Running Head: Analyzing Financial ments of a small US company ANALYSING T-ACCOUNTS & BALANCE SHEET & PROFIT AND LOSS ACCOUNT FOR A SMALL US COMPANY Customer Inserts His / Her Name Customer Inserts Grade Course Customer Inserts Tutor’s Name Assignment Part 1 - Requirements The accounting entries for each of the events, which took place within a small distribution company, have been accounted for under various relevant T accounts in Exhibit 1.1 in attached Excel sheet. Assignment Part 2 - Requirements Vertical analysis of financial statements of a Company For business purposes and to clarify the better financial position and performance of a Company, vertical analysis of financial statements of enterprises is performed in order enlighten various financial analysis and comparative outlook of a Company financial standing and result.
Vertical analysis is basically the display of every line items of financial statements as a percentage or rate of gross revenues, which exactly tells that where are each penny of Company’s earned revenue is utilizing and what is its overall flow of expenditures towards attaining the final net profit for the Company (Netplaces. com, 2014). In addition, same analysis is performed with respect to balance sheet of Company as well.
The vertical analysis of Profit and Loss statement and Balance sheet of a Company has been performed in Exhibit 1.2 of excel file attached. Horizontal analysis of financial statements of a Company On the other hand, the major aspect and intention behind performing and developing a horizontal analysis on any Company’ s financial statements, is to analyze and critically evaluates the figure work incorporated in such statements from one financial year to another one (Berry, 2011). This analysis is basically termed as the trend analysis in typical accounting literature, and it would clearly points out the recent trends with which a particular line item of financial statements of a company is affected with.
Moreover, the horizontal analysis of Profit and Loss statement and Balance sheet of a Company has been performed in Exhibit 1.3 of excel file attached. Cash flow Statement of Company A cash flow statement of Company is prepared with the help of the financial statements of Company in Exhibit 1.4 of attached excel file. Brief Analysis on financial performance of Company A Dupont model is used here to analyze the financial performance of Company, particular to its current year financial results accruing and forming several heads and classification of overall revenue figure that company has earned in 2013.
This model successfully demonstrates the overall company performance in terms of, where its ultimate return on equity is developing from. Moreover, the prime strength of Dupont models of financial evaluation is typical means through which, it takes an indirect consideration over the broad scale of financial information to determine and analyze the ultimate outcomes which it provides on clear basis (Guidotti, 2013).
For instance, with the help of following figure, asset turnover percentage input, is indirectly flowing some great extent of informational data with regard to different facets and breakups of overall financial analysis, including line items of balance sheet, profit and loss statement, and their overall interlocking interactions. Source: (Guidotti, 2013) However, when implementing and analyzing the financial data of the company in question, it would be much appropriate and feasible to accurately divide the overall financial performance of a company under its ultimate net of return on equity basis.
Although, a core structure of such model would be quite different from one company performances to another, but, as far as our company is concerned this model would certainly depict a unique and clear mode of financial outcomes analysis with regard to company’s current and past financial performances. Key Findings The overall analysis performed and calculations made and demonstration of various set of financial techniques implicated in order to meet and critically evaluated varied financial standings and outcomes of a Company, following are some key findings as a result of this analytical report; On the basis of vertical analysis, the income statement of a company can be clearly viewed from the overall proportion or percentage of gross revenue as a product of other line item of presented in such statement.
Moreover, such analysis also enabled the presentation of balance sheet framework in a more congenial manner as well, and it is due to each line item of assets and liabilities and share holders equity can be truly represented as the percentage of assets and liabilities and equity in particular. This would highly facilitate the users of financial statements as they would not need to indulge themselves in analyzing diversified and head aching figures work and terms. Moreover, horizontal analysis depicts the change in figure and proportional means of such figures, of comparative years of financial information for two years and more.
With regard to company analyzed, a considerable fluctuated line items under our analysis includes the transformation of company from profit earning entity to loss generating company from 2012 to 2013, which is proportionally accruing the net change of 1300%. In addition, due to this substantial change, an overall fluctuating picture has been presented by the profit and loss statement of a company analyzed with horizontal techniques. As far as balance sheet is considered, a horizontal analysis strongly depicts and highlights two major line items in 2013 which have been significantly varied as compare to last year financial scenarios.
This includes the major fall in accumulated account receivables and a rise in share capital structure of a company. However, cash flow analysis of Company provides a positive inflow of cash resources towards the company during the year, which is mainly due to the reasons of payment received from debtors, receipt of cash from banks in form of loans and accounting for non cash items from the profitability of company, including depreciation, amortization and doubtful debts expenses. REFERENCES Netplaces. com, (2014). Vertical and Horizontal Analysis - Accounting.
[online] Available at: http: //www. netplaces. com/accounting/the-best-use-of-your-financial-statements/vertical-and-horizontal-analysis. htm [Accessed 19 Aug. 2014]. Berry, L. (2011). Financial accounting demystified. 1st ed. New York, NY: McGraw-Hill. Guidotti, D. (2013). Strengths and Shortfalls of Dupont Analysis. [online] PFhub - Business, Financial & Economic News. Available at: http: //www. pfhub. com/strengths-and-shortfalls-of-dupont-analysis/ [Accessed 19 Aug. 2014].