Rice always glisten and burst with flavor. Our
rice is pure basmati, extra-long, polished to a silky sheen, unbroken and ready to cook straight from the bag
no picking or cleaning required.

1.11.9 Fruitily
National Foods Fruitily instant drink mix is so much more than a refreshing beverage. Each serving
of Fruitily is bursting with essential nutrients that not only provide the energy that your body and mind need
but also leave you refreshed, nourished and perked up!

1.11.10 Chinese
National Foods Chinese recipes make authentic, homemade Chinese dishes a breeze to cook. A
dash of our sauces range and vinegar livens up any soup or Chinese dish with a savory flavor that keeps the
food lovers coming back for more.

1.11.11 Snacks
National Foods offers a range of savory snack mixes and seasonings, which are a combination of
spices used in the preparation of traditional snack dishes.

1.11.12 Basic Spices


National Foods has a range of basic recipes which provide convenience to the cooking experience.
Basic recipes are a combination of spices commonly used in Pakistani cuisines to enhance taste and flavor.

1.11.13 Salt
National Foods is the pioneer in iodized salt in Pakistan and has become a brand leader in this
category. With its delicate, pure white salt crystals, National Salt adds a brilliant taste to food and also
offers nutritional benefits.

1.11.14 Chutneys & Sauces


National Foods has an exciting range of tangy and tasty chutneys. The range of chutneys includes
exciting and mouthwatering flavors. Whether used as a meal complement or as a dipping sauce, these
chutneys add the element of Pakistani taste through their unique traditional flavors.

1.11.15 Ginger & Garlic Pastes


National Foods provides a range of flavorsome pastes which make the cooking experience more
delightful. It is a convenient solution to adding the touch of savory Pakistani flavor and essence to food.

1.11.16 Golden Fried Onions


National Golden Fried Onions, aromatic and flavorsome in taste, make your meals special.
Prepared from the best onions and through the highest quality processes, give them a sunshine gold color

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ANALYSIS AND INTERPRETATION OF FINANCIAL STATEMENT

and a deliciously crispy texture. Whether cooked, seasoned or garnished, National Golden Fried Onions,
make your food a magical mouthwatering experience.

1.11.17 Masala Snax


Nationals Masala Snax range captures the authentic spice flavors of Pakistan. Exotic, explosive
and exciting, these snacks provide a burst of flavor that will dazzle the taste buds and excite the senses. The
range offers a variety of tantalizing flavors, which add a masala twist to your snacking experience.

1.12 SWOT Analysis


SWOT analysis plays an important role to evaluate the performance of any organization. This is
most commonly followed a set pattern to analyze the strength, weakness, opportunities, and threats. For
any company strength and weakness are internal elements and threats and opportunities always come from
outside the organization. Now we perform a detailed SWOT analysis considering the National foods.

1.12.1 Strengths
1.12.1.1 Broad Product Line
National food has a very broad product line that includes different types of Masala powders, Kheer
mix, Ketchup, Custard powder, Pastes, Achar and much more.
1.12.1.2 Broad Market Coverage
National food occupies 80% market share in powder mix market and one very obvious reason for
that is strong and very broad market coverage. According to Sales and Purchase Manager National food,
they have excellent market coverage all over Pakistan and citizens of each city have easy access to sales
and display centers.
1.12.1.3 Manufacturing Competence
National food has engineering and technical staff of the highest caliber that is capable of
manufacturing such products that differentiate National food products from its competitors. National food
possesses specific manufacturing competence for example uses of imported machinery and high-quality
ingredients in the manufacturing of powder mix that maintain the quality of the product.
1.12.1.4 Good Marketing Skills
National foods efficient marketing team in Pakistan has over the years played a crucial role in
developing public awareness. National food has its in-house advertising agency for promoting all National
foods products.
1.12.1.5 Enhanced Research and Development
National food emphasizes on Research and Development department to a great deal. The chief
executive of National food has hired a team of R & D himself, and he makes sure that ongoing
improvements in the existing National food products range is a continuous activity. Efficient R and D
department is considered as a vital strength of the company.

