1. Background of Nestle, Dutch Lady and Carlsberg.

In 1866 Nestle Company was establish by the founder, Henri Nestl. Henri is the people
who first created infant milk formulas. The first product was formulated by mixture of cows
milk, flour and sugar and named Farine Lacte (cornflour gruel in French) Henri Nestle. The
new product was first marketed in Europe. Besides, Nestls headquarters are located in Vevey,
Switzerland, but nowadays Nestle Company has operation around the world. Nestle is expanding
the size of the company every year. Nestle has develop much more products in different field:
breakfast cereals, ice creams, beverages and so on. As the Nestle Company become the leader in
foods and drinks field, Nestle always provide good quality product for the consumer in daily life.
In 1963, Dutch Lady Malaysia was established as Pacific Milk Industries (Malaya) Sdn
Bhd whereby to produce milk in its Petaling Jaya factory. In 1968, Pacific Milk Industries
(Malaya) turn into a public company and it became the first milk company in Malaysia and listed
in the Bursa Malaysia. The name of the Dutch Lady Industries (Malaya) Berhad was replaced the
original name of the company which is the Pacific Milk Industries (Malaya) Berhad to ensure
there is no confusion in the trade and marketplace. The core business of Dutch Lady is producing
milk based product. After a few years, the company has been changed its name to Dutch Lady
Milk Industries Berhad with a new commitment of Goodness for Life. In 2011, Dutch Lady
Malaysia became the share leader as the result of Dutch Lady Brand holding 40% of national
market share. In addition, some of its products have been exported to Asia and Oceania
countries.
Carlsberg was founded in 1847 by Jacob Jacobsen. He founded a small brewery and used
his innovations in the art of brewing.. On 10 November 1847 the first brew was finished.
Carlsberg became the first beer trademarks to be exported throughout the world which includes
Scotland, West Indies and European countries. Based on the responses of the beer consumers by
throughout a regular interview, Carlsberg have their own characteristic which combination of a
special aroma with nice bitterness. The slogan of Probably the best beer in the world is the
well-known green label of Carlsberg was created by the famous English actor Orson Welles and
architect Thorwald Bindesball created the famous green label of Carlsberg in 1894. Carlsberg
become well-known brands for the modern young people around the world. Since then,
Carlsberg become the first brand with more than a 50% share of the Malaysian Beer Market.

2. Interpretation:
Nestle
For the perspective of creditors, they would look into Nestles liquidity and leverage
ratio. Based on the analysis, the liquidity ratio of Nestle is very doubtful. The low quick ratio
indicates that Nestle had the problem of overstocking since the year 2005 to 2012. Generally, the
inventories of Nestle made up of the 49.6% of the total current assets for the 5 years mentioned,
which was the main cause of such a low quick ratio shown. Working capital of Nestle from 2005
to 2012 fluctuated greatly, with negative working capital in the year 2008 to 2012, which could
be the result of the financial crisis. The world had came to the toughest economic state at the
year of 2008.(The financial crisis in year 2008 : Year in review 2008, n.d.) The problem of
liquidity continued in the year 2012 was mainly attributed to the rising interest rate. The world
has yet recovered from the crisis and has the problem of increasing lending rate. (Financial
crisis, n.d.)Combining all these factor, the low liquidity ratio indicates that Nestle had the
problem to service the payment to the creditors during the year 2005 to 2012. Now lets look at
the leverage ratios. The Debt to Equity ratio in 2008 and 2012 are considered low which are 0.22
and 0.30 respectively. Nestle relied more in debt to finance the operational activities in these 2
years. Its because the financial crisis happened in 2008 and 2010. The Debt to Equity ratio in
2008 and 2012 are considered low which are 0.22 and 0.30 respectively. Nestle relied more in
debt to finance the operational activities in these 2 years. Its because the financial crisis
happened in 2008 and 2010.
Profitability ratio of Nestle is acceptable in the perspective of the investor. Return on
investment or return on asset of Nestle had been increasing steadily throughout the 5 years.
Return on asset shows how much a firm can get the return by utilizing the asset that it
has(Joshua, n.d.). Nestle is able to earn about 20% of return by utilizing the asset that it has.
Besides, the return on equity is also included in the profitability ratio. Return on equity indicates
the ability of the company to generate sales or revenue by utilizing the shareholders equity that it
has. It simply helps the investor to know how much they can get back as the return of their
investments in the company. (Joshua, n.d.) The return on equity of Nestle was quite steady.
There was only a small deviation from 0.65. Based on the analysis on Nestles financial report, it
is because the Nestles turnover rate had been increasing since the year 2008 to the year 2012.

