Financial Ratio Analysis: Financial Analysis Of Nestle

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1(d) Recommendation Financial ratio analysis is used to determine the financial structure comparability through time or with other competitors within the same industry. It consists of five categories which are profitability, liquidity, efficiency, capital structure and shareholders. Profitability ratio is to measure the overall effectiveness of entity’s operating management and determine the ability of the entity to earn profit. The profit of a company will affect the ability of the entity to get debts and equity financing. Based on the profitability ratios of the three companies, the gross profit margin of the Ajinomoto Malaysia Bhd is the highest compared to the Nestle and F&N. This means, Ajinomoto spend their money more wisely on sales to generate the optimum gross profit as compared to Nestle and F&N companies. However, the operating profit margin and net profit margin of Nestle is the highest which consist of 18.66% and 12.21& for each. It indicates that Nestle has managed their expenses that occur in their production well and minimize it according to the sales they make. In addition, Nestle has more expertise to reduce their tax, interest to increase their profit. Shareholder ratios indicate how well a company is performing relation to the price of its shares and other related items including dividends and the number of shares in issue. The earning per share of Nestle is the highest compared to the other companies…show more content…
Capital structure ratios measure the entity’s ability to pay interest and the face value of debts when it’s due. The debt ratio of the Ajinomoto is the lowest compared to others which mean the company is facing lesser financial risk. The debt to equity ratio showed that Ajinomoto has the lowest ratio which will attract more investor thus increase their capital because the shareholder’s equity are being protected

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