Located in Vevey, Vaud, Switzerland, Nestlé S.A. is an international food and beverage processing diversified business firm. As other responsible businesses and firms around the globe, Nestle publishes publicly available annual reports, which encompass various types of corporate information, including financial statements. In general, ten essential financial accounting indicators were described and discussed for the Nestle company, illustrating the importance of analyzing the annual business report of a corporation.
- Rights, copyright, franchising, reputation, trademarks, brand names, and software are all instances of intangible assets that do not possess any physical components. Considering accounting policies, value and intangible assets in Nestle SA in 2021 was $58.244B, a factual increase amounted in 14.32 percent from 2020 (Nestlé S.A., 2022). Value and intangible assets in Nestle SA in 2020 was $50.949B, an 8.35% growth over 2019 (Nestlé S.A., 2022). In fact, intangible assets in Nestle represent a positive trend with an acceptable level of dynamics in increase.
- For a corporation, all current and contingent liabilities represent crucial financial factors. A current liability is a quantity that a firm already pays, while a contingent liability is a sum that it could possibly owe based on the course of certain circumstances. In terms of accounting policies, for the period ended December 31, 2021, Nestle SA’s sum of current liabilities and contingencies equaled $43.786B, a 0.47 percent decrease from the previous year (Nestlé S.A., 2022). The sum of current liabilities for Nestle SA in 2021 were $43.786 billion, rising 3.35 percent from 2020 (Nestlé S.A., 2022). Hence, current liabilities in Nestle company are unstable since the deviation through periods can be both positive and negative.
- Long-term liabilities, also known as non-current liabilities, are obligations that must be fulfilled after a year or the firm’s typical operating period. The length of time required for a business to convert inventory into cash is defined as the standard operation period. Overall long-term liabilities for the company Nestle SA in 2021 reached $49.667 billion, a rise of 23.21 percent from 2020 (Nestlé S.A., 2022). In comparison, Nestle SA’s long-term liabilities totaled $40.309 billion in 2020, a growth equaled to 19.68 percent from 2019 (Nestlé S.A., 2022). Thus, the levels of long-term liabilities in Nestle illustrate a stable positive trend of development due to the mentioned figures.
- Equity held by shareholders refers to the sum that a business’s founders have contributed to the enterprise. This covers the funds they have personally invested as well as the total amount of earnings the business has generated and reinvested since its commencement. Concerning accounting policies, Nestle’s total stockholders equity, which measures the net assets possessed by shareholders, was equaled to $55,400 million for the reporting financial period that finished in December 2021 (Nestlé S.A., 2022). Consequently, equity held by shareholders in Nestle is strongly corresponded to the net assets levels annually.
- The financial worth of an organization’s profits per outstanding share of stock is known as earnings per share. It is a crucial indicator of organizational profitability and is frequently applied to stock pricing. Nestle SA reported $6.63 billion in annual earnings or profits per share in 2021, growing 44.89 percent from 2020 (Nestlé S.A., 2022). Nestle SA reported $4.58 billion in total earnings per share in 2020, rising 5.73 percent from 2019 (Nestlé S.A., 2022). Therefore, according to Nestle, the firm’s earnings per share are constantly growing during several fiscal periods.
- Financial assets known as investments reflect a firm’s authority to collect money through its ownership of bonds, shares, and real estate. These investments are made with the intention of generating investment earnings and profiting from anticipated capital gains. Investments in associates and joint ventures within the reporting period of 2021 was equal to 11,806 million CHF, comparing to 12,005 million CHF in 2020 (Nestlé S.A., 2022). The short-term investments during the financial year of 2021 were equaled to 7,007 million CHF, whereas this indicator in 2020 was 3,374 million CHF (Nestlé S.A., 2022). It is feasible to state that various types of investments possess different trends of growth or decline in Nestle.
- Recognizing tax obligations for anticipated income taxes payable and calculating the present period’s tax cost are the two key components of income tax accounting. Regarding accounting policies, Nestlé paid CHF 2.2 billion in overall income taxes on the common group earnings in 2021 (Nestlé S.A., 2022). In actuality, this equates to an effective tax rate on global profits of 20.9 percent (Nestlé S.A., 2022). Hence, the firm proved to be a well-disciplined and responsible entity regarding tax obligations and their monitoring process.
- The method by which businesses document the financial effects of contracts to fund or rent the option to use particular assets is known as lease accounting. Accounting regulations, sometimes referred to as leasing, specify how lessees and lessors must monitor and evaluate their leases. Outflows from bonds, lease liabilities and other long term financial debt on the year 2021 were equaled to 4,474 million CHF, a growth in comparison to 2020 (Nestlé S.A., 2022). Thus, an increase in the sum of lease liabilities represents the financial situation in the company connected to lease accounting.
- The entire sum a company spent on expenses directly connected to the selling of products is known as cost of goods sold. That might include items bought specifically for secondary market, raw materials, storage, and direct labor involved in manufacturing or distributing the item. For the fiscal periods of Nestle SA ending December 31, 2021 and 2020, the cost of goods sold equaled to 45,468 million CHF and 42,971 million CHF, or 56.3 and 54.7 percent of sales, correspondingly (Nestlé S.A., 2022). Therefore, a positive trendline in the deviation of cost of goods sold indicator in Nestle can be emphasized.
- A business’s gross profit is calculated by deducting the whole cost of the items sold from its total sales, where total sales refer to all of the products the firm has ever provided. Nestle SA’s yearly gross profit in 2021 was $45.954 billion, rising 3.3 percent from 2020, whereas it dropped by 4.37 percent from 2019 to $44.488 billion for 2020 (Nestlé S.A., 2022). Consequently, a rise in the level of gross profit can be connected to the growth of the sum of cost of goods sold.
To summarize, Nestle provides annual reports that are open to the public and contain a variety of company data, particularly financial statements. In overall, ten crucial financial reporting metrics for the Nestle firm were outlined and examined, highlighting the significance of reviewing a corporation’s annual corporate report. In fact, it is compulsory to highlight that the majority of indicators and accounts represented numerical increases. In other terms, the critical financial accounts for the financial condition of an organization were identified to possess positive dynamics and growth.
Reference
Nestlé S.A. (2022). Nestle annual report. Nestlé S.A., Cham and Vevey.