The turnover in 2008 was amounted to approximately RM3 billion and it successfully hiked up
to about RM 4 billion in the year 2012. By integrating all the ratios we have, it indicates the
profitability ratio is quite steady as a whole. There is obviously show that in 2008, it was a very
low Price/ Earnings (P/E) Ratio which is only RM18.57, which means the investors are willing
to pay RM18.57 for the share in this year in Nestle. This is because it is the year where the
financial crisis happened, and cause the investors less willing to invest finance to the company
and more concern about the future profitability of Nestle. In following years, it shows the
increasingly of (P/E) Ratio which are RM22.06, RM25.97 and RM30.86, represent that investors
are keener to invest in Nestle in the year 2009, 2010 and 2011. But, in year 2012, it drops to
RM29.16, due to the financial crisis. It can conclude that Nestle has perform outstandingly in the
perspective of investors in term of its market ratio.
Nestle use 34days of average collection period to collect back the debt repayment from
debtors or their customers, while it use more than 100days of average payment period to settle its
debt with suppliers. Based on year 2008 and 2012, they obviously show that Nestle use more
longer time to pay money to its creditors, due to the 2 highest total amount of current liabilities
(RM000) that need to settle in a shorter period to avoid the charging of higher interest on them
which are RM1030457 and RM929392. In addition, there is a negative figures of working capital
(RM000) RM148575 and RM88689 in those 2 years. Thus, with the ineffective management
of working capital and higher amount of current liabilities, affect the firm use 123days and 106
days to settle its debt with suppliers in 2008 and 2012 relatively. A high debtor day indicates
inefficiency in debt collection, but Nestle takes around 32 to 37days to collect debt, that means it
has an acceptable standard (30-60days) of average collection period. In short, efficiency ratio
may very doubtful for the managements perspective.
Dutch Lady
For the creditor's perspective, they would look into liquidity and leverage ratio. Based on
the calculation of ratio, the liquidity ratios of the Dutch Lady are fluctuating throughout the
years. Look into the five year trend of quick ratio, we found that the quick ratio was keep
increasing from year 2008 to year 2011, however the ratio has decreased in year 2012. The quick
ratios of from year 2008 to 2012 were fluctuating between 1.17 and 1.37. As the quick ratio of
the five years was above 1.00, it shows that Dutch Lady has the sufficient liquid cash to meet

their short term obligations. Working capital of the Dutch Lady from year 2008 to year 2012
fluctuates. This is because from year 2009 to year 2012 the current liability bear by the Dutch
Lady had increase. Combining all these factors, the high liquidity ratio indicates that Dutch Lady
had the ability to pay to the creditors during the year 2008 to year 2012.
For the investor's perspective, they would look into the profitability ratio. Return on asset
or return on investment of Dutch Lady had been increasing year by year from year 2008 to year
2012. Dutch Lady is able to earn about 30% in year 2012, which is the most profitable year for
them compared with the previous years from year 2008 to year 2011 is able to earn about 15% 27% profit. Besides, return on equity is included profitability ratio. The return on equity of Dutch
Lady is steadily increased. Based on the annual report, the sales of Dutch Lady had been
increasing from year 2008 to year 2012. The sales are up to RM8 billions in year 2012. In terms
of market ratio, the price per earnings ratio (P/E ratio) of Dutch Lady was fluctuating throughout
the years. The P/E ratio of Dutch Lady increased drastically in 2011, which is increased from
17.58 to 52.82. This was due to the high market price per share and this indicated that the
investors have confidence in the companys future performance.
The efficiency of management team of the company can be seen through the efficiency
ratios. From year 2008 to 2009, the average repayment period of Dutch Lady was reduced from
84.88 to 72.53 days. In the same year, the quick ratio was increased from 1.17 to 1.41, this
indicated that the cash flow of the company had improved therefore they can repay back to their
supplier in a shorter period. However, the average repayment periods of the following three years
were increased from 81.19 to 99.89 days. Generally, longer repayment period is good for the
companys cash flow management. However, in year 2012, the average repayment period was
surpassed 90 days, which is over the normal range of credit terms. This shows that the company
had liquidity problem in 2012. They might not have enough cash flow to meet their short term
debts. From 2008 to 2012, the average collection periods of the company were decreased by a
wide margin which is from 64.26 days to 6.69 days. The main reason that caused the dramatic
changes was in year 2011, the company entered into an arrangement with a licensed financial
institution to enable certain customer to pay for their purchases by using a corporate purchasing
card issued by the financial institution. This made the payment process became much more
efficient. In addition, the debts to the company and the credit risk were assumed to be transferred
to the financial institution as well.

