Custom «Financial Report Analysis» Essay Paper Sample

Financial Report Analysis

The following evaluation compares loss and profit performances of two companies namely Kingway Brewery Holdings Limited and San Miguel Company Limited. Kingway Brewery company performed poorly in 2008 since its revenue dropped by 15 percent. In 2009, the revenue increased by 14 percent compared to the previous year. In 2010, there was an observable increase in revenue by 6 percent.  On reviewing the loss that the company incurred, the company went a loss of 69 percent in 2008. During the period in 2009, the company experienced an increase in the profit by 136 percent. The company thereafter stopped experiencing losses, instead it had a series of profits started flowing in the company. In the final year of 2010, the company experienced a considerable increase in profit by about 150 percent (Kingway Brewery Holdings Limited, 2010).

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On the other hand, San Miguel Company performed poorer than Kingway Brewery Holdings Limited. For instance, in 2008, the company recorded no major increase in revenue. As a matter of fact, in 2009, the company experienced decreased revenue by about 8 percent. Finally in 2010, the company performed poorly since it recorded a decrease in the revenue by 15 percent. The company shows a poor trend in its performance since the revenue continues to decrease with no signs of increase. By looking at the profit and loss performances of the company, San Miguel Company reported an increase in loss by 2 percent. In 2009, the company recorded an increase in profit of 34 percent compared to the previous year. Finally, in 2010, the company performed well since it reported a remarkable increase in profit by 126 percent (San Miguel Brewery Hong Kong Ltd., 2008).

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Evaluation and Comparison

The limitation of this cross-sectional analysis is that each of the two companies uses different accounting standards and policies as well as concepts. For instance, the Kingway Brewery Holdings Company uses different methods of impairment of assets compared to those of San Miguel. The accrual and materialization concept have been understood differently by the two countries. In fact, Kingway Brewery Company discloses unrealized income in the income statement. On the other hand, San Miguel Company follows the generally accepted accounting principles (GAAPs) in accounting for unrealized incomes (San Miguel Brewery Hong Kong Ltd., 2008). These differences in accounting policies and standards contribute to the differences realized in the performances between the two companies.

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San Miguel Company has shown a series of poor performances compared to the Kingway Brewery Company. San Miguel Company should review its credit terms with its suppliers as well as the customers. The poor performance can be attributed to poor management of the company resources. Also, the poor performance can be a result of ineffective marketing policies of the company (San Miguel Brewery Hong Kong Ltd., 2008).

Consequently, San Miguel Company should review its provisions for depreciation and contingent liabilities. These provisions usually have the effect of increasing the expenses in the income statements. The increase causes an understatement in the profit that is realized at the end of the year. Kingway Brewery Holdings Limited has shown a commendable performance compared to San Miguel Company. The good performance is reflected by the 150 percent increase in the 2010 profits (Kingway Brewery Holdings Limited, 2010). It is an outstanding performance which ought to be acknowledged. It is worth mentioning that the company uses the accepted accounting principles and extensive advertisements so as to increase its revenue.

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