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ANALYSIS AND INTERPRETATION OF FINANCIAL STATEMENT

1.12.1.6 Brand Name Reputation


National food is among those few brand names that have earned a lot by its brand reputation.
However, the fact is that company has seen tiring 34 years of hard work to achieve this brand image. The
brand name is a source of vital strength for the business and is known all over the marketplace.
1.12.1.7 Appropriate Organizational Structure
The organizational hierarchy at National food is very functional and adequate. Company top
management consists of the Chief Executive and Managing Director. Then there are middle managers of
concerned departments like Marketing, Production, R&D and Finance. The company believes firmly in a
good relationship with its human resource.
1.12.1.8 Good Finance Management
Finance Department of National food is efficiently working to allocate resources to each of its
business portfolios. Good finance management is yet the strength of a company that is helping the company
out in assessing the exact financial situation.

1.12.2 Weaknesses
Currently, National food is operating with its full capabilities and Companys sales manager does
not think that there is any internal weakness in the organization. Because Company has a good repute in
the market and working with full concentration to improve its image in the minds of people.

1.12.3 Opportunities
Expanding Into Foreign Markets
The biggest opportunity for National food currently is exploiting new market segments. After
achieving good market coverage all over Pakistan, National food is now trying to expand its business in the
Middle East and Central Asian states.
1.12.3.1 Expansion of Core Business
National food started as mix powder producers but soon after gaining rapid market shares in powder
mix; Company considered expansion of core business as a major opportunity. Today Company has a wide
range of products that it has achieved by expanding the core business.
1.12.3.2 Entering Related Business
Entering those new businesses that are related to current business is a high potential opportunity.
For example, the company has entered the related businesses like Kheer mix, Ketchup, Custard powder,
Pastes, Achar and many other things.

1.12.4 Threats
1.12.4.1 New Entrants
The biggest threat for the Company has been the entry of new competitors in the market has made
National food management think that they will have to adjust the pricing or to provide some handsome

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ANALYSIS AND INTERPRETATION OF FINANCIAL STATEMENT

incentives to customers in competition with other brands in the market because Company does not want to
lose its market share.
1.12.4.2 No Barriers On Entry
The government has not fixed any hard rules upon the entrants in this industry. Any group of
companies that is financially strong can enter this industry without facing any strict barriers. This is another
threat for National food that more and more entrants coming in this industry and the profit margin shrinking
gradually
1.12.4.3 New Form of Industry Competition
In Pakistan, some other companies like Star have started competing for National food with its
Custard powder and Achar. It has formed a new form of industry competition. Star is producing its products
at a lower price and price war is already on.
1.12.4.4 Government Legislation
The production department of National Food uses special machinery that has to be imported from
abroad. The government has fixed a quota system that company cannot import. It more than a specific ratio.
This quota system is creating a threat to the company, and soon company needs to find an alternative.

1.13 Problem Statement


To analyze the companys growth and position on its competitors in the market.

1.14 Objective of the Study

To analyze the profitability, solvency position and liquidity position of companies.

To identify the net profit and EPS growth rate performance of companies.

1.15 Significance of the Study


The study will help the investors in analyzing the respective companys financial position in a
market.

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ANALYSIS AND INTERPRETATION OF FINANCIAL STATEMENT

2.0 Literature Review


2.1 Introduction
A series of authors have addressed the use of financial statement analysis and interpretation in investment
decision in one way or the other. In some instances, the sum of this analysis to determine the profitability
of a company and specifically returns on investment and optimal management decisions have been stated.
According to Pandey (2005), profitability is the ability of an entity to earn income. It can be
assessed by computing various relevant measures including the ratio of net sales to assets, the rate earned
on total assets, etc.
Meigs and Meigs (2003) stated that the rate of return on investment (ROI) is a test of managements
efficiency in using available resources. This review is organized under the following sub-heads for ease of
comprehension.