Carlsberg
As a creditor, bank would like to know the liquidity and leverage aspects of the firm to
decide whether the firm is trustworthy or not. Based on our analysis, Carlsberg did a good job in
maintaining its liquidity and it can be shown by the range of quick ratio and working capital for
the five consecutive years, 2008 to 2012. According to the table above, quick ratio of Carlsberg
is much higher in year 2008 and getting lower in the following years. However, Carlsberg had
successfully recovered the ratios but in a much slow mode year by year. The crisis year might be
the main reason which causes the company faced a challenge in repaying the short term
obligation using its fast cash. Same goes to working capital of the company. Carlsberg has a
relatively low amount of working capital to carry out its daily operation after the crisis happened.
As a whole, Carlsberg still performed well in its liquidity because the ratios were around or
above the standard of 1, which is the standard for a well-operated firm.

According

to

the

table, we found that debt ratio has increased for 84% which from year 2008 to year 2012.
Besides, it is shows that amount of total liabilities also gradually increased and the debt ratio
amount increased at the same time. In general, the higher the ratio, the more risk and leverage
that business is considered to have taken on. Besides, company has a lot of debt relative to its
asset with high ratio. Therefore, creditors are considered the lower ratio to be better than the
higher one. This is because the company is less dependent on leverage with low debt ratio or it is
indicates low borrowing capacity of the company and lower the companys financial flexibility.
Debt to equity ratio has increased significantly for 75% from year 2008 to year 2012. It is shows
that debt to equity ratio has decreased from year 2009 to year 2012 which is from 0.14 to 0.07. In
general, a high debt to equity ratio means that company has been violent in financing its growth
with debt. Thus, creditors are considered the low debt to equity ratio to be better than the higher
one due to the less debt a business uses compared to equity.
In an investors perspective, they would like to look on the profitability and market ratio
of the firm. They are interested in a high performance firm which able to generate sufficient
profit and high returns. From the results we analyzed, Carlsbergs ROA and ROE has dropped in
year 2009 and rose continuously sooner. This is also one of the effects of financial crisis in year
2008. Carlsberg will be a good choice of company to invest in as it can easily adapted the

changing environment, efficiently utilized the assets and equity in the business and thus generate
high returns to stockholders. The P/E Ratio of Carlsberg was fluctuated from year 2008 to 2009
and 2011 to 2012 respectively. Both increase vigorously from RM0.14 to RM10.18 and RM0.16
to RM10.20. This means that the investors have confident that Carlsberg will earn money in
following year. In year 2009, The P/E Ratio have reached RM10.18, means the investors were
willing to pay RM10.18 for the share. It was quite high compare to previous year 2008 which
only reached RM0.14. Same situation happened in year 2012, the P/E ratio reached RM10.20
compare to year 2011 only reached RM0.16. From the P/E ratio, it shows that Carlsberg has the
ability to withstand financial crisis in year 2012. In the other hand, Carlsberg has good record in
M/B ratio. M/B ratio of Carlsberg increased stable from year 2008 to year 2012, which were
RM0.28, RM0.30, RM0.39, RM0.52, RM0.73. The M/B ratio showed that relative value of
Carlsberg increased every year compared to its stock price or market value. The increasing M/B
Ratio will attract many investors to buy Carlsberg shares.
From the viewpoint of management, the table showed that the amount of average
collection period has decreased for 3.23% from year 2008 to year 2012. The lower the average
collection period indicate that it took shorter time for the account receivable to pay back. The
credit sale of Carlsberg has increased from year 2010 to 2012 which is from 1368158 to
1584780. So, the amount of the account receivable has also increased. This leads to a longer
period of average collection period. It is also shows that average collection period ratio have
increased significantly which is from 55 days to 60 days between year 2010 and 2012. Another
difference is the net sales have also increased significantly among the 3 years especially in year
2012 which is 1368158. Thus, a lower average collection period is optimal because a company
does not take very long time to turn its receivables into cash. Besides, it shows that the lower the
average collection period, the more efficient the business is at collecting payment from
customers. As a result, from the viewpoint of management it is better to have a shorter period of
average collection period because it is able to minimize risk and increase payment expectations
with decreasing the length of credit terms. The increase of the credit sales no really brings
benefits for the company. According to the table, it is shows that the average collection payment
period has increased for 9.72% among the five years. The average payment period has increased
from year 2008 to 2009 whereas it has decreased significantly for eight days in year 2012 when

