Assignment Sample on ACF734 Accounting and Finance
Introduction
This report will analyze the business environment of Unilever Plc. It will also discuss those internal and external factors, which can affect the business of Unilever Plc. Not only that, this report will also focus on the counter of those disturbances. In this report, the performance of the company in four years will discuss. In this report, the major findings and conclusion based on Unilever Financial statement and annual report for the accounting year 2018, 2019, 2020 and 2021 will highlighted.
Unilever PLC is a British Company, which deals in multinational consumer goods. The headquarters of the company is located in London. They deal in various kinds of things including food and beverage items, various kinds of supplements, beauty products, air and water purifiers, personal care etc. Though the starting of their organization was in London, they are a multinational company. They have their business all over the world. In 2013, Unilever had 36 percent share of the global market, but it dropped down to 26% in the year 2020.
2.0) Context
In this segment, the main thing, which is going to discuss, is the various macro and microenvironments of Unilever that affect their business.
2.1) Macro Environment
PESTLE Analysis of Unilever PLC
The PESTLE analysis helps to give an idea about the challenges that a company is going to face in their operating activity. In this whole analysis the different kinds of challenges of Unilever PLC is going to describe
Political Factors
Political factors play an important role in the determination of long-term profit of an organization. As it already described, that Unilever is a multinational company so they have to face different kinds of political environments in different countries.
Economic Factors
There are various kinds of economic factors, which can be a burden for an organization in their operation. There are various macro economical things (Buica et al. 2021). Those are inflation rate, deflation rate, interest rate. There are some micro economical things also which plays a key role in the operation of a business. The micro economical things in this context are growth rate, industry growth rate, customer spending etc.
Social Factors
Society and culture of a country also plays a key role in the expansion of a business. Unilever is a multinational organization so they have their business all over the world. That is why they have to cope with the various cultures of the world in running their business.
Technological Factors
In the modern business world, technology plays an important role. From the fast production to quick delivery, technology has an immense role in business sectors (Utami and M.W 2018). It is very important for an organization to do technological analysis and find technological disruption of the particular industry. Recently Unilever has taken many technological development programmes to update the technology in their production unit.
Environmental Factors
There are different kinds of environmental factors that Unilever faces because they have their business all over the world (Ehiedu et al. 2022). Therefore, they have to cope with different kinds of environmental issues. It is very important for an organization to measure the environmental factors of the stipulated area or place before commencing any business.
Legal Factors
As Unilever has their business all over the world. So they have to face different kinds of legal factors in different countries (Umesi et al 2020). It is very important for them to understand and maintain the data protection law, employment law, antitrust law and safety of the particular country.
2.2) Micro Environment
The microenvironment consists of suppliers, consumers, competitors, competition in the market etc. Unilever Plc has a market share of 26% in the global market.
| Competitors | Market share |
| Procter and Gamble Co | 14.96% |
| Kimbley clark corporation | 17.48% |
| Helen of Troy Limited | 15.45% |
| Est e Lauder Companies Inc | 4.98% |
| The Clorox Company | 5.16% |
Table 1: Major Competitors of Unilever PLC
(Source: csimarket.net)
Porters 5 force model analysis
| “Competition” | “Strong force.” |
| “Bargaining power of customers” | “Strong force.” |
| “Bargaining power of suppliers” | “Moderate force.” |
| “Threat of substitution” | “Weak force.” |
| “Threat of new entry” | “Weak force.” |
3.0) Overview
| 2021 | 2021 % of change | 2020 | 2020 % of change | 2019 | 2019 % of change | 2018 | |
| 1) Current Asset | 13,640.00 | 12.69% | 11,908.00 | 4.48% | 11,374.00 | 2.06% | 11,139.00 |
| 2) Non Current Asset | 54,476 | 85.87% | 7,694 | 15.63 | 6,491 | 7.4% | 6,010 |
| 3) Current Liabilities | 10,841.00 | 16.02% | 9,104.00 | 8.24% | 8,353.00 | -3.38% | 8,636.00 |
| 4) Non Current Liabilities | 9,841.00 | 74.93% | 2,467.00 | 24.88% | 1,853.00 | 22.39% | 1,438.00 |
| 5) Equity | 235.00 | 8.08% | 216.00 | 0.00% | 216.00 | 0.00% | 216.00 |
Table 2: Consolidated balance sheet of Unilever PLC
(Source: Unilever PLC annual report)
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| Column1 | Column2 | 2021 | 2021 % of changes | 2020 | 2020 % of changes | 2019 | 2019 % of changes | 2018 |
| 1) “Revenue” | 28,993 | -0.05% | 29007 | 1.94% | 28,456 | 8.51% | 26,224 | |
| 2) “Cost of Goods sold” | 26,977 | 0.97% | 26719 | 0.55% | 26574 | 8.07% | 24590 | |
| 3) “Gross profit” | 4000 | 50% | 2000 | 40% | 1200 | 8.33% | 1100 | |
| 4) “Admin Expenses” | 1,459 | -15.42% | 1725 | 21.91 | 1415 | 17.23% | 1207 | |
| 5) “Operating profit” | 600 | 8.33% | 550 | 27.27 | 400 | 5% | 380 | |
| 6) “Finance Cost” | 398 | -6.79% | 427 | 205% | 140 | 2.94% | 136 | |
| 7) “Profit for the year” | 152 | -18.28% | 186 | -39.81% | 309 | -18.04% | 377 |
Consolidated Income statement of Unilever PLC
(Source: Unilever Plc annual reports.)
