Horizontal analysis is the comparison of historical financial
information over a series of reporting periods, or of the ratios derived from
this financial information. The intent is to see if any numbers are unusually
high or low in comparison to the information for bracketing periods, which may
then trigger a detailed investigation of the reason for the difference. The
analysis is most commonly a simple grouping of information that is sorted by
period, but the numbers in each succeeding period can also be expressed as a
percentage of the amount in the baseline year, with the baseline amount being
listed as 100%.
Vertical analysis is the proportional analysis of a financial
statement, where each line item on a financial statement is listed as a
percentage of another item. Typically, this means that every line item on
an income statement is stated as a percentage of gross sales,
while every line item on a balance sheet is stated as a percentage
of total assets.
Financial ratio analysis are actually involves the calculation of
several ratio that will enable the manager to evaluate the performance and
financial status of the company by comparing its financial ratios with the
financial ratio of other companies.
Liquidity ratios are used to determine a company’s ability to meet its
short-term debt obligations. Investors often take a close look at liquidity
ratios when performing fundamental analysis on a firm. Since a company that is
consistently having trouble meeting its short-term debt is at a higher risk of
bankruptcy, liquidity ratios are a good measure of whether a company will be
able to comfortably continue as a going concern. Any type of ratio analysis should
be looked at within the correct context. For instance, investors should always
look at a company’s ratios against those of its competitors, its sector and its
industry and over a period of several years.
Asset management ratios indicate how successfully a company
is utilizing its assets to generate revenues. Analysis of asset management
ratios tells how efficiently and effectively a company is using its assets in
the generation of revenues. They indicate the ability of a company to translate
its assets into the sales. Asset Management
Ratios attempt to measure the firm’s success in managing its assets to generate
sales. For example, these ratios can provide insight into the success of the
firm’s credit policy and inventory management.
The key for financial
statements are the balance sheet, the income statement, the statement of
retained earnings, and the statement of cash flow. To summarize, financial
analysis is the use of financial statements to analyse a firm’s financial
position and its performance. It is concerned with analysing the balance sheet
and the income statement of a business to interpret the business and financial
ratios of a business for financial representations, business evaluation, in
addition to financial forecasting.
In order to make financial information that is sourced
from financial statements be more useful, financial ratios that restate the
financial figures in relative terms are used to identify the financial
strengths and weaknesses of a firm. In the end, financial ratios can be an
important tool for small business owners and managers to measure their progress
towards reaching company goals, as well as towards competing with larger
companies within an industry.
In conclusion, Zhulian Corporation Berhad has achieved better sales growth, gross and net
profit margins and profit growth. Zhulian Corporation Berhad also has ability to generate earnings, profits
and cash flows relative to relative to some metric, often the amount of money
invested than Cocoaland Holdings
Berhad. Besides, Zhulian Corporation Berhad has better capital
structure and more liquidity indicates that the company is in good financial
health and it is less likely fall into financial difficulties compared to the Cocoaland Holdings Berhad. In addition, in a
climate of economic recession, Zhulian
Corporation Berhad appears better poised to ride out the recession than Cocoaland Holdings Berhad. In the other hand, Cocoaland Holdings Berhad appears to be more
efficient in terms of generating returns for its providers of capital
I were given a chance to choose which company to work for, I would choose
Zhulian Corporation Berhad as are they shows better performance compared to the
Cocoaland Holdings Berhad and more stable in terms of financial management.
Even though this both companies are actually able to generate profits but
Zhulian are looks better in term of the efficiency and effectively of the
performance and activities. We can see based on the computation above. Net working capital for Zhulian was higher than Cocoaland where
this shows that Zhulian have more current assets. Current ratio for Zhulian
Company is also higher compare to Cocoaland Company. Zhulian are also able to
collect their debts from customers in a short of times according to the average
collection period results.