Financial Analysis of Farsons & Heineken

This document provides a detailed analysis of the financial position and performance of Farsons & Heineken, including vertical analysis, ratio analysis, and current ratio. It discusses the importance of financial statements and the use of ratios, working capital, and cash flow in decision-making and performance analysis.

FINANCIAL ANALYSIS
MANAGEMENT & ENTERPRISE
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Contents
Contents...........................................................................................................................................2
INTRODUCTION...........................................................................................................................3
PART 1............................................................................................................................................3
Explanation of financial position and performance of finance of Farsons & Heineken.............3
Brief description of working capital............................................................................................3
Brief description of Cash flow.....................................................................................................3
CONCUSION..................................................................................................................................3
REFRENCES...................................................................................................................................3
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INTRODUCTION
Every business organization run their business activities with the use of financial analysis. It
is a procedure where corporation measure business in fiscal details in attempt to assess and
scrutinize actual position of business organization within economy. Theses analysis also use full
in identifying the liquidity and profitability value and level of the organization. To understand
this concept Farsons and Heiniken has been taken. Both are deal in manufacturing high quality of
drinks product. This report has been include the importance of financial statement and use of
ratio ,working capital and cash flow for taking decision and analysis the performance of the
business organization in brief manner.
PART 1
Explanation of financial position and performance of finance of Farsons & Heineken
Financial analysis: Financial review is the method of reviewing companies, programs,
expenditures and other activities relevant to finance to assess their efficiency and
appropriateness. Financial analysis is usually used to determine how an enterprise is adequately
secure, viable, liquid or competitive to justify a capital expenditure. In detailed manner it is the
evaluation and measurement of business financial activities through which manager can identify
the performance of business and easily evaluate their profit and loss incurred during particular
time period. (Fulton and et .al. 2015). About Farsons: It is retail organization which is situated in
Malta and established in 1928. The organization work for providing beer, soft drink cold drinks
wines and other beverage product to their customers. Farsons is private sector organization
which offer many products, Kine soft drink, Blue Label any etc. The organization is also a listed
company of Malta stock exchange.
About Heiniken: This is one most popular Dutch organizations that is producer and leading
distributor of beer across the globe. The organization provides more than 300 products in the
world. Heiniken has employed more than 85000 personals in their organization which prodded
best serves of beers in the world. The organization at present run their business in more than 70
countries. The organization is focus on provide best service to their customers and on the basis of
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their satisfaction level they enhance their market. They are use customers situation as their
organizations core competences.
Following are the ways through which manager identify the financial performance of theses
organization which are describe below
Vertical Analysis: Vertical assessment is a form of review of the financial report, where each line
element is described as a proportion of a reference number in the document. Therefore, line
items on a net income should be reported as a percentage of profits revenue, while column
headings on a balance sheet should be mentioned as a proportion of gross assets or liabilities, and
lateral review on a financial statements reveals either cash flow over time as a proportion of all
future cash flows. In other words, it is one of the most useful analysis which is based on the
profit and loss statement where they analyse total proportion and contribution of each income
statement ‘s item. Analysis should be premised on the proportion of sales risen by form of the
specific percentage. On other hand, income statement would be regarded as the proportion of
total gross revenues while balance sheet component expressed in the monetary worth of the
aggregated assets. The accompanying is vertical analysis of respective corporation.
Heiniken ‘s income statement: It is formatted to determine the value of profit earned by the
organization during specific period of time. The Heiniken organization’s profit has been
increase since 2015 to 12017 but in the year 2018 it has been goes down at 51 % due to
lack of managerial policies. However the value of net profit in 2015 was 4.67 % which is
reduce in 2016 at 3.75 % as well as the value of net profit in 2017 increase at the
organization earn 4.46 % of profit but is decrease in 2018 from some rate (Huotari, 2015).