4.0) Ratio
| Reference | 2021 | 2020 | 2019 | 2018 | |
| 1) Profitability Ratio | Appendix 1 | ||||
| Gross profit margin | 13.79% | 6.89% | 4.21% | 4.19% | |
| Operating Profit Margin | 2.06% | 1.89% | 1.40% | 1.44% | |
| 2) Liquidity Ratio | Appendix 2 | ||||
| Current Ratio | 1.25% | 1.30% | 1.36% | 1.28% | |
| Acid Test Ratio | 1.16% | 1.20% | 1.26% | 1.27% | |
| 3) Efficiency Ratio | Appendix 3 | ||||
| Average inventory Turnover Ratio | 13 “days” | 12 “days” | 7 “days” | 2 “days” | |
| “Average payable days” | 54 “days” | 27 “days” | 15 “days” | 37 “days” | |
| 4) “Financial Gearing Ratio” | Appendix 4 | 2021 | 2020 | 2019 | 2018 |
| Gearing ratio | 97.6% | 91.94% | 89.56% | 87.28% | |
| 5) Investment Ratio | Appendix 5 | ||||
| Dividend Ratio | 2.7 | 0.83 | 1.3 | 1.7 |
5.0) Evaluation
Profitability
The margin of gross profit was 4.19% in the year 2018. It became 4.21 in the year 2019, 6.89% in 2020 and 13.79% in 2021. The study is showing that there is a steady increase in the gross profit in all those years (Uwuigbe et al. 2019). That means Unilever gets more cash in all those years to bear all their indirect expenses such as administrative expenses. In the administrative expense, also a reduction means the organization can spend some money in other sectors also.
Liquidity
The current ratio of Unilever in the year 2018 was 1.28%, in 2019 it was 1.36%, in 2020 it was 1.30%, in 2021 it was 1.25%.The current ratio of the organization is decreasing that means the company has ability to settle the short term borrowings (G Tayo et al. 2019). Whether the acid test ratio gives the indication of whether a firm has enough short term assets.
Investment
Dividend cover by Unilever in the year 2018 was 1.7 times; in 2019, it was 1.3 times, in 2020 it was 0.83 times and in 2021 it was 2.7 times. The investment ratio helps to understand the capability of the company (OsazefuI and J 2019). The shareholders get interest when they see a company is giving a good dividend rate.
6.0) Management techniques of Unilever
It is very important for an organization to have a proper technique in their business management system. In their operation of business, they take several steps for proper management. Their balance sheet and financial statement for several years show that they are developing their business on a good scale. Their business has been growing day by day.
7.0) Conclusion
Unilever is a multinational company. They have their business all over the world. It is not an easy task to control a business in a huge range smoothly. There are many problems and hindrance the organization faced but they have been doing their business successfully in adverse situations. They manage their business in a successful way. In this research, many ratios and the financial condition of the organization named Unilever PLC has discussed. The various ratios and financial conditions of the company suggest that there are many opportunities for the company. The investment ratio, which related to the dividend, is also showing a positive side for shareholders. There are many political, environmental and other social issues, which the company faced in the past, and even they are facing now too. But they have successfully coped with the situation in the past and they will be able to continue their business in a successful way in the future. The company should focus on increasing their market share.
7.0) Reference List
Journals
Buica, N.A., Avram, M. and Mihai, M., 2021. Financial Audit Procedures Employed in Sustainability Assurance. Ovidius University Annals, Economic Sciences Series, 21(1), pp.703-709.
Ehiedu, V.C. and Toria, G., 2022. Audit indicators and financial performance of manufacturing firms in Nigeria. Linguistics and Culture Review, 6, pp.14-41.
Umesi, E. and Ntewo, A., 2020. A COMPARATIVE ANALYSIS OF FINANCIAL PERFORMANCE OF SELECTED COMPANIES IN NIGERIA’S FCMG INDUSTRY.
Rusdiyanto, R., Agustia, D., Soetedjo, S., Septiarini, D.F., Susetyorini, S., Elan, U., Syafii, M., Ulum, B., Suparman, P. and Rahayu, D.I., 2019. Effects of Sales, Receivables Turnover, and Cash Flow on Liquidity.
Uwuigbe, O.R., Olorunshe, O., Uwuigbe, U., Ozordi, E., Asiriuwa, O., Asaolu, T. and Erin, O., 2019, September. Corporate governance and financial statement fraud among listed firms in Nigeria. In IOP conference series: earth and environmental science (Vol. 331, No. 1, p. 012055). IOP Publishing.
G Tayo, A. and O Olayeye, A., 2019. Effect of audit committee characteristics on the timeliness of financial reporting in Nigeria. Journal of Economics, Management and Trade, pp.1-10.
