Horizontal analysis is the comparison of historical financialinformation over a series of reporting periods, or of the ratios derived fromthis financial information. The intent is to see if any numbers are unusuallyhigh or low in comparison to the information for bracketing periods, which maythen trigger a detailed investigation of the reason for the difference. Theanalysis is most commonly a simple grouping of information that is sorted byperiod, but the numbers in each succeeding period can also be expressed as apercentage of the amount in the baseline year, with the baseline amount beinglisted as 100%.Vertical analysis is the proportional analysis of a financialstatement, where each line item on a financial statement is listed as apercentage of another item.
Typically, this means that every line item onan income statement is stated as a percentage of gross sales,while every line item on a balance sheet is stated as a percentageof total assets.Financial ratio analysis are actually involves the calculation ofseveral ratio that will enable the manager to evaluate the performance andfinancial status of the company by comparing its financial ratios with thefinancial ratio of other companies. Liquidity ratios are used to determine a company’s ability to meet itsshort-term debt obligations. Investors often take a close look at liquidityratios when performing fundamental analysis on a firm. Since a company that isconsistently having trouble meeting its short-term debt is at a higher risk ofbankruptcy, liquidity ratios are a good measure of whether a company will beable to comfortably continue as a going concern. Any type of ratio analysis shouldbe looked at within the correct context.
For instance, investors should alwayslook at a company’s ratios against those of its competitors, its sector and itsindustry and over a period of several years.Asset management ratios indicate how successfully a companyis utilizing its assets to generate revenues. Analysis of asset managementratios tells how efficiently and effectively a company is using its assets inthe generation of revenues. They indicate the ability of a company to translateits assets into the sales. Asset ManagementRatios attempt to measure the firm’s success in managing its assets to generatesales.
For example, these ratios can provide insight into the success of thefirm’s credit policy and inventory management. The key for financialstatements are the balance sheet, the income statement, the statement ofretained earnings, and the statement of cash flow. To summarize, financialanalysis is the use of financial statements to analyse a firm’s financialposition and its performance.
It is concerned with analysing the balance sheetand the income statement of a business to interpret the business and financialratios of a business for financial representations, business evaluation, inaddition to financial forecasting. In order to make financial information that is sourcedfrom financial statements be more useful, financial ratios that restate thefinancial figures in relative terms are used to identify the financialstrengths and weaknesses of a firm. In the end, financial ratios can be animportant tool for small business owners and managers to measure their progresstowards reaching company goals, as well as towards competing with largercompanies within an industry. In conclusion, Zhulian Corporation Berhad has achieved better sales growth, gross and netprofit margins and profit growth.
Zhulian Corporation Berhad also has ability to generate earnings, profitsand cash flows relative to relative to some metric, often the amount of moneyinvested than Cocoaland HoldingsBerhad. Besides, Zhulian Corporation Berhad has better capitalstructure and more liquidity indicates that the company is in good financialhealth and it is less likely fall into financial difficulties compared to the Cocoaland Holdings Berhad. In addition, in aclimate of economic recession, ZhulianCorporation Berhad appears better poised to ride out the recession than Cocoaland Holdings Berhad. In the other hand, Cocoaland Holdings Berhad appears to be moreefficient in terms of generating returns for its providers of capital IfI were given a chance to choose which company to work for, I would chooseZhulian Corporation Berhad as are they shows better performance compared to theCocoaland Holdings Berhad and more stable in terms of financial management.
Even though this both companies are actually able to generate profits butZhulian are looks better in term of the efficiency and effectively of theperformance and activities. We can see based on the computation above. Net working capital for Zhulian was higher than Cocoaland wherethis shows that Zhulian have more current assets. Current ratio for ZhulianCompany is also higher compare to Cocoaland Company. Zhulian are also able tocollect their debts from customers in a short of times according to the averagecollection period results.