Question

analyse these ratios for NESTLE CAMEROON for financial year 2018, 2017, 2016 and 2015 respectively

Gross profit margin	10,171/ 91439 x100. 11.1%	7760/ 89590x x100 8.7%	9624/ 89469 X100 10.76%	5529/ 88785 X100 6.2%
Current ratio	41003/ 43030 0.95 of 1	31884/ 38189 0.83 of 1	32042/ 37517 0.85 of 1	29434/ 33321 0.88 of 1
Debt to Equity ratio	78712/ 58403 1.3 of 1	70981/ 62229 1.1 of 1	65920/ 65981 0.9 of 1	60006\ 63986 0.94 of 1

Answer 1

Answer:

Gross profit margin :

For 2015 the every dollar of sales earned 6.2 cents in profits before other expenses are paid.This has increased to 10.76 cents in 2016,dropped to 8.7 cents in 2017 ...but increase considerably to 11.1 cents per dollar in 2018.The gross profit ratio evaluates the ability of a company to manufacture and sell their product in cost effective manner.The increasing trend shows the manufacturing expenses are effectively reduced year to year generate more gross profit.To give a proper analysis need industry ratios for comparison.

Current ratio :

It measures the short term liquidity of a company.It shows the ability of current assets to pay off all current liabilities.The trend shows the ratio is below 1 for all years though increasing one.This shows the company is highly leveraged and highly risky.The preferreable current ratio is more than 1 so that all current liabilities are covered.

Debt to Equity ratio :

The debt Equity ratio in 2015 shows Investors and creditors have a stake of 1:0.94 that is debt is 94% of Equity.The trend increases where in 2017 both Investors and Creditors have equal stake.But the 1.3:1 in 2018 shows higher debt to equity ratio which is considered more risky creditors and investors.