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Business Finance Final Project


Ratio Analysis
Of
Food Industry

Group Members:
MUZZAMIL SHAKIR

12046005107

MUQADDAS ARSHAD

15011030003

ARSAL QAZI

114405033

SYED MESAM ABBAS

110354011

AHSAN MASUD

110354003

Submitted to:
Miss Safia Nosheen

Introduction of food industry


In our final project we choose food industry there included fast food companies and Beverage
Companies and we cover all the ratios which we discuss in our course and try to cover all those
ratios. Companies that I choose for the ratio analysis are
1. Nestle
2. PepsiCo
3. Coke
4. McDonalds
There include some fast foods and junk foods companies and some beverages companies there
ratios are in the following. In ratio analysis we calculate all the values and try to cover all ratios.

Small Introduction of companies


Nestle
Nestl Pakistan operates in many ways but people, products and brands are the main flag bearers
of the Companys image, and we continue to enhance the quality of life of people of Pakistan.
This is basically food generating company there are multiple product of nestle and it is
multinational company which produce goods and service and deliver to the consumer through
proper channel by supply chain. Their product are enlisted below
o Ambient Dairy
o Chilled Dairy
o Juices
o Bottled water
o Culinary & Foods
o Baby Foods
o Breakfast Cereals
o Coffee
o Confectionary

o Nestle Professionals
They have their manufacturing unit where they made their product and multiple departments
which deals and handle the queries, complaints that are HR, Marketing, Finance, research and
development, Supply chain, Production and Operation, Manufacturing. Their tag line is Good
Food Good Life
PepsiCo
PepsiCo is one of the world's leading food and beverage companies and a global portfolio of
diverse and beloved brands. We have a complementary food and beverage portfolio that includes
22 brands that in 2014 each generated more than $1 billion in estimated annual retail sales. Pepsi
Basically believes on values, performance with purpose, human sustainability, environmental
sustainability, talent sustainability, global citizenship.
Products of Pepsi are
o Lays
o Mountain Dew
o Diet Pepsi
o 7 up
o Cheetos
o Mirinda
o Lipton
o Aquafina
These are some of the product which Pepsi made in globally.

Coke
Coca Cola is a carbonated soft drink. It is produced by The Coca Cola Company of Atlanta,
Georgia, and is often referred to simply as Coke (a registered trademark of The Coca-Cola
Company in the United States since March 27, 1944). The Coca Cola Company has, on occasion,
introduced other cola drinks under the Coke brand name. The most common of these is Diet
Coke, with others including Caffeine-Free Coca-Cola, Diet Coke Caffeine Free, Coca Cola
Cherry, Coca-Cola Zero, Coca Cola Vanilla, and special versions with lemon, lime, or coffee.
Products are

Caffeine-Free Coca-Cola

Coca-Cola Cherry

New Coke

Coca-Cola with Lemon

Coca-Cola Vanilla

Coca-Cola with Lime

Coca-Cola Raspberry

Coca-Cola Black Cherry Vanilla

Coca-Cola Blk

Coca-Cola Citra

Coca-Cola Orange

Coca-Cola Life

There tag lines is open happiness

McDonalds
McDonald's is the world's largest chain of hamburger fast food restaurants, serving around 68
million customers daily in 119 countries across more than 36,000 outlets. A McDonald's
restaurant is operated by either a franchisee, an affiliate, or the corporation itself. The
McDonald's Corporation revenues come from the rent, royalties, and fees paid by the
franchisees, as well as sales in company operated restaurants.
McDonald's predominantly sells

o Hamburgers
o Various types of chicken

o Chicken sandwiches
o French fries
o Soft drinks
o Breakfast
o Desserts.
Types of restaurants
o McDrive
o McCafe
o McExpress
o Truck Shops
o Walmart Stores
o Shopping Malls

Liquidity Analysis

Current Ratio
Formula of current Ratio= current assets/current liabilities

In the above table we calculate all the current ratio from 2011 to 2014. McDonalds leading in
Current ratio as compared to PepsiCo, Coke and Nestle. In 2013 and 2014 his ratios increases.