Abosede, I.A. and Dada, O.A., 2021. Manufacturing Firms’ Profitability and Management of Credit: A Study of Unilever Nigeria, PLC and Nigeria Breweries PLC. International Journal of Advanced Studies in Business Strategies and Management, 9(1), pp.50-61.
AGBOWO, C.H., 2018. AN APPRAISAL OF INVENTORY MANAGEMENT AND CONTROL IN MANUFACTURING FIRMS. A STUDY OF NIGERIA BREWERIES AND UNILEVER PLC (Doctoral dissertation, Godfrey Okoye University).
As, A.J., 2020. An Organization Study Report Of Hindustan Unilever Ltd.
Kehinde, G., Oluwayomi, T. and Samuel, O., 2020. Auditors Autonomy and Financial Performance of Food and Beverage Companies in Nigeria. ADEDIPE, Oluwaseyi Ayodele OLADEJI, Ige Olubunmi, p.53.
Utami, M.W., 2018. THE ROLE OF NATIONAL CULTURE IN THE EMERGENCE OF FINANCIAL STATEMENT FRAUD: COMPARISON OF JAPANESE AND BRITISH CULTURE IN THE CASES OF OLYMPUS AND TESCO.
Osazefua, I.J., 2019. Operational efficiency and financial sustainability of listed manufacturing companies in Nigeria. Journal of Accounting and Taxation, 11(1), pp.17-31.
9.0) “Appendices”
“Appendix 1” – “Profitability Ratio”
Profitability ratio revealed the success of a business. It related to wealth creation. A firm or business organization commences a business to create wealth.
Gross Profit Margin
This generates the gross profit of a business. The formula of gross profit margin ratio is = (Gross profit / revenue) x 100
2021: (4000/28993) * 100 = 13.79%
2020: (2000/29007)*100 = 6.89%
2019: (1200/28456) * 100 = 4.21%
2018: (1100/26224) * 100 = 4.19%
Operating Profit Margin
The formula of operating profit margin is = (operating profit/revenue) x 100
2021: (600/28993) * 100 = 2.06%
2020: (550/29007) * 100 = 1.89%
2019: (400/28456) * 100 = 1.40%
2018: (380/26224) * 100 = 1.44%
Appendix 2 – Liquidity Ratio
Liquidity ratio measures the company’s ability to pay short-term liabilities. It also determines how quickly an organization can convert their assets and use them for paying their dues.
Current Ratio
Current ratio depends on the current asset and the current liability of an organization.
The formula of current ratio is = Current Asset / Current Liability.
2021 : 13640/10841 = 1.25
2020 : 11908/9104 = 1.30
2019 : 11374/8353 = 1.36
2018 : 11139/8636 = 1.28
“Acid Test Ratio”
The formula of acid test ratio is (Current Asset – inventories) / Current Liabilities
2021: (13640 – 1000) / 10841 = 1.1659
2020: (11908 – 908) / 9104 = 1.20
2019: (11374 – 800) / 8353 = 1.26
2018: (11139 – 200) / 8636 = 1.27
Appendix 3 – Efficiency Ratio
Efficiency ratio helps to understand the ability of a business. The formula of average inventory turnover ratio is
“(Average inventory held / Cost of sales) x 365 days.”
2021: ((1000 + 908) / 2) / 26977) x 365 = 13 days
2020: (( 908 + 800) / 2) / 26719) x 365 = 12 days
2019: ((800 + 200) / 2) / 26574) x 365 = 7 days
2018: (( 200 +100) / 2) / 24590) x 365 = 2 days
“Average Payable days”
This means the “average number of days” a business helps to supply their goods to consumers. The formula is (Average trade payable / Cost of sales) * 365
2021: ((4000 + 4008) / 2) / 26977) x 365 = 54 days.
2020: ((2000 + 2008) /2) / 26719) x 365 = 27 days.
2019: ((1000 + 1200) /2) / 26574) x 365 = 15 days.
2018: ((2000 + 3000) / 2) / 24590) x 365 = 37 days.
“P & G’s” “Payable Days” Calculation
2020: ((8,922 + 9,131) / 2) / 60,180) x 365 = 55 days.
2019: ((9,131 + 8,773) / 2) / 59,215) x 365 = 56 days.
“Appendix 4” – “Financial Gearing” Ratio
Formula: Noncurrent Liabilities / (non current liabilities + Equity)) x 100
2021: 9841 / ( 9841 + 235) x 100 = 97.6%
2020: 2467 / ( 2467 + 216) x 100 = 91.94 %
2019: 1853 / ( 1853 + 216) x 100 = 89.56%
2018: 1483 / ( 1483 +216) x 100 = 87.28 %
Appendix 5 – Investment Ratio
Investment ratio determines the percentage of dividend to be paid to the shareholder. The formula of this ratio is “Earnings for the year available for dividends / Dividend announced for the year.”
2021: 19.8 / 7.3 = 2.7 times.
2020: 9.1 / 11 = 0.83 times.
2019: 13.3 / 10.2 = 1.3 times.
2018: 17.5/10.2 = 1.7 times.
