For the wisdom and knowledge of writing this research report, I thank God the creator. Thank you for the breath of life and may all glory and honor be your name. I wish to thank the staff of the Coventry University for the provision of all necessary materials for conducting this research. May the Almighty God bless each one of you and may you continue helping future generations. I wish also to acknowledge my supervisors in this entire period of research for the guidance they accorded me. My special thanks also go to my friends and family members for the moral support they shown me when undertaking this research. For all those who played a part in ensuring the success of this research, I wish to recognize you and say thank you for the support.
This research was structured to conduct an analysis of the financial statements of a company operating in the Fast Moving Consumer Goods in the Pakistan Market. The chosen company that the research has been undertaken on is the Unilever Pakistan.
The research focuses on the importance of financial ratios in assessing the performance of a company. Additionally, the result focused on analyzing the performance of Unilever Pakistan using the financial ratios. Furthermore, the research has analysed the impact of external and internal factors to the survival and endurance of Unilever in the Pakistan FMCG industry. Another aspect that the research focused on is the standing of Unilever Pakistan in the past, presently and in the future. The research was conducted using a descriptive method utilizing both qualitative and quantitative data. The research has relied on secondary sources of data such as the company annual reports, reference books and journals. Some factors limited this report however, they were all overcome contributing to the final findings of the report.
Findings of the research have revealed that Unilever Pakistan has less current assets than current liabilities which makes it unable to meet its obligations within the required time. The main challenge, which is highlighted in the analysis of the report, is the rising debt that the company has. The company, however, has strong strengths such as strong international reputation and a wide range of brands enabling it to continue operating in Pakistan amid political and economic instability. It is important to conduct a future study on the marketing strategies that FMCG companies should pursue in international markets.
Table of Contents
TOC \o "1-3" \h \z \u Acknowledgement PAGEREF _Toc423014372 \h 2Abstract PAGEREF _Toc423014373 \h 3Table of Figures PAGEREF _Toc423014374 \h 6Table of Figures PAGEREF _Toc423014375 \h 7CHAPTER ONE PAGEREF _Toc423014376 \h 81.1 The Introduction PAGEREF _Toc423014377 \h 81.2 Research questions PAGEREF _Toc423014378 \h 121.3 Research purpose PAGEREF _Toc423014379 \h 121.4 Research objectives PAGEREF _Toc423014380 \h 13CHAPTER TWO: PAGEREF _Toc423014381 \h 142.1 Introduction PAGEREF _Toc423014382 \h 142.2 Financial ratios PAGEREF _Toc423014383 \h 162.2.1 Introduction PAGEREF _Toc423014384 \h 162.2.2 Profitability Ratio PAGEREF _Toc423014385 \h 172.2.3 Liquidity ratio PAGEREF _Toc423014386 \h 182.2.3 Leverage ratios PAGEREF _Toc423014387 \h 202.2.4 Debt coverage ratio PAGEREF _Toc423014388 \h 202.3 Factors behind Unilevers position PAGEREF _Toc423014389 \h 212.3.1 Internal: SWOT PAGEREF _Toc423014390 \h 212.3.2 External: PESTEL & Porter PAGEREF _Toc423014391 \h 222.4 Justification of the research/ Gap PAGEREF _Toc423014392 \h 24CHAPTER THREE PAGEREF _Toc423014393 \h 263.1 Research Plan PAGEREF _Toc423014394 \h 263.2 Research Perspective PAGEREF _Toc423014395 \h 263.3 Research Design PAGEREF _Toc423014396 \h 273.4 Descriptive research PAGEREF _Toc423014397 \h 273.5 Secondary data PAGEREF _Toc423014398 \h 293.6 Limitations PAGEREF _Toc423014399 \h 323.6.1 Validity PAGEREF _Toc423014400 \h 323.6.2 Generalizability PAGEREF _Toc423014401 \h 323.6.3 Reliability