Financial Analysis

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Term Paper on Financial Performance Evaluation
(For the Partial Fulfillment of financial and managerial accounting Course Code: MBA 514)

Submitted to: A .S.Kannan (assistant professor)
Submitted by: Abel Dula
Aynemogn Getachew
Mekonen Yimer
School of Business And Economics
Dilla University

Dilla

January, 26, 2012

Table of Contents
ACKNOWLEDGEMENTS4
1.Introduction5
1.1Back ground of the organization5
1.2Objective of the study7
1.2.1 The general objective7
1.2.2Specific objective of the study7
1.3Research methodology8
1.3.1. Source of data8
1.3.2. Methods of data analysis8
1.4Significance of the study8
1.5Delimitation of the study8
1.6Limitation of the study9
2.Literature review9
2.1. An over view of financial Statement9
2.2 Objective of financial analysis10
2.2. Tools and Techniques of FPA11
2.2.1. Horizontal Analysis11
2.2.2. Vertical analysis12
2.2.3. Trend Analysis12
2.2.4. Using Ratios to Make Decisions12
2.3. Red Flags in Financial Statement Analyses13
3. DATA presentation and analysis14
3.1. Horizontal Analysis for the last Two years14
3.1.1. Interpretation for the analysis of Balance sheet using Horizontal Analysis17
3.2. Vertical analysis for the last Two years19
3.3. Trend analysis for the last Five years25
3.4. Ratio analysis for the last three years29
3.4.1. Liquidity ratio29
3.4.2. Activity/efficiency/ ratio33
3.4.7. Profitability ratio40
3.4.8. Evaluating Cash Flow Adequacy45

ACKNOWLEDGEMENTS

We wish to record our sincere gratitude to Prof. A.S. Kannan for assigning us to prepare this term paper. We feel very much honored to get such an opportunity at this stage of our career. The opportunity has given us the chance to Practice our knowledge and gain deeper insight on the financial Statement analysis. We also extend our genuine appreciation and thanks to Harrar brewer Share Company’s shashemene staffs especially to the sales branch manager Ato Seyoum Tadesse without his valuable assistance the work of this paper would have not been fruitful.

Acronyms

F.Y Fiscal Year
FPA Financial performance Analysis
NPBT Net profit before taxation
Sh. Co. Share Company
CR current ratio
QR Quick ratio
A/R Account receivables
DERDebt Equity Ratio
GPMGROSS PROFIT MARGIN
GPGROSS PROFIT
CGSCost of goods sold

List of Tables
Table 3.1 Comparative Balance Sheets with Horizontal Analysis Table 3.2 Comparative Income Statements with Horizontal Analysis Table 3.3 Comparative balance sheets of Harrar brewery sh. Co. as on Sene 30, 2006 and 2007 Table 3.4 Comparative Income Statement of Harrar brewery sh. Co. for the year ended Sene 30, 2006 and 2007 Table 3.5 Balance sheet trend analysis of harrar brewery Share Company Table 3.6 Income statement trend analysis of harrar brewery Share Company Table 3.7 Current ratio

Table 3.8 quick ratio
Table 3.9 summary of liquidity ratio
Table 3.10 Receivables Turnover ratio
Table 3.11 Days sales uncollected
Table 3.12 Inventory turnover ratio
Table 3.13 payables turnover ratio
Table 3.14 days payables Turnover ratio
Table 3.15 Debt equity ratio
Table 3.16 Interest coverage ratio
Table 3.17 gross profit margin graphical presentations
Table 3.18 Return on asset ratio
Table 3.19 Asset turnover ratio
Table 3.20 Return on Equity
Table 3.21 cash flow adequacy computation

List of Figures
Figure 3.1 Vertical analysis of Harrar brewery sh. Co. graphical illustration Figure 3.2 Vertical analysis of Harrar brewery sh. Co. graphical illustration Figure 3.3 Vertical analysis of Harrar brewery sh. Co. graphical illustration Figure 3.4 trend sales, cost of goods sold, total expense and tax expense Figure 3.5 trend analysis of sales and net profit before...
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