FINANCIAL STATEMENTS ANALYSIS:

The primary goal of financial management is to maximize shareholder`s wealth. If management has to
maximize a firm`s value, it must take advantage of the firm`s strengths & correct its weaknesses. Financial
analysis involves evaluating trends in the firm`s financial position over time.
Below mentioned is the three types of analysis of financial statements.

1. RATIO ANALYSIS:

A quantitative method of gaining insight into a company`s liquidity, operational efficiency, and
profitability by studying its financial statements such as the balance sheet & income statement. It is a
cornerstone of fundamental equity analysis.

2. HORIZONTAL ANALYSIS:

It is used in financial statement analysis to compare historical data, such as ratios, or line items, over a
number of accounting periods. It is usually depicted as a percentage growth over the same line item in
the base year.

3. VERTICAL ANALYSIS:

It is a method of financial statement analysis in which each line item is listed as a percentage of a base
figure within the statement. It makes it easier to understand the correlation between single items on a
balance sheet and the bottom line, expressed in a percentage.

CONCLUSION:

The financials of “UNILEVER PAKISTAN” have been studied thoroughly and interpreted according
to the three types of analysis. We have given the logical reasoning which is represented in the section of
“interpretation” based on the accounting principles used in the reporting of financial statements. In our
opinion, the company has been able to generate a promising track record of efficiency and profitability.
With this brilliant financial management, we can say that the company looks quite confident in
maximizing wealth and revenue generation as well as securing a towering future growth which will
serve as a reason to attract investors, creditors & shareholders.
 PERFORMANCE INDICATORS FOR 2 YEARS
FINANCIAL UNIT YEAR YEAR INTERPRETATION
RATIOS 2019 2018

PROFITABILITY RATIOS - (RATIOS USED BY ANALYSTS & INVESTORS SPECIFICALLY)

Gross Profit % 40.86 44.96 This ratio indicates company`s financial health. On an average, a
Ratio 20% profit margin is considered great.
Here, it is indicating that the company has been maintaining a
much more reasonable profit on sales by securing a smart 40% in
both the years.
Net Profit To % 18.46 14.58 This ratio indicates how much net income or profit is generated as
Sales a percentage of sales. On an average, businesses should aim to
secure 10% to 20%.
Here, it has been shown that the company is balancing a smart
percentage of profit in both the years.
EBITDA % 23.85 22.87 This ratio shows how much in earnings a company is generating
Margin To before interest, taxes, depreciation, and amortization, as a
Sales percentage of sales. A 60% margin is considered to be a good sign
for companies.
Here, the company is generating 22% to 23% in both the years
indicating that it needs to work on this area to generate higher
levels of profit.
Operating Times 6.34 4.68 It measures company`s fixed costs as a percentage of its total
Leverage costs. A high ratio means a large proportion of the company`s
Ratio costs are fixed costs. In this case, the firm earns a large profit on
each incremental sale but must attain sufficient sales volume to
cover its substantial fixed cost.
Here, the company is handling the ratio very well in both the years
as it is indicating that the company can make more money from
each additional sale if they don’t have to increase costs to produce
more sales.
Pretax % 133.81 240.68 Measures the rate of return on common stockholders` investment
Return On and tells how well the company utilizes its equity to generate
Equity profits. A high ROE suggests that a company is increasing its
Post Tax % 116.90 167.25 profit generation without needing much capital.
Return On Here the percentages are showing a promising record to maintain
Equity effective asset and debt management.
Return On % 116.90 167.25 Describes how well a company is generating profits from its
Capital capital. A high ratio indicates the efficiency with which the
Employed investment is used in the business.
Here, the firm is handling investments made by shareholders with
an efficiency up to more than 100% in both the years.

FINANCIAL UNIT YEAR YEAR INTERPRETATION

 RATIOS 2019 2018

LIQUIDITY RATIOS - (RATIOS USED BY SUPPLIERS SPECIFICALLY)

