ACCOUNTING AND MANAGEMENT DECISIONS.

Running head: ACCOUNTING AND MANAGEMENT DECISIONS
Accounting and management decisions – Week 10
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1ACCOUNTING AND MANAGEMENT DECISIONS
Table of Contents
E12.3..........................................................................................................................................2
E12.4..........................................................................................................................................3
E12.6..........................................................................................................................................4
Additional in – class Question 1................................................................................................5
Additional in – class Question 2................................................................................................8
Reference....................................................................................................................................9

2ACCOUNTING AND MANAGEMENT DECISIONS
E12.3
(a) Horizontal analysis of Forrester’s Ltd’s financial position
(b) Explanation of changes
From the above presented horizontal analysis of Forrester’s Ltd’s financial position as
at 30th June 2017 and 30th June 2016 it can be noticed that the current assets as well as the
non-current asset that is the property, plant and equipment has been increased by 9.09% and
7.94% respectively in 2017 as compared to 2016. If the total assets is considered it is
increased by 8.08% in 2017 as compared to 2016. If the current liabilities and non-current
liabilities are considered it can be noticed that both the current as well as non-current
liabilities of the company has been reduced in 2017 as compared to 2016 by 10% and 7.69%
respectively (Entwistle 2015). Hence, it can be stated that the liquidity position of the
company has been improved. Share capital of the company over the years from 2016 to 2016
has been increased by 23.29% whereas the retained earnings have been reduced by 7.11%.

3ACCOUNTING AND MANAGEMENT DECISIONS
Total liabilities and equity of the company has been increased by 8.08% over the years from
2016 to 2017.
E12.4
a. Schedule showing the vertical analysis
b. Importance of vertical and horizontal analysis
When analysing the financial statement of a company vertical as well as horizontal
analysis is important to analyse the trends over times. Under the competitive landscape
growth of the company is preeminent particularly for the industries where significant amount
of upfront investment is required. Through analysing the trends the corporate analysts can
also state whether the company is efficiently managing the money and investing the same
wisely. Under vertical analysis generally one accounting item, for example sales in income
statement are set as the benchmark and other items are compared with numerical standards.
Main advantage of vertical analysis is that the firms of different sizes can be compared. On
the other hand, the horizontal analysis is studying the trends over the years (Karaibrahimoglu
and Tunç 2014). For example, 5 year balance sheet can be reviewed to determine the