PAGEREF _Toc423014402 \h 323.7 Ethical Considerations PAGEREF _Toc423014403 \h 32CHAPTER FOUR: DATA COLLECTION, FINDINGS AND ANALYSIS PAGEREF _Toc423014404 \h 334.1 Liquidity ratio PAGEREF _Toc423014405 \h 334.1.1 Current Ratio: PAGEREF _Toc423014406 \h 334.1.2 Quick Ratio: PAGEREF _Toc423014407 \h 344.1.3 Cash Ratio PAGEREF _Toc423014408 \h 354.2 Asset management ratios PAGEREF _Toc423014409 \h 374.2.1 Accounts receivable turnover PAGEREF _Toc423014410 \h 374.2.2 Average collection period PAGEREF _Toc423014411 \h 384.2.3 Inventory Turnover Ratio PAGEREF _Toc423014412 \h 394.2.4 Accounts Payable Turnover PAGEREF _Toc423014413 \h 404.2.5 Accounts Payable turnover in days PAGEREF _Toc423014414 \h 414.2.6 Fixed asset turnover PAGEREF _Toc423014415 \h 424.2.7 Total asset turnover PAGEREF _Toc423014416 \h 434.3 Profitability Ratio PAGEREF _Toc423014417 \h 454.3.1 Net Profit Margin PAGEREF _Toc423014418 \h 454.3.2 Gross Profit Margin PAGEREF _Toc423014419 \h 464.3.3 Return on Total Assets PAGEREF _Toc423014420 \h 474.3.4 Return on common stock equity PAGEREF _Toc423014421 \h 484.3.5 Operating Profit Margin PAGEREF _Toc423014422 \h 494.4 Debt coverage ratio PAGEREF _Toc423014423 \h 514.4.1 Debt Ratio PAGEREF _Toc423014424 \h 514.4.2 Time interest earned PAGEREF _Toc423014425 \h 524.4.3 Cash Coverage PAGEREF _Toc423014426 \h 534.4.4 EBITDA Margin PAGEREF _Toc423014427 \h 544.4.5 Book value per share PAGEREF _Toc423014428 \h 554.5 Market value ratios PAGEREF _Toc423014429 \h 574.5.1 Earnings per share ratio PAGEREF _Toc423014430 \h 574.5.2 Price to Earnings Ratio PAGEREF _Toc423014431 \h 584.5.3 Market/Book Ratio PAGEREF _Toc423014432 \h 594.5.4 Market Capitalization PAGEREF _Toc423014433 \h 604.5.5 Dividend Payout Ratio PAGEREF _Toc423014434 \h 624.5.6 Capital Gearing Ratio PAGEREF _Toc423014435 \h 634.6 External and internal factors behind Unilevers position PAGEREF _Toc423014436 \h 644.6.1 Internal factors PAGEREF _Toc423014437 \h 644.6.2 External Factors PAGEREF _Toc423014438 \h 644.7 Standing of company in past present and future PAGEREF _Toc423014439 \h 66CHAPTER FIVE: CONCLUSION AND RECOMMENDATION PAGEREF _Toc423014440 \h 685.1 CONCLUSION PAGEREF _Toc423014441 \h 685.2 RECOMMENDATIONS PAGEREF _Toc423014442 \h 72REFERENCES PAGEREF _Toc423014443 \h 74
Table of Figures TOC \h \z \c "Figure" Figure 1: Current ratio PAGEREF _Toc422925311 \h 31Figure 2: Quick Ratio PAGEREF _Toc422925312 \h 32Figure 3: Cash Ratio PAGEREF _Toc422925313 \h 33Figure 4: Accounts receivable turnover PAGEREF _Toc422925314 \h 35Figure 5: Average collection period PAGEREF _Toc422925315 \h 36Figure 6: Inventory Turnover Ratio PAGEREF _Toc422925316 \h 37Figure 7: Accounts Payable Turnover PAGEREF _Toc422925317 \h 38Figure 8: Accounts Payable turnover in days PAGEREF _Toc422925318 \h 40Figure 9: Fixed asset turnover PAGEREF _Toc422925319 \h 41Figure 10: Total asset turnover PAGEREF _Toc422925320 \h 42Figure 11: Net Profit Margin PAGEREF _Toc422925321 \h 43Figure 12: Gross Profit margin ratio PAGEREF _Toc422925322 \h 44Figure 13: Return on Total Assets PAGEREF _Toc422925323 \h 45Figure 14: Return on common stock equity PAGEREF _Toc422925324 \h 47Figure 15: Operating Profit Margin PAGEREF _Toc422925325 \h 48Figure 16: Debt Ratio PAGEREF _Toc422925326 \h 49Figure 17: Time interest earned PAGEREF _Toc422925327 \h 50Figure 18: Cash Coverage PAGEREF _Toc422925328 \h 51Figure 19: EBITDA Margin PAGEREF _Toc422925329 \h 52Figure 20: Book value per share PAGEREF _Toc422925330 \h 54Figure 21: Earnings per share ratio PAGEREF _Toc422925331 \h 55Figure 22: Price to Earnings Ratio (PE) PAGEREF _Toc422925332 \h 57Figure 23: Market/Book Ratio PAGEREF _Toc422925333 \h 58Figure 24: Market Capitalization PAGEREF _Toc422925334 \h 59Figure 25: Dividend Payout Ratio PAGEREF _Toc422925335 \h 60Figure 26: Capital-Gearing Ratio PAGEREF _Toc422925336 \h 61
