Analysis of Balance Sheet and Profit and Loss Account

Topics: Financial ratios, Financial ratio, Expense Pages: 15 (4297 words) Published: July 16, 2011
Analysis of balance sheet and profit and loss account

The whole industry that we have developed considers three companies. Confidence, Lafarge surma and the other one is Heidelberg cement. Considering the four year balance sheet and income statement we have got the account for the whole industry. In the horizontal and vertical analysis of the balance sheet we can get the picture of the overall industry. The company Heidelberg cement is increasing its Current Asset account not in terms of receivables and inventories but in terms of prepayment of taxes and cash balances. Confidence cement was initially holding a negative balance in terms of raw materials which eventually left out with negative balance with the packaging and other related accounts. Therefore as the balance was shifting positively with the cash and marketable security it make the company to prepay the taxes, advances and put deposit on the bank. Lafarge surma has a huge investment in the property and plant. They have also a contribution to other subsidiary company while the company has deferred tax. The industry has the same picture as the company individually. The overall industry is booming in terms of their asset account which can be reflected in the liability account where both of the companies have made significant improvements in acquiring property, plant and equipment. Heidelberg is showing a better picture in their liability management than the confidence cement. Heidelberg has drastically decreased its long term liability providing more pressure in the short term liability. As the industry is moving in the same direction confidence cement has also the affect of the industry which made them to shift pressure to the short term financing. This picture for the Lafarge surma is totally different. It is moving on the opposite direction as the industry moves.

Sales are booming in the industry because of the real state business in our country is booming. As the price of the product of the Heidelberg cement is high in the market comparing to the confidence cement it has loss it sales in other word the market share to the confidence. This is an overview statement of the profit and loss account for both the companies. As the balance sheet was providing an overlook of the trend going in the industry for shifting to short term financing the cost of the interest payment was also decreasing. These trends have been looked in the overall industry. As the company has started recently Lafarge has fewer sales in the industry. The inefficiency of Lafarge surma has been looked in the operating loss account. It is also been reflected in the financial expenses of the companies except the Lafarge surma. As the sales is more and the financial expense is less historically we can get the conclusion that Heidelberg is doing good in terms of the industry but confidence is doing much better. Both of the company is cutting down its cost from the operating expenses as it is reflected. Confidence was showing a downward movement in their EBIT account. It was balanced with the industry as the sales gone up and the cost cut strategy was taken at hand. Heidelberg cement was having some problem with the operating expense. As they were not handling the operating expense efficiently their EBIT was falling. A huge push up in the sale and cost reduction in the administrative and operating management along with the short term financing the cost decreased. As the industry was booming in terms of sale the company was getting better and showing a healthy financial statement.

Trend analysis

A trend analysis is a much clearer picture about what the company is going through. An investor or equity holder might get a clear idea about his investment with the company and the return that he is looking for.

If we observe the trend of the confidence cement it would be very clear what might be the share price of the company in the future. In the given trend it is clear that the share prices...
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