What is a financial statement?

Objective of financial statement analysis

Uses and users of financial statement analysis

Classification of financial statement

2.2 What is Financial Statement?


According to Meigs and Meigs (2003), the financial statement is a structured representation of the
financial position and financial performance of an entity. The objective of financial statements is to provide
information about the financial position, financial performance and cash flows of an entity that is useful to
a wide range of users in making economic decisions.
Financial statements also show the results of the managements stewardship of the resources
entrusted to it. To meet these objectives, financial statements provide information about an entitys:

Assets

Liabilities

Equity

Income and expenses, including gains and losses

Contribution by and distribution to owners in their capacity as owners

Cash flows

A complete set of financial statement comprises:

A statement of financial position as at the end of the period

A statement of comprehensive income for the period

A statement of changes in equity for the period

A statement of cash flows for the period

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ANALYSIS AND INTERPRETATION OF FINANCIAL STATEMENT

Notes of Account comprising a summary of significant accounting policies and other explanatory
information

A statement of financial position as at the beginning of the earliest comparative period when an
entity applies an accounting policy retrospectively or makes a retrospective restatement of items in
its financial statements or when it reclassifies items in its financial statements.

2.2.1 Objective of a Financial Statement Analysis


Business decisions are made by the best available estimates of the outcome of such decisions.
According to Meigs and Meigs (2003), the purpose of financial statement analysis is to provide information
about a business unit for decision-making purpose and such information need not be limited to accounting
data. White ratios and other relationships based on past performance may be helpful in predicting the future
earnings performance and financial health of a company; we must be aware of the inherent limitations of
such data.
According to Meigs and Meigs (2003), the key objectives of financial analysis are to determine the
companys earnings performance and the soundness and liquidity of its financial position. We are
essentially interested in financial analysis as a predictive tool. Accordingly, we want to examine both
quantitative and qualitative data to ascertain the quality of earnings and the quality and protection of assets.
In periods of recession when business failures are common, the balance sheet takes on increased importance
because the question of liquidity is uppermost in the minds of many in the business community. However,
when business conditions are good, the income statement receives more attention. Nevertheless, a financial
analyst has to grapple with the above complexities of using financial statement analysis to achieve a specific
purpose.

2.3 Uses and Users of Financial Statements


According to Akpan (2002), financial statement may be used by users for different purposes:

Owners and Managers: Require financial statement to make important business decisions that
affect its operations. Financial analysis is then performed on these statements to provide
management with a more detailed understanding of the figures. These statements are also used as
part of managements annual report to the stockholders.

Employers: Also need these reports in making collective bargaining agreements (CBA) with the
management, in the case of labor unions or for individuals in discussing their compensation
promotion and rankings.

Prospective Investors: They make use of financial statements to assess the viability of investing
in business. Financial analysis is often used by investors and is prepared by professionals (financial
analyst), thus providing them with the basis for making investment decisions.

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ANALYSIS AND INTERPRETATION OF FINANCIAL STATEMENT

Financial Institutions: Financial institutions (banks and other lending company) use them to
decide whether to grant a company with fresh working capital or extend debt securities (such as a
long-term bank loan or debentures) to finance expansion and other significant expenditures.

Government Entities: Government entities (Tax authorities) need financial statements to ascertain
the property and accuracy of taxes and other duties declared and paid by a company.

Vendors: They require financial statement to access the credit worthiness of the business.

Media & General Public: They are also interested in financial statements for a variety of reasons.

2.4 Classification of Financial Statement


According to Diamond (2006), all watchful business owners have an innate sense of how well their
business is doing. Almost without thinking about it, these business owners can tell you anytime during the
month how close they are to putting budgeted figures. Certainly, cash in bank plays a part, but its more than
that. Helpful is the now tiny review of financial statements. They are three types of financial statements.
Each will give important information about how efficiency and effective the business is operating.