compared with year 2010 which from 86 days to 79 days. Besides, the huge difference which is
the net purchase has risen significantly from 666180 to 1005232 among the five years. The
higher the average payment period is more benefits to a company because the company has
longer time to pay back the debtors. It will be more liquidity and the company can used their
money in other aspect. As a result, most companies and management consider the longer the
average payment period is more beneficial to a company.

3. Comment, compare and contrast financial performance of Nestle, Dutch Lady and
Carlsberg.
Liquidity Ratios:
A. Quick Ratio (times)
2008
Nestle
0.42
Dutch Lady 1.17
Carlsberg
2.78

2009
0.58
1.41
0.96

2010
0.56
1.52
1.13

2011
0.54
1.71
1.21

2012
0.46
1.37
1.32

Average
0.51
1.44
1.48

According to the table, Carlsberg is the outperformer among the three companies. Carlsberg is
capable to service the short term obligation and it shows the good liquidity although the
inventories are taken out from the calculation, the result is still within the favorable ranges.
Nestle has the worst performance when compared to the others as it fails to repay the short term
debt or face the financial problem. The liquid asset of Nestle is only able to cover the debts by
50%, which is very risky. Similar to the result of current ratio, we can observe that Dutch Ladys
quick ratio has resulted in consistency among these 5 years, which ranged from 1.17x to 1.71x.
In short, there is not much different in the average quick ratio in Dutch Lady and Carlsberg,
however, Carlsberg is still performed better than Dutch Lady.
B. Working Capital (RM000)

Nestle
Dutch lady
Carlsberg

2008
-148,575
96,887
316203

2009
58,892
96,929
43055

2010
62,954
127,983
85922

2011
100324
189,157
115728

2012
-88689
146,724
123792

Average
-3019
131536
136940

The table shows that there is a huge different between Nestle and the other companies in working
capital. As expected, Nestle shows the worst result again, with the working capital that is less
than 0 in average. This shows that Nestle has the problem in their capital in financing its
operating activities. Therefore, Nestle tends to increase its borrowings for its daily operations.
This could create a negative result as Nestle might continue to decrease its working capital in the
future. On the other hand, there is not much difference between Dutch Lady and Carlsberg on

their working capital, which are RM131, 536,000 and RM136, 940,000 respectively. Both of
them prove that they have enough cash flow for the other uses such as investment and others.
Consequently, the performance of the Carlsberg is the best as it has the most efficient and
effective cash flow management among the 3 companies in terms of liquidity.
Efficiency ratios:
A. Average Collection Period (days)

Nestle
Dutch lady
Carlsberg

2008
37
64
62

2009
36
50
76

2010
32
39
55

2011
35
17
57

2012
32
7
60

Average
34.11
35.40
62.00

In the part of average collection period, we can see that Carlsberg takes the longest period of
time in collecting the payment from the account receivables. It averagely takes about 62 days to
do it while only 34.11 and 35.40 days in Nestle and Dutch Lady respectively. Although the result
shows that Nestle has the highest efficiency in collecting the payments, but it never explain how
its improvement is. By looking at the trend of improvement, we knew that Dutch Lady enhanced
a lot in their degree of efficiency which is from 64 days in the year 2008 to only 7days in the
year 2012. This might be due to the effective collection and loan management as stated in the
part b compared to the others. In short, we opined that Dutch Lady ranked the highest among the
other 2 companies regardless of its average figure but its strength of improvements.
B. Average Payment Period (days)

