Financial Analysis of Farsons and Heineken

FINANCIAL ANALYSIS
MANAGEMENT & ENTERPRISE

Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
Introduction of both companies:.............................................................................................1
(a) Vertical analysis................................................................................................................1
Ratio analysis..........................................................................................................................4
2. IMPORTANCE OF ASSESSING THE WORKING CAPITAL................................................6
Working capital management of Farsons...............................................................................6
Working capital management of Heineken............................................................................7
EVALUATION OF CASH FLOW OF ORGANIZATIONS..........................................................7
Cash flows of Heineken..........................................................................................................7
Cash flows of Farsons............................................................................................................8
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
The term financial analysis is a systematic process of assessing information of different
financial statements in order to evaluate financial condition of business entities in an effective
manner (Hua and Nin-jing, 2012). There are various types of financial statements such as income
statement, balance sheet and many more with an objective of gathering key monetary
information. The aim of project report is to analysing and comparing financial performance of
companies. The project report is based on analysing financial position of two companies that are
Farsons and Heineken. For this purpose, various types of techniques are used such as vertical
analysis, horizontal analysis and ratio analysis. In the end part of the report comparative analysis
is done in order to evaluate efficiency of both companies.
TASK 1
Introduction of both companies:
Farsons company- This company was established in year 1966 and it operates its
business in the production & distribution of wines, beers, coffee etc. The company was
previously known as Wands limited. Its headquarter is at Birkirkara, Malta. This company's key
and most famous products are Blue Label Ale, Cisk Lager and many more. The company is
listed on Malta stock exchange though it is a non-banking sector company.
Heineken company – It is a Dutch brewing company which was established in year 1864
by Gerard Adriaan Heineken in Amsterdam. The company operates its business into 70 countries
and have a large product portfolio. They produce and offer more than 250 international and local
speciality beers. This company's key objective is to focus on value creation that helps them in
core success.
(a) Vertical analysis
Heineken
Income Statement:
On the basis of prepared income statement of Heineken Plc, it can be assessed that it is
prepared as per the consideration of 100% of sales. Their income statement provides a detailed
information regards to profitability and expenditures (Lin, Shicong and Yu, S., 2015). It can be
find out that their gross profits are decreased in year 2018 till 51.29%. While during year 2015 to
2017, it has been increased by huge manner. In addition, their net profits were fluctuating
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throughout the four years 2015,2016,2017 and 2018. Like in year 2015, it was of 4.67% that
reduced in next year and became of 3.75%. In further years, it increased and decreased. Such as
in year 2017, it increased and became of 4.46% but again decreased in year 2018 till 4.28%
(Annual Report of Heiniken, 2019).
Balance sheet:
On the basis of vertical analysis of balance sheet of Heineken company, it can be
assessed that all the items are based on the 100% of net assets value. It be assessed that their non-
current assets had been decreasing in all four years. In the starting year 2015, it was of 84.32%
that decreased significantly like 79.31% in 2016, 79.90 in 2017 and 78.38% in year 2018. On the
other hand, the value of current assets is increasing and decreasing in considered four years. Like
in year 2015, it was of 15.68% that raised in year 2016 by 31.95% and became of 20.69%. While
in next year 2017, it reduced by a little margin and became of 20.10% but again in next year
2018, it increased till 21.62% (Annual Report of Heiniken, 2019).
In the context of shareholder's funds, it can be assessed that its value has been fluctuated
in all four years. Starting from 2015, it can be find out that its value was of 17.90% that
decreased and became of 16.78% in year 2016. While in year 2017 and 2018, it was of 16.16%
& 17.06%. One of the key thing which is beneficial for company is that their current liabilities
are decreasing during year 2016 to 2018. As well as their non-current liabilities are also reduced
from 59.52% to 58.03% during time period of 2015 to year 2018.
Farsons:
Income Statement:
Same as the above mentioned income statement, under this company all the items are
based on proportion of total sales amount. In the context of gross profit, it can be find out that in
year 2015, this was of 37.97% that raised in next year 2016 till 38.82%. As well as in next two
years it was of 38.64% and 38.95% for year 2017 and 2018. In addition, their net income is
fluctuating in all four years. Such as in year 2015, it was of 14.74 that reduced and became of
10.13% in 2016. While in next two years, it had growth of 12.94% and 13.64% (Annual Report
of Farsons, 2019).
Balance sheet:
In the aspect of balance sheet of this company, it can be assessed that the value of
shareholder's equity is decreasing in three years except from year 2017. Such as in year 2015, it
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