Financial Analysis of Management & Enterprise

TASK 1

Introduction of both companies:

Heineken company-

It is a Dutch scotch ale that Gerald Adriaan Guinness founded in Holland in 1864. The company works in 70 nations and has a strong portfolio of goods. More over 250 locally and internationally specialty beers are produced and offered. The key goal of such an organization is to focus on developing value that allows them to achieve core performance (Lin, 2012).

Farsons Company -

Formed in 1966, this corporation runs its operations in wine, beer, coffee, etc. development & delivery. Earlier, the business was identified as Wands Limited. The headquarters are located in Malta, Birkirkara. Blue Label Ale, Cisk Lager and many others are the main and most popular items of this business. Although, it is a non-bank business firm, the business is traded on the Malta stock exchange (Barashian and Pronnikova, 2016).

Vertical analysis

Heineken

Income Statement:

Depending on Heineken Plc's updated comprehensive income statement, it can be determined that it is structured according to 100 percent of revenue calculation. It was improved significantly over the period from 2015 to 2017. It could be noted that their operating profits dropped to 51.29 percent in 2018. A declaration of profits contains specific information on productivity and spending. Nevertheless, over the four periods 2015, 2016, 2017 and 2018, their net profits fluctuated. As in 2015, it fell by 4.67 percent in the year to 3.75 percent. This increased or decreased in other years. It rose became 4.46 percent as in 2017. As in 2015, it fell by 4.67 percent during the year to 3.75 percent. It growing and reduced in other years. As in 2017, it improved became 4.46% but declined again in 2018 to 4.28%.

Balance sheet:

Depending on Heineken's vertical financial position statement review, this can be determined that certain products are depending on the 100% book value (Rui, 2012). It is estimated in all four accounting periods; their non-current assets had decreased. It was 84.32 percent in the beginning year of 2015, which fell substantially as 79.31 percent in 2016, 79.90 in 2017 even 78.38 percent in 2018. On the other hand, in deemed four financial years, the cost of current assets increases and decreases. This was 15.68 percent, like in 2015, which increased by 31.95 percent in 2016 and have become 20.69 percent. Even though it declined by a decent margin in 2017 and have become 20.10% in 2017, it rose by 21.62% in 2018.

This can be measured throughout the sense of investor assets that its price has continued to rise over all four accounting period. Beginning in 2015, this can be found that its price was down 17.90 percent in 2016 it was down 16.78 percent. While this was 16.16 percent in 2017 & 2018 & 17.06 percent. Some of the main advantages for the organization is that their current liabilities would decrease between 2016 and 2018. In contrast to their multi-current liabilities, during span from 2015 to 2018 they are often decreased from 59.52 percent to 58.03 percent.

Farsons:

Income Statement:

Similar with the above balance sheet, all products are calculated on even a share of the total revenue sum within this business. With respect to net sales, it can be found that in 2015, it was 37.97%, which rose to 38.82% in 2016. This was 38.64 percent through 38.95 percent in 2017 and 2018 and in the following two accounting period. Furthermore, their net profit fluctuates over all fourth periods. As in 2015, it declined from 14.74 to 10.13 percent in 2016. Whilst it rose by 12.94% and 13.64% over the succeeding 2 financial year.

Balance sheet:

As for this corporation's financial position statement, it could be calculated that perhaps the company's enterprise value will decline in three periods other than in 2017. Like in 2015, it fell from 67.11 to 66.87 percent in 2016. Since it rose and becoming 67.21 percent in 2017, it dropped once more in 2018 to 59.88 percent. Apart from this, regards to the entity's total liabilities, this can be noted that in given four accounting periods it increases and decreases dramatically. Such as in 2015, it fell by 32.79 percent in the year to 32.52 percent. Although its value dropped by a decent profit in 2017, it grew by 32.89% throughout 2018. This decreased significantly to 20.37%. For both the client, this is a good indication that the overall debts were through.

It may have determined, in the light of non-current assets, that its value was improved other than in 2018. Like in 2015, it rose by 78.52% to 79.14% then 81.42% in the next two financial periods. Whilst it decreased by an enormous margin in 2018, it had become 77.16%. Rather than the current assets of the organization for 2015, 2016, 2017 through 2018 are 21.48 percent, 20.25 percent, 18.58 percent and 22.22 percent overall.

CONCLUSION

From the above vertical analysis, it is resulted that the gross profitability situation of Farsons is quite optimistic whereas the net profitability is optimistic of Heineken comparatively to Farsons’. The financial position presents favourable current assets position for Farsons compared to Heineken and the current liability is analysed the effective current liability position organisation.