Nestle
Dutch lady
Carlsberg

2008
123
85
72

2009
92
73
168

2010
85
81
86

2011
101
88
82

2012
106
100
79

Average
101.40
85.40
97.40

In view point of paying to the creditors, Nestle takes the longest period of time to service the
payment to the suppliers as compared with the others. This can be explained by the negative
working capital of Nestle that happens occasionally. Dutch Lady and Carlsberg are
comparatively better than Nestle, which are 85.4 and 97.4 days respectively. It can be due to the

better cash flow management and payment policies of Dutch Lady and Carlsberg. Hence, Dutch
Lady is the most efficient in servicing and repaying the loans to the creditors.
In short, Dutch Lady performs the best among the all others in terms of efficiency ratio as it
shows that Dutch Lady is most efficient in managing its firm.
Leverage ratio:
A. Debt Ratio (%)

Nestle
Dutch lady
Carlsberg

2008
0.69
0.44
0.25

2009
0.67
0.36
0.51

2010
0.66
0.36
0.37

2011
0.68
0.35
0.34

2012
0.61
0.44
0.46

Average
0.66
0.39
0.39

Based on the table of debt ratio, it is clear and easy to notice that Nestle has the highest
percentage of debt in its own company. It has almost 2 times of the debt ratio compared with
Dutch Lady and Carlsberg. This can be observed that the working capital of Nestle has the
negative figure. It indicates that Nestle finances 66% of its asset by using the debts averagely.
Looking into the other figures obtained, it shows that Nestle did not utilize its own money to
finance the assets well as compared with the others. Instead, Nestle depends a lot on the external
parties in financing its assets and properties. There is no difference between Dutch Lady and
Carlsberg in terms of the degree of liability. Besides, both of them only use 39% of debt to
finance its own assets. Thus, this proves that Nestle has relatively larger exposure to financial
risk and financial influence.

B. Debt to Equity (%)

Nestle
Dutch lady
Carlsberg

2008
0.22
0.04
0.04

2009
0.79
0.06
0.14

2010
0.72
0.06
0.13

2011
0.70
0.06
0.12

2012
0.30
0.08
0.07

Average
0.55
0.06
0.10

As shown in the table above, Nestle has the highest average level of debt to equity which is 55%
as compared to only 6% and 10% in Dutch Lady and Carlsberg respectively. This shows that
Dutch Lady and Carlsberg have sufficient shareholders funds to finance their own respective
assets instead of relying a lot on external funds such as the loan and others. There is a
magnificent difference between the Nestle and the other 2 companies. This can be due to the
failure of Nestle in utilizing the shareholders funds. For example, taking the record of annual
report, the amount of the shareholders capital of Nestle is the highest compared to Dutch Lady
and Carlsberg, in which Nestle has RM234.5 millions of shareholders fund but only RM
64millions and RM154 millions in Dutch Lady and Carlsberg respectively. However, it results in
low debt to equity although Dutch Lady and Carlsberg have relatively smaller amount of capital.
As a result, both Dutch Lady and Carlsberg perform better in utilizing shareholders equity, with
the former performs slightly better than the latter.
In short, again Dutch Lady ranked the best the in leverage ratio as it successfully prove that it has
the best potential in managing its debts.
Profitability:
A. Return on Total Assets (%)

Nestle
Dutch lady
Carlsberg

2008
0.21
0.15
0.12

2009
0.21
0.21
0.08

2010
0.22
0.21
0.14

2011
0.21
0.27
0.17

2012
0.27
0.32
0.34

Average
0.23
0.23
0.17

Nestle and Dutch Lady are ranked the top in terms of return on total asset. Nestle and Dutch
Lady have 23% of return by utilizing the assets while Carlsberg has only 17% of return on doing
so. As mentioned in the previous paragraph, we would opine that the success of Nestle in
generating profit is due to its great sales as shown in the annual report. On the other hand, the
reason behind the great percentage of return of Dutch Lady is mainly attributed to its own
effective asset management, as the net profit of Dutch Lady is not as large as what the Nestle can
achieve. Looking on the case of Carlsberg, we can see that the ability to generate sufficient sales
revenue is not a problem, but the cost management is. Comparing the revenue generated by
Carlsberg and Dutch Lady, Carlsberg is able to hit the amount of RM1billion of sales but only
RM0.8 billion by the latter. However, the cost of sales of Carlsberg is almost the same as its sales

revenue, causing its net income to reduce by a wide margin. This is why the return on asset of
Carlsberg is relatively lower than the others.
B. Return on Equity (%)