2.4.1 Income Statement


The income statement shows all items of income and expense for arts or crafts business. It reflects
a specific period. So an income statement for the quarter ending March 31, shows revenue and expense for
January, February and March, if the income statement is for the calendar year ending December 31, it would
contain all the information from January 1 to December 31. Note that the normal accounting period for
income statement is 12 months or year. Income statements are also known as profit and loss account. The
button line on an income statement is income fewer expenses. If when income is more than expenses, it is
known as net profit and when the expense is more than the income it is a net loss.

2.4.2 Balance Sheet


Accounting is based upon a double entry system. For every entry into the books, there has to be an
opposite and equal entry. The net effect of the entries is zero, which results in your books being balanced.
The proof of this balancing act is shown in the balance sheet when Asset = Liability + Equity. The balance
sheet shows the health of business from day one to the date on the balance sheet. The balance sheet is
always dated on the late day of the reporting period. If you have been in business since 1st January 2011
and your balance sheet is dated as of 31 December of the current year, the balance sheet will show the
results of your operations from 1st January 2011 to December 31,
2011.

2.4.3 Statement of Cash Flows


The statement of cash flows the ins and outs of cash during the reporting period. You may be
thinking well who needs that type of report? I will just look at the checkbook. Good point, unless you are

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ANALYSIS AND INTERPRETATION OF FINANCIAL STATEMENT

reporting things that dont immediately affect cash such as depreciation, accounts receivable, accounts
payable. If I could only choose one of those three financial statements to evaluate the ability of a company
to pay dividends and meet obligations (indicating a healthy business), I would pick the statement of cash
flows. The statement of cash flows takes aspects of the income statement and balance sheet and kind of
crams them together to show cash sources and uses for the period.

2.4.4 The Statement of Retained Earnings


The statement of retained earnings shows the breakdown of retained earnings. Net income for the
year is added to the beginning of year balance, and dividends are subtracted. This results at the end of year
balance for retained earnings. Remember that expenses, revenues and dividends impact retained earnings.
Since net income equals revenue minus expenses, we need to include dividends when computing end of
period retaining earnings, plus net income and minus dividends.

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ANALYSIS AND INTERPRETATION OF FINANCIAL STATEMENT

3.0 Research Design


A research design is simply the framework or plan for the study, which is used as the modus
operandi of collecting pertinent data. In this study, the ratio comparison has conducted between NFL and
Murree Brewery Ltd.

3.1 Sources and Method of Data Collection


The main source and method of data collection in the study is secondary data which provides the
theoretical framework for the study.

3.2 Research Instrument


A research instrument is any device constructed for the recording of measuring data. It is the means
for generating pertinent information to be used for solving the research problems (Olakunori 1997)
therefore, to obtain valuable data for analysis, interpretations, and appreciation of problems
aforementioned. The present study is mainly based on secondary data which were collected from the
corporate annual audited reports, company database, published research reports by various industries,
related websites and research organization.

3.3 Reliability/Validity of Research Instrument


To forestall measurement errors, which occur when the research instrument is faulty, the reliability
of the research instrument was ensured through its careful construction and pre-test. The pre-test was done
by conducting a pilot survey, wherein the research instruments (questionnaire) were administered to apart
(sample) of the population with a new to finding possible fault and after that, correction than before the full
application of the main sample for the study.

3.4 Population
The population here refers to the totality of targeted individuals that form the focus of this study.
The objectives of the data collection process are to draw conclusions about the population. It is, therefore,
imperative to have a clear picture of what constitutes the research population.
The population of this study consists of five companies of Pakistan which are in food and personal
care products.

3.5 Sample Size


According to Egbu (1998), sampling involves the selection of some study units from a defined
study population. A sample is, therefore, a small representative of a large population. In drawing a small
sample for the study, the researcher considered how many people that are needed in the sample and their
category first to be selected. The sample size for this study is two.