Name of the Company

2014

2013

2012

2011

McDonalds

1.52

1.59

1.45

1.25

Coke

1.02

1.13

1.09

1.05

PepsiCo

1.14

1.24

1.10

0.96

Nestle

1.03

0.91

0.91

0.95

Quick ratio

Formula:
Quick ratio= current assets-inventories/current liabilities

Name of the Company

2014

2013

2012

2011

McDonalds

1.20

1.30

1.09

1.05

Coke

0.81

0.90

0.77

0.78

PepsiCo

0.85

0.93

0.80

0.62

Nestle

0.69

0.59

0.60

0.66

Well here again McDonalds leading in Quick ratios. Others companies have less than 1 and
McDonalds Quick ratio is greater than one. In 2013 and 2014 its chart increase 1.20 to 1.30.

Assets Management

Inventory turnover
Formula:
Inventory Turnover Ratio= Sales/Inventories

2014

2013

2012

2011

145.36

140.20

140.47

143.97

Coke

5.61

5.63

6.00

6.34

PepsiCo

9.43

8.94

8.45

8.78

Nestle

5.42

5.50

5.27

5.14

Name of the Company


McDonalds

In asset management ratio there is inventory turnover ratio coming first in this ratio analysis
McDonalds again on the top and there is big margin if we compared McDonalds performance
with Pepsi, Coke and Nestle. He is leading in 2014 that is 145.36.

Days sales outstanding

Formula:
DSO= Receivable/Annual sales/365

In Days sales outstanding ratio Nestle is leading as compared to performances of McDonalds,


coke and Pepsi. In 2011 DSO is 55.47 which is higher than 2014 year performance that is 50.99.
Which shows Nestle is greater than the others food and beverages companies.

Name of the Company

2014

2013

2012

2011

McDonalds

16.85

17.50

17.94

16.99

Coke

37.05

37.52

36.79

36.66

PepsiCo

32.43

33.22

36.14

36.32

Nestle

50.99

50.60

52.87

55.47

Asset Turnover

Formula:
Asset turnover ratio= sales/total assets

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Name of the Company

2014

2013

2012

2011

McDonalds

0.77

0.78

0.81

0.83

Coke

0.51

0.53

0.58

0.61

PepsiCo

0.90

0.87

0.89

0.94

Nestle

0.72

0.75

0.77

0.74

While in this section Pepsi asset turnover ratio is greater than others companies Pepsi has 0.90
and 0.94 which is greater than Coke, Nestle and McDonalds.

Fixed asset turnover

Formula:
Fixed asset turnover= Sales/Net fixed assets

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Name of the Company

2014

2013

2012

2011

McDonalds

1.09

1.11

1.16

1.20

Coke

3.11

3.18

3.26

3.14

PepsiCo

3.72

3.52

3.37

3.43

Nestle

3.32

3.43

3.63

3.68

In fixed asset turnover again Pepsi and Nestle on the top they have 3.72, 3.68 and McDonalds
has 1.09 which is less ratio and Pepsi has greater ratio in this ratio analysis.

Profitability Analysis

Profit Margin on sale


Formula:
Profit margin= Net income/sales

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Name of the Company

2014

2013

2012

2011

McDonalds

17.34

19.87

19.82

20.38

Coke

15.43

18.32

18.78

18.42

9.77

10.15

9.43

9.69

15.74

10.84

11.49

11.34

PepsiCo

Nestle

Again McDonalds have higher or greater ratio than Coke and Pepsi Nestle is quite near to
McDonalds. It has 20.38 and Nestle have highest value 15.75 and Pepsi have low value which is
9.69

Return on total assets (ROA)

Formula:
ROA= Net income/Total assets

Name of the Company

2014

2013

2012

2011

13

13.42

15.51

15.98

16.94

Coke

7.80

9.74

10.86

11.21

PepsiCo

8.80

8.86

8.38

9.14

11.39

8.12

8.83

8.41

McDonalds

Nestle

Here again McDonalds leading company. His return on assets are higher in percentage than
beverages and its high in 2011 which is 16.94 as compared to 2014 and 2013. Pepsi is at the last.