Nestle
Dutch lady
Carlsberg

2008
0.67
0.26
0.16

2009
0.62
0.34
0.14

2010
0.65
0.32
0.23

2011
0.67
0.42
0.26

2012
0.69
0.57
0.63

Average
0.66
0.38
0.28

As expected, the return on equity of Nestle is the highest than the others. The return on equity of
Nestle has been remaining stable that changes within the range of 66%. Again it is main
attributable to its sky-rocketing sales as compared to the others. The sales of Milo have
successfully conquered the market by having 65% of market share.in chocolate-based beverage
sector (Industry Analysis, n.d.) That is one of the reasons that could explain why the return on
equity Nestle is so high as there is a huge difference between the proportion of net income and
the shareholders funds. Dutch Lady has conquered 40% of market share in the milk market.
(Dutch Lady, n.d.) Looking into the trend of Dutch Lady, the return on equity has been
increasing steadily since the year 2008. Although Dutch Lady has conquered so many portions in
the market share, this is, however, its market is not that big. Compared to Nestle, the products of
Nestle are diversified into a few segments, for example, beverages, ice cream, culinary segments
and others. In contrary, Dutch Lady only limits its product into the milk market. Thus, the sales
of Dutch Lady are not as large as compared to Nestle though it has sufficient market dominance
in Malaysia. In the case of Carlsberg, the worst return on equity happened in the year 2008,
which was during the crisis year. However, it starts to recover after the crisis, which pushed up
the return on equity up to the level of 63% after 4 years. Generally, the 3 companies mentioned
in the table were doing well throughout the years, as it also indicates that the firms are able to
generate revenue from the investment of shareholders, but Nestle represented as the best as it
outperformed the others by having 2 times of return of equity compared to the others.
In short, Nestle is considered to be the best in terms of profitability ratio as it shows that Nestle
has the highest potential in creating the greatest profit, both for the shareholders and for itself.
Market :

A. Price/ Earnings (P/E) Ratio

Nestle
Dutch lady
Carlsberg

2008
18.57
13.43
0.14

2009
22.06
12.36
10.18

2010
25.97
17.58
0.15

2011
30.86
52.82
0.16

2012
29.16
24.09
10.20

Average
25.32
24.06
4.17

According to the table as shown above, there is obvious difference between Carlsberg and the
other two companies. Generally, the price earnings ratio of Nestle is the highest compared with
the others. Although Dutch Lady had the price to earnings ratio was as high as RM52.82, but the
poor performance during the crisis year 2008 has slumped its average ratio. As mentioned in
previous paragraph, the market dominance of Nestle and Dutch Lady made them seemed to be
more attractive compared to the others. That is why the investors have higher willingness to
invest in Nestle as they have higher degree of confidence towards Nestle. In the case of
Carlsberg, Carlsberg only has the price earnings ratio of RM4.15 in average. Dividend is one of
the factors that influenced market price per share. (Determinants of Share Price: Evidence from
India, n.d.) By comparing the dividends of Carlsberg with Nestle and Dutch Lady, the share of
Carlsberg seemed unattractive at all. Generally, there is only about 5 sen of interim dividends
paid to the shareholders, while there are about 50sen and 55sen in Dutch Lady and Nestle
respectively. There is approximately 10 times of difference between Carlsberg and the other 2
companies. So, it helps to explain the factor that causes the price earnings ratio of Carlsberg to be
the lowest compared with the others. In conclusion, Nestle is the best among the three of term in
price earnings ratio.
B. Market/ Book (M/B) Ratio
2008
2009
2010
2011
2012
Average
Nestle
12.27
13.68
16.54
20.59
19.64
16.54
Dutch lady 3.57
4.14
5.68
5.78
13.74
6.58
Carlsberg
0.28
0.30
0.39
0.52
0.73
0.44
As stated before, market to book ratio indicates the value of a firm or an organization. Based on
the table above, Nestle has the highest average market to book ratio, which implies that it has the
highest value among the others. Although Carlsberg has increased the market to book ratio after
the crisis year, but the average figure is just approximately RM0.44 only. The value of Carlsberg
is greatly influenced by its cost management ability. This can be explained by the previous