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ANALYSIS AND INTERPRETATION OF FINANCIAL STATEMENT

3.6 Selection of Company and Period


The present study is mainly intended to examine the comparative financial performance of National
Foods Limited, and Murree Brewery Limited for five years in the period between 2011 2015.

3.7 Methodology
The researcher, being an external analyst, had to depend on mainly on secondary data for the
purpose of studying the financing performance of foods and personal care Industries in Pakistan from the
top two companies in Pakistan which are highly performed in overall growth regarding finance, exports,
and total assets value. The exploratory research techniques have been used for this study and also the study
is restricted only to Pakistan-based food and personal care products organizations.

3.8 Tools Used for Analysis


The present study has analyzed the financial performance of two food & personal care products
companies. To estimate and compare the financial performance of selected industries Ratio Analysis
technique and average mean has been used.

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ANALYSIS AND INTERPRETATION OF FINANCIAL STATEMENT

29

4.0 Results & Discussions


4.1 Profitability Ratio
4.1.1 Gross Profit Margin
Table 1
Gross Profit Margin
Company
Years

National Foods Limited

Nestl Pakistan Limited

2011

28.51%

26%

2012

32.52%

27%

2013

34.61%

28%

2014

35.05%

28.38%

2015

35.01%

33.13%

Average

33.14%

28.50%

Table 1 shows that average gross profit of NFL is 4.64% greater than Nestl Pakistan Limited.

4.1.2 Net Profit Margin


Table 2
Net Profit Margin
Company
Years

National Foods Limited

Nestl Pakistan Limited

2011

4.18%

7%

2012

8.14%

7%

2013

7.88%

7%

2014

7.29%

8.22%

2015

8.56%

8.5%

Average

7.21%

7.54%

Table 2 shows that average net profit of NFL is 0.33% less than Nestle Pakistan Limited.

4.1.3 Operating Profit Margin


Table 3
Operating Profit Ratio
Company
Years

National Foods Limited

Nestl Pakistan Limited

2011

8.83%

13%

ANALYSIS AND INTERPRETATION OF FINANCIAL STATEMENT

30

2012

12.66%

14%

2013

12.33%

13%

2014

11.51%

14.63%

2015

12.66%

15.84%

Average

11.59%

14.09%

Table 3 shows that the average operating profit ratio of NFL is 2.492% less than Nestle Pakistan Limited.

4.1.4 Total Assets Turnover


Table 4
Total Assets Turnover
Company
Years

National Foods Limited

Nestl Pakistan Limited

2011

1.9 : 1

2.2 : 1

2012

2.3 : 1

1.8 : 1

2013

2.0 : 1

1.7 : 1

2014

1.9 : 1

1.9 : 1

2015

2.1 : 1

2.0 : 1

Average

2.0 : 1

1.9 : 1

Table 4 shows that the average total assets turnover of NFL is greater than Nestle Pakistan Limited (NPL).

4.1.5 Return on Assets


Table 5
Return on Assets
Company
Years

National Foods Limited

Nestl Pakistan Limited

2011

8.08%

34.85%

2012

18.46%

11.52%

2013

15.84%

11.21%

2014

14.22%

15.32%

2015

17.89%

17.78%

Average

14.89%

18.13%

Table 5 shows that the average return on assets of NFL is 3.24% less than NPL, but as NPL shows 34.85%
ROA in 2011 which is much larger percentage than other respective years so if we again analyze NFL and
NPL from 2012 to 2015 we came to know that NFL ROA on average is 16.6% as compared to NPL 13.84%.