Table of Figures TOC \h \z \c "Table" Table 1: Current Ratio PAGEREF _Toc422925337 \h 32Table 2: Quick Ratio PAGEREF _Toc422925338 \h 33Table 3: Cash Ratio PAGEREF _Toc422925339 \h 34Table 4: Accounts receivable turnover PAGEREF _Toc422925340 \h 36Table 5: Average collection period PAGEREF _Toc422925341 \h 37Table 6: Inventory Turnover Ratio PAGEREF _Toc422925342 \h 38Table 7: Accounts Payable turnover PAGEREF _Toc422925343 \h 39Table 8: Accounts Payable turnover in days PAGEREF _Toc422925344 \h 40Table 9: Fixed asset turnover PAGEREF _Toc422925345 \h 41Table 10: Total asset turnover PAGEREF _Toc422925346 \h 42Table 11: Net Profit Margin PAGEREF _Toc422925347 \h 44Table 12: Gross Profit Margin PAGEREF _Toc422925348 \h 45Table 13: Return on Total Assets PAGEREF _Toc422925349 \h 46Table 14: Return on common stock equity PAGEREF _Toc422925350 \h 47Table 15: Operating Profit Margin PAGEREF _Toc422925351 \h 48Table 16: Debt Ratio PAGEREF _Toc422925352 \h 50Table 17: Time interest earned PAGEREF _Toc422925353 \h 51Table 18: Cash Coverage PAGEREF _Toc422925354 \h 52Table 19: EBITDA Margin PAGEREF _Toc422925355 \h 53Table 20: Book value per share PAGEREF _Toc422925356 \h 54Table 21: Earnings per share ratio PAGEREF _Toc422925357 \h 56Table 22: Price to Earnings Ratio PAGEREF _Toc422925358 \h 57Table 23: Market/Book Ratio PAGEREF _Toc422925359 \h 58Table 24: Market Capitalization PAGEREF _Toc422925360 \h 60Table 25: Dividend Payout Ratio PAGEREF _Toc422925361 \h 61Table 26: Capital-Gearing Ratio PAGEREF _Toc422925362 \h 62
CHAPTER ONE1.1 The IntroductionThe research is based on one of the top and leading FMCG organizations i.e. Unilever that has its headquarters in the UK. Unilever has its presence in more than 190 countries but for this research, Unilever Pakistan is chosen (Unilever 2015). Unilever is among the worlds most old multinational company owning over 400 brands having a focus on only 14 brands, which generate sales of approximately 1 billion Euros. Unilever was formed initially as a merger between two companies, Lever Brothers that was a British soap-maker and a Netherlands based margarine producer Margarine Unie in the year 1929 (Unilever 2015).
The company started growing in the 1930s when it started launching new ventures into other continents using the strategy of acquisitions. In Pakistan, the company started its operations in the year 1948 after renaming to Unilever Pakistan Limited from the previous name Lever Brothers Pakistan Limited (Unilever 2015). The company chose Rahim Yar Khan as the best site to set up a vegetable oil factory. It happens that Unilever Pakistan is one of the largest Multinational operating in the country as well as being the largest FMCG Company in the country. Presently, the head office of the company in Pakistan is in Karachi after it was moved from Rahim Yar Khan in the 60s (Unilever 2015). In Pakistan, the company offers food and beverages, personal care products, and home care products that are among the numerous categories of products that the company offers in other countries (Unilever 2015).
Among the products, which are offered in the category of personal care, include; Clear, Close-up, Fair and Lovely, Lifebuoy shampoo, Lifebuoy soap, Lux, Rexona, Sunsilk in addition to other products. In the category of Home Care, the company offers; Comfort which is a fabric softener, Rin, which is a detergent, and Surf Excel, which is a detergent, and at the same time a gentle wash (Unilever 2015). The company continues to operate in a country, which is continuously faced with internal political disputes, which makes the country unfavorable for foreign investors to enter the market (The CIA 2015).
Unilever Pakistan has been protective of its employees in terms of provision of quality working conditions. The company has been developing various employees initiatives such as the health passport with the purpose of their well-being. The company provides a gym facility as well...
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