Horizontal analysis

Heineken:

Income Statement:

Based on this firm's horizontal profit and loss statement review, this can be found that the revenue rate was greater in 2017, and that was 5.27% when it was less in 2018, and that was 2.66%. Therefore, their gross margin volume declined by 2.08% in 2018 as well as the higher inflation was 6.04% throughout 2017. A net income also dropped from 1.64 per cent in 2018 as well as its price rose to 25.42 per cent in 2017 (Annual Report of Heiniken, 2019).

Balance sheet:

Based on this business's financial statements, this can be found that only in 2017 through 2018, the rising percentage of the company's funds was 0.53 percent or 7.91 percent. As it declined from 2.25 percent in 2016. As for this firm's resources, this can be seen this is rising dramatically, like 37.59% in 2016, 1.36% throughout 2017 but 9.97% in 2018. Therefore, the non-current debts are also increased by 7.24% in 2017 than 1.69% in 2018. The cost of receivables in 2016 and 2017 grew from 22.09% to 0.59%. The volume of money resources rose from 268.33% in 2016, which dropped by 19.54% in 2018. Although it decreased to 0.08% in 2018. Their non-current assets dropped to 1.94% in 2016, but decreased by 5.14% in 2017 to 0.31% in 2018 over the next two accounting.

Farsons: 
Income Statement:

In the sense of these business, its revenue increased by 7.95 percent in 2018 but enhanced by 3.53 percent in 2016-17 and 7.59 million in 2018. In addition, their gross margin rose by 10% in 2016, by 3.03% in 2017 and also by 8.82% in 2018. Together the overall productivity, they improved to 16.67%in 2018,2016, 9.09% in 2017 and 37.50% (Annual Report of Farsons, 2019).

Balance sheet:

As for this business's financial position statement, it can be noted that the resources of its owner decreased by 21.14% in 2018, and there was a rise of 9% and 12.84% in 2016 as well as 2017. In contrast, their bit of a non-current liabilities rose as 8.16%, 13.21% respectively 11.67% in 2016, 2017 and 2018. The cost of current assets also rose in 2018 from 33.33%. In the sense of the company's overall wealth, it can be found that it rose from 12.27% and 9.40% in three years 2016 and 2017, but declined by 11.48% for 2018. In comparison, the amount of non-current assets declined to 16.11% in 2018, which rose from 10.26% or 15.50% in 2016 through 2017. In 2016, 2017 and 2018, together with the total assets grew from 3.13 percent, 3.03 percent and 5.88 percent.

Conclusion

Form the above horizontal analysis it is analyzed that the income position of Farsons is in optimistic conditions whereas the financial position of Heineken H.V. is optimistic subject to financial feasibility.

Ratio analysis:

It is a type of technique that is used for assessing companies financial performance (Peda, Argento and Grossi, 2013). Under this a vital range of ratios are calculated and interpreted. Such as profitability ratio, efficiency ratio, liquidity ratio and many more (Chun-yu, 2013). In the aspect of above both of companies, ratio analysis is done below:

Conclusion-

In comparative manner, Farsons company seems better. It is so because their current ratio is higher in all four years. Though, it is declining but this is higher then Heineken company. This is so because Farsons company's current ratio is increasing significantly. Such as in year 2015, it was of 1.72 times that ended on 1.12 times in year 2018. While Heineken company's current ratios are increasing in all four years like in year 2015, it was of 0.69 times that raised in next year and became of 0.78 times as well as in next two years too.

• Quick ratio:

Conclusion- In comparative manner, Farsons company seems better. It is so because their quick ratio is higher in all four years. Though, it is declining but this is higher then Heineken company. It is so because Farsons company's quick ratio is increasing significantly. Such as in year 2015, it was of 1.14 times that ended on 0.7 times in year 2018. While Heineken company's quick ratios are fluctuating in all four years like in year 2015, it was of 0.43 times that raised in next year and became of 0.58 times as well as in next year it reduced till 0.55 tines. In year 2018, increased and became of 0.6 times.

• Gross profit ratio:

Conclusion-

In comparative manner, Heiniken company is better because their GP margin is higher in all four years. It is so because Farsons company's GP ratio is increasing except year 2017. In year 2015, 2016 this was of 37.97% and 38.82% but in year 2017 it decreased till 38.64%. On the other hand, GP ratio of Heiniken company has been increased in starting three years it was as 52.75% in year 2015, 53.39% in year 2016 and 53.77% in year 2017 but in year 2018, it reduced till 51.29%.

• Net profit ratio:

Conclusion-

In comparative manner, Farsons company is better because their net profit margin is higher in all four years and increasing. This is so because Farsons company's net profit ratio is increasing significantly. Such as in year 2015, it was of 10.11% that ended on 14.49% in year 2018. While Heineken company's quick ratios are fluctuating in all four years like in year 2015, it was of 4.67% that reduced in next year and became of 3.75% as well as in next year it raised till 4.46%. In year 2018, decreased and became of 4.28%.

