Case Study on Financial Accounting of Nestle

RUNNING HEAD: FINANCIAL ACCOUNTING
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Financial Accounting

Financial Accounting
1
Table of Contents
Executive Summary and Conclusion...............................................................................................2
1. Working Capital....................................................................................................................2
Appendices......................................................................................................................................5
References....................................................................................................................................5
Ratio Calculations........................................................................................................................6

Financial Accounting
2
Executive Summary and Conclusion
Nestle is a multinational company that operates in food and beverage industry. It is the largest
companies in the world in terms of revenue (Nestle,2018). On the other side, Unilever is also a
big brand in the food and beverages and consumer goods industry that give competition to
Nestle. Both the companies operate at the large scale. This report includes analysis of working
capital of both the companies for the year 2017 and 2018. Working capital analysis is an
important consideration because it dictates the liquidity position of the company and includes
cash conversion time of the company (Weetman,2019).
In order to understand the position of Nestle current ratio and trade payable days for the
company are calculated. It is analyzed that the liquidity position of Nestle is better than
Unilever, however both the companies struggle to pay its short term liabilities as their current
assets are less than their current liabilities that indicate that both the companies struggle for
availability of cash for day to day transactions. Nestle improved its current assets in order to
strengthen its liquidity position as compared to last year but need to improve further
(Nestle,2018). On the other side, trade payable indicates that how efficiently the company is
able to pay its suppliers that is its short term liabilities. Nestle take more time to pay its suppliers
than Unilever, it indicate that Nestle is not able to meet its short term liabilities on time or Nestle
as compare to Unilever is inefficient in maintaining its working capital (Unilever,2018).
1. Working Capital
Working capital ratios are useful for lenders and investors but for different reasons. The ratios
that are calculated to know the liquidity position and availability of cash in the firm to meet
immediate liability are current ratio and trade payable days. The working capital ratios are used
to measure the efficiency of company to use its current assets to meets its current liabilities.
Current Ratio
2018 2017 2018 2017
0.95 0.83 0.76 0.73