Financial position statement: Value of noncurrent asset of the Heiniken in 2015 was 84.32
%, in 2016 it was decrease and the value is 79.31 % in 2017 it is 79.90% and in 2018 the value
measured of the no current assets was 78.38 %.It shows that the value of noncurrent of this
organization has been decrease with the changes in times. The value of the cash of Heiniken was
increase since 2015 as the value measure by the department of cash was 5.95 % in 2016 and it
was 6.92 % in the year 2018.The value of current asset of this organization was 1.68%, 20.69 %
and 21.62 %.The value of shareholders find of the Heiniken has been measured at 17.06 % of the
asset it has been reduce since 2015 as in that year the worth of shareholder fund as compare with
their assets was 17.90%.Its value in 2016 was 16.68%.The value of liabilities has been increase
as there was 2644 % observed in 2016 and in2-18 it was 26.99 %.
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Farsons:
Profit and loss statement: The value of profit has been increase of this organization .In
2018 it was 7.95 % which was highly increase as the value of revenue in 2017 was 3.53 %. The
value of the gross profit in 2016wast 3.03 %which increase in 2017 AND recorded at 10 % and
in 2018 it was also increase at 8. 8 %.The value of net profit also increase which growing rate as
compare to the past years of the organization. In 2018 te net profit rate was 16.6 %. With the
organization take decision based on analysing their financial statement.
Financial position statement of Farsons: The horizontal analysis is used to observed the worth of
shareholder’s fun to the business organization. In 2018 the ratio of shareholder fund regard with
the Farsons organization has been decrease. In 2018 the value of shareholder fund was 21.14 %
and in 2016 it was 12.84 as well as in 2017 it was valued at 9%.The value of long term
Liabilities has been increase it was Valued at 8.16 % in 2016 and in 2018 it was 11.67 %.The
value of current business liabilities in 2018 also increase although there would be no changes has
been measure in 2017.the Value of current asset has been decline from 16 % which was increase
in 207 from 15 .50 %.At the end of the financial year the value of asset has been increase 5.88,
3.03 and 3.13 % in 2018 to 2016 year. With the use of financial analysis the management
department will be take decision regarding their future business aspect and they choose the best
alternant and change in the current business policy are also used by using the analysis of
financial statement of the business organizations (OH, 2016).
Ratio analysis
It is characterized as financial management strategy which is linked to the comparing of different
valuable financial facts OR statistics, which are generally set out in the financial statements
of business entity. This method mainly applies by the top level of management department of the
organization to identify the over-all liquidity, profitability and solvency of the asset and
liabilities of the business organization. Ratio analysis are useful in decision making procedure
Also and for comparison.
Net profit ratio: That measure effectively indicates the sum of the gross benefit received by the
corporate company after the allocation of any of the expenses and net profits of the person. It
highlights the potential of companies to offer net profits to shareholders/investors. Here are the
formula of net profit ratio which organization used to determine their ratio of profitability
NET PROFIT RATIO: NET PROFT / NET REVENU *100
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Following statement show the value of net margin of Heiniken and Farsons
Year Heiniken
Farsons
2015 4.67 % 10.11%
2016 3.75% 13.22%
2017 4.46% 13.77%
2018 4.28% 14.49%
Interpretation: From this analysis it has been observed that the value of net profit of Heiniken
was decreases . This show that organized will not be able to effectively use their resource and
sells rate goes into down. In the other side the value of net profit ratio in Farsons was increase
the rate of 2015 iand218was highly different with each other. It goes that the value of net profit
increase hit the change of sales policy ant their sales rate has been increase with the changes of
times.
Gross profit ratio: This is a part of financial ratio being used by organizations to identify the
relation between gross profit and sales. It represent the % value how munches an organization is
able to here is profit by selling their product in market. This is a metric that is indicative
of working efficacy of the corporation as included in this percentage of net profit./Net profit is
the level of income of corporation which deducts any specific direct cost found by the
manufacturing division of the company and excludes all direct costs directly related
to production of finished products (Sangster Kuter, Gurskay and Andreenkova, 2017). Formula:
Gross profit: Gross Profit /Net Revenues *100
Year Heiniken
Farsons
2015 52.75 % 37.97 %
2016 53.39 % 38.82 %
2017 53.77% 38.64 %
2018 51.29 % 38.95 %
Interpretation: Gross profit issued to show the profitability level of the business organization.