Current Times 0.74 0.78 This ratio measures a company`s ability to pay short-term
Ratio obligations. It tells investors & analysts how a company can
maximize current assets on its balance sheet to satisfy its current
debt & other payables. A good current ratio is considered to lie in
the range from 1.2 to 2.
In both the years, the company has to work hard to achieve a ratio
of 1.00 that will help them to keep sufficient amount of current
assets to cover its debts.
Quick/ Asset Times 0.54 0.54 It measures the firm`s ability to pay off short-term obligations
Test Ratio without relying on the sale of inventories. A result of 1.00 is
considered to be an ideal ratio.
Here both the ratios are indicating that the firm may not be able to
fully pay off its current liabilities in the short term.
Cash To Times 0.16 0.29 Also known as the cash ratio. Tells us about the ability of a firm to
Current settle its current liabilities using only its cash & highly liquid
Liabilities investments. A high cash ratio is preferred as it indicates that a
company can easily pay off its debts. Although there is no ideal
figure, a ratio of not lower than 0.5 to 1 is usually preferred.
Here the figures are more than 0.5 in both the years proving that
the firm has maintained a sufficient amount of cash & cash
equivalents to pay off its current liabilities.
Cash Flow Times 0.27 0.14 This ratio compares the operating cash flows of a company to its
From sales revenue. It gives the indications about the ability of a
Operations company to generate cash from its sales. The higher this ratio is,
To Sales the better it is for the company. Although there is not any standard
guideline for this ratio but a consistent and/or increasing trend in
this ratio is a positive reflection of good debt management.
Here, an upward trend has been specified in both the years creating
a desirable state for the firm.
FINANCIAL UNIT YEAR YEAR INTERPRETATION
RATIOS 2019 2018

ACTIVITY/OPERATING PERFORMANCE RATIOS - (RATIOS USED BY MANAGERS/OWNERS

SPECIFICALLY)

Inventory Days 43 55 It measures the efficiency of the company`s inventory

Turnover management. It specifies how many days the firm averagely needs
Ratio to turn its inventory into sales. The decline of the inventory
turnover (days) value during the year is a positive trend for the
company. It means that less funds are being distracted to form the
inventories.
Here, a downward trend has been mentioned in both the years
showing positivity for the company.
Debtor Days 19 15 Also known as receivable turnover ratio. It measures how effective
Turnover a company is in extending credit as well as collecting debts. It tells
Ratio how efficiently a firm uses its assets. A high ratio can indicate that
a company`s collection of accounts receivables is efficient & that
the company has a high proportion of quality customers paying
their debts quickly.
Here, company is showing an increase in the ratios in both the
years highlighting the efficient debt management.
Credit Days 165 156 Also known as accounts payable turnover ratio or creditors`
Turnover velocity. It calculates the average number of times a company pays
Ratio its creditors over an accounting period. The ratio is a measure of
short-term liquidity, with a higher payable turnover ratio being
more favorable.
Here, the firm is showing an increase in the ratios in both the years
displaying favorableness.
Total Assets Times 2 2 It calculates a company`s ability to generate sales from its assets
Turnover by comparing net sales with average total assets. The higher the
Ratio ratio, the more efficient a company is at generating revenue from
its assets.
Here, an asset turnover ratio of 2 means that every 1 thousand
worth of assets generated 2 thousand worth of sales. Which
presents an ideal condition for the company in both the years.
Fixed Assets Times 4 4 It determines how well the firm is using its fixed assets to generate
Turnover sales. A high ratio implies that management is using its fixed
Ratio assets more productively.
Here an ideal state has been maintained by the firm in both the
years.
Operating Days (103) (87) It expresses the time (measured in days) it takes for a company to
Cycle convert its investments in inventory and other resources into cash
flows from sales. This metric takes into account how much time
the company needs to sell its inventory, how much time it takes to
collect receivables, and how much time it has to pay its bills
without incurring penalties. A short cycle is preferred indicating a
successful business.
Here an increasing trend has been shown indicating that the
company has to dig a bit deeper in order to maintain a short cycle.
FINANCIAL UNIT YEAR YEAR INTERPRETATION
RATIOS 2019 2018

INVESTMENT/MARKET RATIOS - (RATIOS USED BY SHAREHOLDERS/INVESTORS

SPECIFICALLY)