• Debt equity ratio:

Conclusion-

In the aspect of this ratio, if it is 0.4 or lower then 0.4 then this is better for company. Thus, the performance of Farsons company is much more better as compare to Heiniken company. It is so because their ratio is as accordance of ideal form.

• Return on assets:

Conclusion-

In comparative manner, the performance of Farsons company is better because their return on assets is higher in all four years. Such as Farsons company's return on assets in year 2015 was of 5.35% while Heiniken company's ratio was of 2.64%. Similar in all years, Farsons company is beating to Heiniken company.

• Return on equity:

Conclusion-

In comparative manner, the Heiniken company is better because their ROE is higher in all four years. Such as Farsons company's ROE in year 2015 was of 8.19% while Heiniken company's ratio was of 14.87%. Similar in all years, Heiniken company is beating to Farsons company.

• Return on invested capital:

Conclusion-

In comparative manner, the performance of Farsons company is better because their return on capital is higher in all four years. Such as Farsons company's return on capital in year 2015 was of 7.17% while Heiniken company's ratio was of 6.75%. Similar in all years, Farsons company is beating to Heiniken company.

• Interest coverage ratio

Conclusion-

On the basis of above graph, it can be concluded that Farsons company is better in compare to Heiniken company in the aspect of interest coverage ratio. Except year 2015, Farsons company is gaining higher interest in all four years.

• Receivable turn over ratio

Conclusion- In the aspect of this ratio, Farsons company is better as compare to Heiniken company. It is so because their turn over of receivable is less that is good sign for company.

• Inventory turn over ratio:

Conclusion-

In this aspect, the Farsons company is better as compare to Heiniken company. It is so because they are effectively utilising their available quantity of raw material. As well as in all four years, Farsons company is producing lower turn over in inventory perspective.

• Fixed assets turn over ratio:

Conclusion-

Higher fixed assets turn over indicates that company is effectively using its fixed assets to generate revenues. Hence, the Heiniken company is better in compare to Farsons company. This is so because their ratios are higher in all four years.

• Assets turn over ratio:

Conclusion- Higher assets turn over indicates that company is effectively using its assets to generate revenues. Hence, the Heiniken company is better in compare to Farsons company. This is so because their ratios are higher in all four years.

TASK 2

Working capital-

It can be defined as a variation between current assets and liabilities during a particular time period (Campbell, Jardine and McGlynn, 2016). If current assets are higher then to current liabilities then this is considered as a better condition for company. In the context of Farsons and Heiniken company, analysis of their working capital is done below in such manner:

Farsons company-

On the basis of above working capital of this company, it can be find out that their working capital is in positive condition. This is so because their current assets are higher as compare to current liabilities. Like in year 2015, it was of 32 million that increased in next three years and became of 33, 34 and 36 million for year 2016, 2017 & 2018. While their current liabilities are lower in compare to current assets. Though their working capital is fluctuating in all four years but its in positive form.

Heiniken company-

This company has large amount of current assets and liabilities in compare to Farsons company. Though, their working capital is producing negative result because the value of current assets is lower then to current liabilities. Like their current liabilities are of 8516, 10397, 10458 and 10450 for year 2015,2016,2017 and 2018. On the other hand, their current assets' value is too lower. Though, their working capital is improving in an effective manner.

Conclusion- From the above analysis, this can be concluded that Farsons company's performance is better in the aspect of working capital as compare to Heiniken company.

TASK 3

Cash flow-

It can be defined as a movement of cash for a particular time period. This is measured on the basis of three activities that are financing, operating and investing (WANG, DUAN and PENG, 2012). In the context of above mentioned companies, analysis of cash flow is done below in such manner:

Farsons company- In the aspect of this company, it can be find out that there is inflow of cash from operating activity that is of 13, 21 million for year 2017 and 2018. As well as in the aspect of financing activity, there is inflow of cash 4 million in year 2017 and outflow of cash is of -1 million in year 2018. While, in the investing activity there is outflow of cash which is of -20 and -21 million for year 2017-18. So overall their cash flow is negative.

Heiniken company-

In the context of this company, this can be assessed that there is inflow of cash from operating activities that is of 3882 million and 4388 million for year 2017 and 2018. While from financing and investing activities, there is outflow of cash in both of years. Though overall, there is inflow of cash from combined three activities.

Related Article :- Financial Decision Making

Conclusion-

On the basis of above analysis, it can be concluded that Heiniken company's position is better as compare to Farsons company in terms of cash flows.

Overall conclusion:

CONCLUSION

On the basis of above project report it has been concluded that Farsons company is better as compare to Heiniken company. This is so because their performance in horizontal and vertical analysis is far better. In addition, in the context of ratio analysis the Farsons company is beating to Heiniken company. As well as Heiniken company's performance is effective in the context of cash flows. So overall, it can be articulated that Farsons company's financial performance is strong in compare to Heiniken company.

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