paragraph, the high cost has successfully offset the benefits of creating high sales revenue. Due
to this, Carlsberg seemed to be less profitable than the others. That is why the value of Carlsberg
is comparatively lower than the others, which in turn contributes to the low market to book ratio.
The high value of market to book ratio of Nestle is greatly attributable to its ability to generate
attractive income, as stated that its products have conquered a big portion of the market. The
same thing happens in Dutch Lady, but the smaller market base causes it to have relatively lower
revenue. The success of Dutch Lady in increasing the market to book ratio could be mainly due
to its ability of managing its cost,( Dutch Lady did best in cost control compared to Nestle and
Carlsberg.) which let it to have sufficient funds to pay for its shareholders, unlike what was
happening in Carlsberg. In conclusion, Nestle is again outperforms the others in market to book
ratio.
In short, Nestle is again be nominated as the top firm among the three in terms of market ratio as
it is calculated as the most-welcomed company in the eyes of investors.

4. Recommendations
1) Increasing Nestles working capital
We would say that Nestle has the biggest problem in its daily operation, which is
attributed to its working capital. Although we knew that there was the financial crisis in
year 2008 and 2012, but it should not be an excuse for a big company like Nestle to have
the negative value of working capital. In fact, Nestle should take Dutch Lady and
Carlsberg as the example by trying to lower down its debt. As shown by debt ratio, the
debt of Nestle is twice the amount of Dutch Lady and Carlsberg, lowering down the total
debt can help to increase the working capital. For such a well-known company, the large
asset base can really back Nestle. In short, Nestle should reduce the reliance of external
debt in order to ensure the good flow or working capital.
2) Reviewing payment policy of Nestle
From what we observed, the average payment period of Nestle is the longest among
others. If the payment period is too long compared to other companies in the industry, it
indicates that the management is inefficient in paying debt or having cash flow problem.
Nestles inefficiency in paying its debt most probably caused by the negative working
capital and the poor management of cash flow. Therefore, we recommend that Nestle to
outsource its payment policy management to relevant service provider such as iH
Technologies. The service provider can select clinically appropriate payment policy that
corresponds with the companys strategy. By outsourcing the payment policy
management, Nestle is able to significantly increase its operational efficiency.
3) Recruiting new blood by Nestle
The management team of Nestle seems inefficient compared to other companies. This can
be seen on the return on equity and assets. If a company fails to manage the funds and
assets efficiently, the profit generated will be restrained. Thus, we suggest that Nestle to
recruit some new blood and senior management in order to bring in new ideas for the
sake of Nestle. Hence, by doing so, we hope that it can help Nestle to improve their
management capability.
4) Grabbing the business opportunity by Carlsberg
The World Cup 2014 is happening now. This is a good business opportunity for many
firms especially those involved in food and beverage industry. If we look into more
detail, Carlsberg will have the highest opportunity among the firms selected. The fans

will mostly celebrate the victory of their desire team by drinking soft and hard drink.
Obviously Carlsberg is inside these categories. So, we suggest that Carlsberg to increase
the price of their product as the liquor will be highly demanded throughout the period.
This is because the effect of increase in the price is smaller than the effect of the decrease
in volume. Thus, Carlsberg should grab this golden opportunity to increase its revenue.
5) Shortening Carlsbergs collection period
We knew that giving longer credit term to the customers can really increase the
relationship between them, but it may cause some potential problems if Carlsberg is in
need of money. Looking on the annual report of Carlsberg, Carlsberg seems not to have
any problem with the working capital; this is, however, not a prudence practice to have a
long collection period. Future cannot be predicted is the common phrase. We do not
know if Carlsberg still able to maintain its working capital in future. If the problem is not
solved, this will increase the liquidity risk of Carlsberg, which eventually increase the
chances of default. So, we highly recommend Carlsberg to review their collection policy.
6) Reducing Carlsberg cost of sales
By looking at the annual reports of the three companies, we can observe that Carlsbergs
cost of sales relatively higher. Although Carlsberg has sales revenue, the high cost has
eventually offset the benefit. So, reducing the cost of production is a crucial move. We
suggest the second alternative, which is to implement Just In Time system(JIT). When
JIT is implemented, the storage cost of Carlsberg will decrease. This is because the
system will automatically inform the supplier to supply the goods when the inventory is
reduced to a favorable level. This can increase the efficiency of stock management. By
doing so, Carlsberg will reduce their cost of production effectively.
7) Expanding Dutch Ladys investment
As proved by the computation of ratios, Dutch Lady has the steadiest growth in all
aspects. We would comment that Dutch Lady is the most stable among the three. Without
much internal problem like the other two companies, we suggest Dutch Lady to increase
their investment in order to widen its profit margin. For example, expanding product lines
will be a good way to start to expand its business.
8) Learning from Dutch Lady