Earnings Per Rupees. 385.08 274.92 It is calculated as a company`s profit divided by the outstanding
Share (EPS) shares of its common stock. The resulting number serves as an
indicator of a company`s profitability. A higher company`s EPS
is considered as profitable.
An EPS rating of 99 indicates that a company`s profit growth has
exceeded 99% of all publicly traded companies in the IBD
database. IBD 50 is a rules based computer generated stock index
identifying the 50 top growth stocks listed on U.S. stock
exchanges.
Here the company is maintaining a smart track record of these
ratios in both the years showing signs of massive success &
profitability.
Price Times 19.48 25.92 This ratio helps investors determine the market value of a stock
Earnings as compared to the company`s earnings. A high P/E could mean
Ratio that a stock`s price is high relative to earnings and investors are
willing to pay a higher share price today because of growth
expectations in future. The average P/E for the S&P 500 has
historically ranged from 13 to 15.
The S&P 500 is a stock market index measuring the stock
performance of 500 large companies listed on stock exchanges in
the United States.
Both these ratios above the S&P average indicate that the
investors expect high growth from the company compared to the
overall market.
Dividend Times 0.05 0.04 It tells how much a company pays out in dividends each year
Yield Ratio relative to its stock price, expressed in percentage. A high ratio
do not always indicate attractive investment opportunities
because the dividend yield of a stock may be elevated as the
result of a declining stock price. A good dividend yield of 4 to 6
percent is considered to be great.
Here, the ratios are giving satisfactory results in both the years.
Dividend Times 1.00 1.02 It is the ratio of the total amount of dividends paid out to
Payout Ratio shareholders relative to the net income of the company. It is the
– Earnings percentage of earnings paid to shareholders in dividends. There
Dividend Times 38.60 28.00 are several formulas to calculate DPR. One method involves
Payout Ratio dividends per share divided by earnings per share. Second
– Par Value includes total dividends divided by net income. A high ratio
indicates that the company is reinvesting less money back into its
business, while paying out relatively more of its earnings in the
form of dividends.
Here, the company is showing an increase in ratios in both the
years proving that it is attracting investors who prefer the
assurance of a steady stream of income to a high potential for
growth in share price.
Dividend Times 1.00 0.98 It measures the number of times that a company can pay
Cover Ratio dividends to its shareholders. It is the ratio of the company`s net
income divided by the dividend paid to shareholders. As a rule of
thumb, a DCR above 2 is considered good.
Here the ratios below 1.5 in both the years are signaling poor
company profitability in the future which may mean the
company will be unable to sustain its current level of dividend
payouts.
Cash Rupees. 386.00 280.00 It measures the proportion of cash flow a company pays to
Dividend* common stock-holders after subtracting preferred dividend
payments. It shows what percentage of a company`s net income
is being paid in the form of cash dividends.
Cash dividends do not affect a company`s` income statement.
They only serve as a measure for companies to return capital to
its shareholders.
Market Rupees. 5,170 6,935 Market value is the price an asset would fetch in the market & is
Value - Low commonly used to refer to market capitalization. These values
Market Rupees. 7,625 9,999 are dynamic in nature depending on an assortment of factors,
Value – High from physical operating conditions to economic climate to the
dynamics of demand and supply.
Market Rupees. 7,500 7,125
Market value per share is calculated as the total market value of
Value – Year
the business, divided by the total number of shares outstanding.
End
This reveals the value that the market currently assigns to each
share of a company`s stocks.
In both the years, the fluctuation in the market values of the stock
has been indicated, still we can say that the company has attained
an optimal state by the year end.

Breakup Rupees. 361.73 297.11 The breakup value of a corporation is the market value of a
Value Per business if its business units were to be sold off and operated
Share independently.
Without If the breakup value of a firm is greater than its current market
Surplus On value as a single entity, it can make sense to sell off pieces of the
Revaluation firm in order to increase the realized value for shareholders. In
Of Fixed these situations, the money gained from an asset sale is given to
Assets shareholders as a special dividend. Another option is to spin off
an operating division and distribute shares in the new business to
existing shareholders.
Investors use this value to assess a company`s financial strength
and determine the best entry-point for investment. Here, the
company is maintaining a smart amount of money in both the
years.
FINANCIAL UNIT YEAR YEAR INTERPRETATION
RATIOS 2019 2018

CAPITAL STRUCTURE RATIOS - (RATIOS USED BY ANALYSTS SPECIFICALLY)

Financial Times 0.02 0.33 It measures the sensitivity of a company`s earnings per share to
Leverage fluctuations in its operating income, as a result of changes in its
Ratio capital structure. The higher the ratio, the more volatile the
earnings will be.
A downward trend has been mentioned showing a positive image
of the company in both the years.
Interest Times 23.91 79.23 Also called times-interest-earned ratio. It measures how many
Cover Ratio times a company can cover its current interest payment with its
available earnings. A higher ratio indicates a better financial
health.
Here, in both the years, the company is weak in meeting its interest
obligations from operating earnings which is why it has to work on
this area.