Return on common equity (ROE)

Formula:
ROE= Net income/Common equity

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Name of the Company

2014

2013

2012

2011

McDonalds

32.97

35.69

36.82

37.92

Coke

22.36

26.03

28.00

27.37

PepsiCo

31.29

28.99

28.87

30.92

Nestle

21.79

16.22

18.02

15.99

Well here again McDonalds is leading it is quite famous in the globally and people go there and
prefer to junk foods. So due to availability of all the food this is the main reason their return on
the equity is higher. Which is maximum in 2011 and that was 37.92 and in 2014 it decrease from
37.92 to 32.97.

Market value

Formula:
Market/Book value= Market price per share/ Book value per share

Name of the Company

2014

2013

2012

2011

15

14.15

15.31

15.25

13.06

7.66

7.30

7.34

7.34

PepsiCo

15.48

14.55

14.41

15.05

Nestle

18.78

21.89

20.70

17.35

McDonalds
Coke

In market and book value nestle is leading their market value 21.89 if we compared to Pepsi,
Coke and McDonalds. Hence in the table it show it is greater than the others companies.

Price/Earning (P/E) Earning Per Share


Formula:

Earnings per share= Price per share/Earning per share

Name of the Company

2014

2013

2012

2011

16

(13.15)

3.54

1.71

15.07

Coke

1.60

1.90

1.97

1.85

PepsiCo

4.27

4.32

3.92

4.03

Nestle

4.52

3.13

3.32

2.96

McDonalds

Nestle price/earnings or we can say EPS Nestle is on the top which has highest score than other.
4.52 is Nestle and PepsiCo is quite near which is 4.27. McDonalds goes in Negative while in
2011 McDonalds has highest value than other companies.

Debt Management
Total debt to total assets
Formula:
Debt ratio= Total assets/total assets

Name of the Company

2014

2013

2012

2011

17

McDonalds

1.17

0.88

0.89

0.84

Coke

0.67

0.63

0.57

0.48

PepsiCo

0.75

0.69

0.68

0.56

Nestle

0.18

0.17

0.15

0.11

Well if we compared debt ratio again McDonalds on the top which is 1.17 has highest value than
the others companies ratio. Nestle have lowest value and it is at the last. McDonalds on the top.

Time Interest Earned (TIE)

Formula:
Time interest earned= EBIT/Interest Charge

Name of the Company

2014

2013

2012

2011

18

McDonalds

13.92

16.72

16.64

17.26

Coke

19.31

24.79

19.43

25.20

9.63

9.76

9.12

20.35

10.47

12.10

5.36

7.19

PepsiCo

Nestle

In time interest earned Coke is on the top which have high value that Is 25.20 in 2011 and 24.79
in 2013. And Pepsi has low value which is 9.63. In the table you can see Pepsi in 2011 their time
interest earned is 20.35 which is quite well as the years passes this his TIE is decrease and Coke
is increasing so it decreases and decrease it fall in 2014 which is 9.63.

EBITDA Coverage

Formula:
EBITDA coverage= EBITDA+ Lease payment/ Interest+ principle payments+ Lease
payment

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Name of the Company

2014

2013

2012

2011

McDonalds

13.92

16.72

16.64

17.26

Coke

20.31

25.79

30.75

28.43

9.73

9.88

9.25

20.51

10.06

20.81

19.08

23.48

PepsiCo

Nestle

Well here Coke is leading which has highest margin and dominate in this category. In 2011 Pepsi
EBITDA is 28.43 and in 2014 which decrease and fall at 20.11 which is still leading todays its
quite famous and succeed in making positioning among the customer mind which is good. Pepsi
is also decrease its EBITDA which is at the end 9.73 score.

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Conclusion
In the above all the ratio analysis McDonalds performance is higher than all the others
companies which include Coke, Pepsi and Nestle. McDonalds is fast food chain and it is quite
famous in Europe and all over the world they create awareness among the peoples they have
multiple competitors worldwide. They have their quality, taste and they meet their level and
people have their first priority. They entertain their customer as much they can. Due to meet their
level they dont compromised against their quality. So they best serve and entertain and they also
offer on promotional activities and discount prices and maintain their level. In the above ratio
analysis few ratios they are less but most of the ratios their performance is very good and this is
good sign as well.