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Financial analysis implies to review of fiscal data in order to achieve efficient decision making in business. Generally, this analysis requires a review of both historical as well as forecasted profit margins, cash-flows and fiscal risks. This may lead to resource allocation into or out of a particular company or internal process. Financial analysis also relates to company assessment in order to assess its performance, obligations, assets and possible future income (Blum and Dacorogna, 2014). A wide range of practices can be used to determine the financial feasibility of a corporation including horizontal & vertical analysis and ratio analysis methods.
This study involves comprehensive analysis of financial statements along with ratio analysis of companies selected: Heiniken and Farsons. Both these corporation are engaged in production of beer and beverages. Further study also covers the detailed evaluation of cash-flows position and working capital condition to provide conclusion on different aspects.
Overview of Companies:
Heineken is a Dutch brewing corporation located in Amsterdam. Company is world's second-largest beer maker. Comapny has a global range of more than 170 beer products, including Heineken, Tiger Beer, Zagorka, Dos Equis, Amstel and Strongbow. Company is famous for it's premium quality beer and soft-drinks, and now an established brand in industry. Company is currently operating in around more than 70 countries. It is also selling cider brands and other innovative product range in beverages. Sustainability is ingrained in business by "Brewing a Better World" and provides value to all its stakeholders (About Heiniken. 2019).
Simonds Farsons Cisk plc which is normally called or recognised as Farsons is Malta based company well known for providing quality beer, food and other beverages. Company sis engaged in brewing, producing, selling of different beers brands and soft drinks. Company also importing, wholesaling and retailing foods and beverages, and operating franchised retail. In Malta and other near countries company is leading beer manufacturer and also company is rapidly moving towards international market. Blue-Label Beer, Kinnie line of soft-drinks, Cisk Lager, San Michel table water, Hopleaf Pale Ale etc. are the corporation's popular breweries and liquor labels. Company is the very first non-bank private corporation listed on the Malta's Stock Exchange, wherein the shares of the organization are known for trade purposes as SFC (About Farsons, 2019).
Evaluation of the financial performance and financial position of Farsons and Heiniken:
Vertical analysis refers to form of examination of financial information where each material item is described in report as a proportion of base figures. So, line items stated in statement of income could be specified as a certain percentage of gross revenues, whereas line items stated in balance sheet could be specified as a certain percentage of aggregate value of assets or liabilities. In specific columns, financial statements which include vertical analysis specifically display line items a percentages (Bragg, 2012).
From vertical analysis of Profit and Loss or Income Statement of company Heiniken it has been evaluated that corporation's aggregate gross profits as in percentage of total revenue has been decreased during 2018 to 51.29% after reporting a sustaining improvement form year 2015 to year 2017. During 2015 to 2017 gross profit proportion was 52.57%, 53.39% and 53.77% respectively. Whereas net profits in proportion of total revenue was 4.67% in year 2015 has been decreased to 3.75% in year 2016 which was increased to 4.46% and 4.28% in year 2017 and year 2018. Above trends shows that after 2017 company's profitability level in proportion of its sales has been declined (Annual Report of Heiniken. 2019).
Statement of financial position:
Vertical Balance sheet's analysis of corporation exhibits that entire non-current assets has covered 78.38%, 79.90%, 79.31% and 84.32% part of company's total stated assets during 2018, 2017, 2016 and 2015 respectively, which points out towards decreasing trend during such period. Whereas cash/cash-equivalents' proportion has been increased during year2018 i.e. 6.92% in that year while it was 2.23% during year2015, 7.72% (in 2016) and 5.95% (in 2017). Corporation's total current assets occupied 15.68%, 20.69%, 20.10% and 21.62%, 20.10%, 20.69% and 15.68% in year 2018, 2017, 2016 and 2015 respectively.
In company shareholder equity covered 17.06% portion of entire assets in 2018 which was 16.16%, 16.78% and 17.90% in year 2017, 2016 and 2015 respectively. Current liabilities' level has been declined from 26.44% to 24.91% during period of year2016 to 2018. Moreover, non-current liabilities' level has been declined from 59.52% to 58.03% from year2015 to 2018.
Vertical income statement as attached in appendix of Farsons shows that corporation's gross profits percentage relative to total revenues was 37.97% in 2015 which increased in 2016 and reached at 38.82%. Also further it was 38.95% and 38.64% during 2018 and 2017 respectively. Whereas net income occupied 14.74% of aggregate revenues in 2018 which was 10.13%, 12.94% and 13.64%, 12.94% and 10.13% in year 2017, 2016 and 2015 respectively. Above increasing trend in gross-profit and net-profit shows that company's profit generation capabilities has been increased over the period (Annual Report of Farsons. 2019).
Statement of Financial Position:
Balance sheet (Vertical) analysis of corporation Farsons indicates that total equity occupied 67.11% of aggregate value of assets in 2015 which reached at 59.88%, 67.21% and 66.87% during year 2018,2017 and 2016 respectively. On other side total liabilities were 20.37% in 2018 and this percentage were 32.89%, 32.52% and 32.79% during year 2017, 2016 and 2015 (Annual Report of Farsons. 2019).
Corporation's non-current or fixed assets proportion has been reduced to 77.16% in year2018 which was 78.52% in 2015, 79.14% in 2016 and 81.42% in 2017. Whereas corporation's aggregate current asset level has been reached 18.58% to 22.22% (2017 to 2018) that was 20.25% and 21.48% in year 2016 and 2015 res