Heiniken gross profit ratio has been decrease although it increases in 2016 as compare to 2015
but since 2017 the rate of the ratio has been decrease, it may be the reason due to high exceeds
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incurred or decrement in the selling rate of the business organization. While the gross profit
margin ratios have been increase just like the net profit ratio of Farsons has been increase it show
positive symbol for the business organization.
Current ratio: This ratio is related with the liquidity position of an organization. Current ratio is
essential estimated with difference between current assets and current business liabilities.
Current ratio is help in identifying how effectively an organization is able to identify the ability
of an organization to pay their debt liability. Current ratio proportion of 2:1 is most suitable
proportion under these conditions to demonstrate that company is not fiscally stable. The
following figure shows current ratio of such two organisations. The current ratio is an indicator
of the competitiveness of a company. Appropriate liquidity ratio differs from sector to business.
For certain situations, a borrower will find a high conversion liabilities greater than a low
liquidity ratio, since a high current ratio means that the borrower is more likely to be paid back
by the client. Large market ratios do not necessarily reflect a positive indication for investors. If
the current ratio of the firm is too large it may mean that the business will not utilize its existing
assets or short-term lending facilities effectively.
Year Heiniken
Farsons
2015 0.69 1.72
2016 0.78 1.39
2017 0.79 1.39
2018 0.87 1.12
Interpretation: This statement show that the Companies have current proportion below 2:1,
however proportion of Farson 's company is increasing as opposed to other company. The value
of current ratio of Farsons has been reduce ate value of Heiniken has been increase which show
that organization have sufficient value to fulfil their current business liabilities by using current
asset.
RETURN OF EQUITY: This ratio is mainly used by fiancé department. This is an indication of
the market efficiency relative to the obligation that is similarly viewed. It show the net resource
and net liabilities of the organization (Edwards, 2016).
Year Heiniken
Farsons
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2015 14.87% 12.52%
2016 11.67% 10.53%
2017 14.77% 10.70%
2018 13.84% 8.19%
Interpretation: The return of equity ratio has bee calculate to identify the return rate on the
investment of equity . It shoe how much organization will be the behave of their equity. The rate
of equity retune of the Heiniken has been increase since 2015 which means that Heiniken will
get higher return on investment of their equity they are in profitable condition and hear
sharholders will be able to take dividend . on the other side Farsons return ratio is decrees and
comparatively low it means that organization is of able to effectively used their resource thus
their return rate is high. Farsons organization’s value f return of equity ratio was 12.53 in 2015
and it was 8.19 % in 2018which means that organization not effectively run their business
activities and problems aeries though their ratio decline as compare to Heiniken .As the value of
return on equity in 2015 14.37 and in 2018 it was 13.94 .The value of this organization also
decline cut as compare to the other organization is was good. It represent that the their effects
way thus the organization is able to pay on equity in effected rate of rerun (Easton and Monahan,
2016).
Brief description of working capital
That is the portion of the capital being used by company to carry out the day-to-day
liabilities of business enterprise. Working capital is contrast between existing current assets
value and total business current liabilities. And gross working capital is the value of lat current
business assets. It is Strangford contrast between the current asset and current liability of the
organization. It includes, inventory, cash balance, partnership account, short term fund, account
receivable and account Payable. It simply represent corporation‘s liquidity status. It is portion of
capital reserved and used by business organization to operate everyday operations.
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Heiniken: The value of current asset of this organization in 2015 was worth 5914 an it increase
in 2016 and it becomes 8137 in 2017 the value on this assets was 8248 an in 2018 its value was
calculated was 9070.Onthe other side the value of its liabilities was also increase with the
changes of time it was in 2015 8156 which was increase in 2018 the value of current liabilities
was 10450. This means that the organization‘s current asst increase with the increment rate also
but there current liabilities is increases with higher rate of increment. The working capital of this
organizat6iom is show negative balance. In which means that the value of liabilities is higher as
compare to value of current assets. The value of working capital in 2015 was -2602 and in 2018
it was -1380 . This show that organization does not sufficient balance to fulfil their day to day
liability it may be the reason that organization is not manage their working capital in effective
way The management department of this organization need to focus on their management of
their working asset and liability in order to change the negative vale and increase the cash inflow
in the organization (Mun and Jang, 2015).
