Professional Documents
Culture Documents
June 4, 2016
ZEESHAN KHALID
(13-ARID-2672)
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
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
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.
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.
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.
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
10
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
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.
Chairman
CEO
Director
Director
Director
Director
11
Director
Audit Committee
Chairman
Member
Member
Member
Member
Human Resource and Remuneration Committee
Chairman
Member
Member
Member
Member
Company Secretory & Acting CFO
CEO
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
12
Principal Bankers
Bank Al-Habib Limited
REGISTERED OFFICE
SITE PLANT
MURIDKE PLANT
GUJRANWALA PLANT
13
14
15
Ramadan. Looking forward to rejoining school, these children enjoy their vacations while munching on
Nationals Goodies!
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.
16
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.
17
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).
1.11.4 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.
1.11.6 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.
18
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.
1.11.13 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.
19
and a deliciously crispy texture. Whether cooked, seasoned or garnished, National Golden Fried Onions,
make your food a magical mouthwatering experience.
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.
20
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
21
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.
To identify the net profit and EPS growth rate performance of companies.
22
Assets
Liabilities
Equity
Cash flows
23
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.
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.
24
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.
25
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.
26
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.
27
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.
28
29
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.
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.
2011
8.83%
13%
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.
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).
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%.
31
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
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%
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.
32
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.
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.
33
Years
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.
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
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.
5.0 Conclusion
5.1 Findings
Profitability Decline.
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
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.
Future researchers try to analyze the firms comprehensively by taking more variables into account.
34
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
Jams, Marmalades & Jellies | National Foods. (n.d.). Retrieved from http://nfoods.com/our-brands/jams/
35
Appendix
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67