Although Dutch Lady does not outperform the companies in all perspective, but its steady
growth and improvement really fascinate us. This could be attributed to their creative
mind in solving problem. For example, the introduction of corporate purchasing card to
help the company to increase efficiency the collection process. It shows how a creative
management team can help the company to reduce its cost. We opined that this spirit
should be a model for the other companies to follow.
9) Conducting Research and Development
Nowadays, the consumers are becoming fussier. Thus, innovation is the key to success
for an organization. Although the three companies that mentioned have a big market
share in Malaysia, however, lack of innovation could stop the growth of the business.
Therefore, the research and development should be carried out such as new packaging,
formula and others in order to maintain the growth of the business.

5. Conclusion
If we were the investors, we would like to choose to invest in Dutch Lady. This is
because Dutch Lady has the steadiest growth of ratios among the others. Besides, looking on the
news of Dutch Lady, we believed that Dutch Lady is moving forward to the next stage of glory.
There are a few reasons why we select Dutch Lady instead of the others. Actually, we
observed that Carlsberg is very capable in generating profit while Nestle is very capable in
distributing the dividends. In this case, Dutch Lady seems to be forgotten. In the point of view of
investors, they will not just only looking at the profitability of the firm but the cash flow and the
risk incurred also. Although Nestle is very good in distributing profit, the fluctuating working
capital exposes its weakness. Carlsberg indeed very good in generating sales, but the high
production cost is the problem. So, when we look all the ratios as the whole, Dutch Lady is the
best as it generate sufficient revenue, and at the same time it successfully minimizing the risk
incurred.
Nestle has broken the code of marketing. (Jeremy, 2003) Nestle seems to be unethical
in marketing their products. Based on Jeremy, it is cited that Nestle marketed their products by
delivering a message to the people to ask them to reject breastfeeding. The formula of the breast
milk contains important nutrition for infants (Nestles Infant Formula as Cause of Child Death,
n.d.)It may lead to the death of the infants as some babies are allergic to milk-based products.
Thus, there were some practices to boycott Nestles products. Due to this, the good fame of
Nestle is deteriorated. Besides, the investor might not prefer to invest in Nestle as it lacks of
humanity.
Again Dutch Lady shows its management capability this year. Dutch Lady is able to
control their capital expenditure within the budget, RM18 million. (Eugene, 2014) Based on the
news, Dutch Lady continues with the investment by purchasing more machines. This can
enhance the future profit of Dutch Lady definitely. Besides, the increase in capital investment
shows that the management teams see the future prospect of the business. This becomes one of
the supporting points to make investment in Dutch Lady.
Besides, Dutch Lady also has a bright idea on the cost control and promotion. Unlike
what happen in Nestle, Dutch Lady markets its product ethically. Dutch Lady involves its

employees in the promotion activity. (Qistina, 2014) It is more convincing than the latter as the
employee knows well about their product. Besides, by involving the employees in promoting the
products, it can reduce the cost and help to build a profitable customer relationship also. Thus, it
again proves that Dutch Lady always has the bright ideas to improve itself.
In a nutshell, one should never only look into the dividends and profitability of the firms
to determine if it is worth to invest. By looking at the cash flow and management capability,
together with the risk incur, the potential investor will also understand the performance of the
company deeper. Again we reaffirm that Dutch Lady is the best companies compare with the
others as it fulfills the all the requirements of a good organization. It is worth to invest in Dutch
Lady.