Farsons: The current asset value of Farsons organization was 32 in 2015 and it was increase in
2018 and the value of assets was recorded at 36.On the other side the value of current liabilities
of the business organization in 2015 was lo increase it was 18 in 2015 and in 20128 the current
liability was record at 32 although the value of current liabilities ins increase but these are not
higher than its current asset the value of working capital is in positive and it was 14 in 2915 and
in 2018 although the rate of working capital is decrease but organization is as compare to
Heiniken able to fulfil their day to day business liabilities and their management of working
capital is better than Heiniken.
Brief description of Cash flow
It is a statement which is formulate to show the cash inflow and cash outflow business
activities. Cash flow is useful for business organizations to take decision regarding their future
business activities by analysing their value and work of cash asset in with a given business time
period.
Heiniken: The organization’s cash inflow value from its operations was in 2015 3489 million and
in 2016 it was 3718 million in the year 2017 the value of cash inflow was 3882 million and in
2018 it was 4388 million. There cash outflow activities value was 2064 million in the year 2015
it was increase in 2016 2007 million, in 2017 it was 2965 million and the worth of it in 2018 was
2355 million. the financial exercise values was 1173 million in 2018 it was 2049 million has
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been valued. all these data represent that organization ‘s cash inflow activities worth more than
its cash outflow activities that they have sufficient amount to fulfil their net current liabilities.
Farsons: The working structure of the organization worth in 2015 was 16 million in 2016 it was
also 16 million and in 2018 it was valued at 21 million. It represent that the organization work in
effective way. The money outsourced structure of the organization was worth 7 million in 2015,
18 and 20 million in 2016 and 2017 the value of the sourcing in 2018 was 21 million. The
outflow to this organization was decrees and down ait negative pint. The income also decrees .
Overall basement (Collins, Hribar and Tian, 2014).
This evolution state that Heiniken value effective return value and the net profit more prominent
then proportion of Farsons. The organization also face negative Woking capital . On the other
side the value of Farsons is comparatively low but they are work towards regressively solid.
CONCUSION
From the Above analysis it has been concluded that every business organization need
vertices and horizontal financial analysis to take decision regarding their future business policies.
Theses analysis are useful in measuring the performance of the business organization.
Management department of an organization also use ration analysis it help in identifying the
level of profitability of the organization and also useful for comparison and define relation with
other element of the organization. They also use working capital and cash flow statement though
which they determine availability of cash and current assets to fulfil their current business
liabilities .Al these tool of financial management help in decision making procedure of the
organization.
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REFRENCES
Books and journals
Fulton, J. J., Calhoun, P.S., Wagner, H.R., Schry, A.R., Hair, L.P., Feeling, N., Elbogen, E. and
Beckham, J.C., 2015. The prevalence of posttraumatic stress disorder in Operation
Enduring Freedom/Operation Iraqi Freedom (OEF/OIF) veterans: A meta-
analysis. Journal of anxiety disorders, 31, pp.98-107.
Huotari, M., 2015. Finding a New Role in the East Asian Fianancial Order. China’s
International Roles, pp.145-69.
OH, T. H., 2016. A Study on the Financial Statements Analysis of Ocean-going Shipping
Companies. The Korean Research Institute of International Commerce and Law, 69,
pp.389-406.
Sangster, A., Kuter, M., Gurskaya, M. and Andreenkova, A., 2017, December. The
determination of profit in medieval times. In International Conference on Information
Technology Science (pp. 215-224). Springer, Cham.
Edwards, J.B., 2016. Modern gross profit analysis. Journal of Corporate Accounting &
Finance, 27(4), pp.45-55.
Easton, P. D. and Monahan, S.J., 2016. Review of recent research on improving earnings
forecasts and evaluating accounting‐based estimates of the expected rate of return on
equity capital. Abacus, 52(1), pp.35-58.
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Mun, S. D. and Jang, S.S., 2015. Working capital, cash holding, and profitability of restaurant
firms. International Journal of Hospitality Management, 48, pp.1-11.
Collins, D.W., Hribar, P. and Tian, X.S., 2014. Cash flow asymmetry: Causes and implications
for conditional conservatism research. Journal of Accounting and Economics, 58(2-3),
pp.173-200.
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