ANALYSIS AND INTERPRETATION OF FINANCIAL STATEMENT

31

4.1.6 DuPont Analysis of Return on Assets


Table 6 (a)
DuPont Analysis of Return on Assets - NFL
Years

Net Profit Margin

Total Assets Turnover

DuPont Return on Assets

2011

4.18%

1.9 : 1

7.94%

2012

8.14%

2.3 : 1

18.72%

2013

7.88%

2.0 : 1

15.76%

2014

7.29%

1.9 : 1

13.85%

2015

8.56%

2.1 : 1

17.97%

Table 6 (b)
DuPont Analysis of Return on Assets - NPL
Years

Net Profit Margin

Total Assets Turnover

DuPont Return on Assets

2011

7%

2.2 : 1

15.5%

2012

7%

1.8 : 1

12.6%

2013

7%

1.7 : 1

11.9%

2014

8.22%

1.9 : 1

15.6%

2015

8.56%

2.0 : 1

17.1%

4.1.7 Sales to Fixed Assets Turnover


Table 7
Sales to Fixed Assets Turnover
Company
Years

National Foods Limited

Nestl Pakistan Limited

2011

7.0 : 1

3.0 : 1

2012

7.4 : 1

2.4 : 1

2013

7.7 : 1

2.5 : 1

2014

7.3 : 1

2.9 : 1

2015

7.1 : 1

3.3 : 1

Average

7.3 : 1

2.8 : 1

Table 7 shows that average Sales to Fixed Assets Turnover of NFL is greater than NPL.

ANALYSIS AND INTERPRETATION OF FINANCIAL STATEMENT

32

4.2 Testing of Financial Position


4.2.1 Days Sales in Receivables
Table 8
Days Sales in Receivables
Company
Years

National Foods Limited

Nestl Pakistan Limited

2011

17.88 Days

22.76 Days

2012

14.68 Days

28.65 Days

2013

20.10 Days

32.23 Days

2014

27.19 Days

2.86 Days

2015

30.62 Days

2.93 Days

Average

22.09 Days

17.88 Days

Table 8 shows that NFL is going bad in recovering receivables as receivables increases with an average of
22.09 days of five years analysis. However, in the case of NPL, they are doing well from 2014 with an
average of 17.88 days of the five years analysis.

4.2.2 Account Receivable Turnover


Table 9
Account Receivable Turnover
Company
Years

National Foods Limited

Nestl Pakistan Limited

2011

20.42 Times

16.03 Times

2012

24.86 Times

12.73 Times

2013

18.16 Times

11.32 Times

2014

13.43 Times

127.17 Times

2015

11.92 Times

124.28 Times

Average

17.75 Times

56.30 Times

Table 9 shows that NFL is going bad in recovering receivables as they increase. However, NPL is doing
good from 2014. So NFL is recovering 38.55 times fewer receivables in a year than NPL on average.

4.2.3 Account Receivable Turnover in Days


Table 10
Account Receivable Turnover in Days
Company

ANALYSIS AND INTERPRETATION OF FINANCIAL STATEMENT

33

Years

National Foods Limited

Nestl Pakistan Limited

2011

20.83 Days

22.76 Days

2012

17.14 Days

28.67 Days

2013

31.39 Days

32.23 Days

2014

33.04 Days

2.86 Days

2015

39.13 Days

2.93 Days

Average

28.30 Days

17.88 Days

Table 10 shows that NFL on average is not efficient in recovering receivables as compared to NPL.

4.2.4 Working Capital


Table 11
Working Capital
Company
Years

National Foods Limited

Nestl Pakistan Limited

2011

Rs. 388,769

Rs. (3,393,438)

2012

Rs. 552,499

Rs. (3,161,297)

2013

Rs. 693,576

Rs. (64,506)

2014

Rs. 877,950

Rs. (9,371,460)

2015

Rs. 1,133,026

Rs. (7,113,514)

Rs. 729,164

Rs. (23,104,215)

Average

Table 11 shows that Working Capital of NFL is greater than NPL.

4.2.5 Current Ratio


Table 12
Current Ratio
Company
Years

National Foods Limited

Nestl Pakistan Limited

2011

1.2 : 1

0.8 : 1

2012

1.3 : 1

0.8 : 1

2013

1.3 : 1

0.9 : 1

2014

1.8 : 1

0.7 : 1

2015

1.4 : 1

0.7 : 1

Average

1.4 : 1

0.8 : 1

Table 12 shows that average Current Ratio of NFL is greater than NPL which means NFL is more liquid
than NPL but according to current ratio standards, a current ratio of any company should be more than 2.00.

ANALYSIS AND INTERPRETATION OF FINANCIAL STATEMENT

5.0 Conclusion
5.1 Findings

Profitability Decline.

Financial Strength Not highly satisfactory.

Fixed Assets mainly contributed towards profitability.

Working Capital Efficiently and efficiently managed.

The company does not have enough current assets to manage its debt easily.

It can be concluded that the performance of National Foods Limited (NFL) is satisfactory in the
comparison with Nestle Pakistan Limited (NPL), NFL is bad in recovering their receivables with
respect to NPL, but NFL is good in managing its overall working capital as compared to NPL and NFL
is more liquid than NPL.

5.2 Limitations

Due to lack of time, only two firms are in consideration.

Analysis has taken by accounting only three variables, companys profitability, solvency, and
liquidity.

Due to lack of time and data firms could not be analyzed in detail.

5.3 Recommendations

Accountants, financial analysts or investors should not be rushed in collection, preparation, analysis
and interpretation of financial statements.

According to companys perspectives financial statements should be made to reflect current cost
accounting to eliminate or reduce the effects to historical cost principle and risk inflation element.

A combination of different ratios should be used in analyzing a companys financial and/or


operating performance. Proper use of financial statement analysis should be made not only in
investment but also in other areas of decision making.

Future researchers try to analyze the firms comprehensively by taking more variables into account.

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ANALYSIS AND INTERPRETATION OF FINANCIAL STATEMENT

References
News - January 17, 2000 - SECP appoints M/s. A. F ... (n.d.). Retrieved from
http://www.secp.gov.pk/news/jan_17_00.htm

Libraries need to Grow2Gig+ | Benton Foundation. (n.d.). Retrieved from


https://www.benton.org/headlines/libraries-need-grow2gig

Frozen Meals | National Foods. (n.d.). Retrieved from http://nfoods.com/our-brands/frozen-meals/

Jams, Marmalades & Jellies | National Foods. (n.d.). Retrieved from http://nfoods.com/our-brands/jams/

Golden Fried Onions | National Foods. (n.d.). Retrieved from http://nfoods.com/our-brands/golden-friedonions/

Uses of Financial Reports - Boundless. (n.d.). Retrieved from


https://www.boundless.com/accounting/textbooks/boundless-accounting-textbook/int
roduction-to-accounting-1/what-is-accounting-17/uses-of-financial-reports-112-68

Heritage Flavors - National Foods Limited. (n.d.). Retrieved from http://nfoods.com/wp/wpcontent/uploads/2015/09/annual-report-2014-15-national-f

CODE OF CONDUCT - shield.com.pk. (n.d.). Retrieved from


http://www.shield.com.pk/download/CODE%2020OF%2020CONDUCT.pdf

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ANALYSIS AND INTERPRETATION OF FINANCIAL STATEMENT

Appendix

Annual Reports of Nestle Pakistan Limited


Annual Reports of 2010 & 2011

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Annual Reports of 2012 & 2013

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Annual Reports of 2014 & 2015

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Annual Reports of National Foods Limited


Annual Reports of 2011 & 2012

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Annual Reports of 2012 & 2013

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ANALYSIS AND INTERPRETATION OF FINANCIAL STATEMENT

61

ANALYSIS AND INTERPRETATION OF FINANCIAL STATEMENT

62

ANALYSIS AND INTERPRETATION OF FINANCIAL STATEMENT

Annual Reports of 2014 & 2015

63

ANALYSIS AND INTERPRETATION OF FINANCIAL STATEMENT

64

ANALYSIS AND INTERPRETATION OF FINANCIAL STATEMENT

65

ANALYSIS AND INTERPRETATION OF FINANCIAL STATEMENT

66

ANALYSIS AND INTERPRETATION OF FINANCIAL STATEMENT

67

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