From the horizontal and vertical analysis of the P & L statement, though the net sales have shown an

increase of 10% YoY, the profit after tax sees a huge decline by 13% in 2019 as compared to 2018.
Following are the causes which have led to this reduction in profit:

1. Reduction in gross profit by 6% due to an increase of 19% in cost of goods sold.

2. Reduction in operation margin (EBIT) by 11% due to increase in selling and administrative
expenses by 18%.
3. Reduction of 13% in profit before tax due to 29% increase in interest expense.

From the horizontal and vertical analysis of the balance sheet, the health of Grace Corporation is not
bright, and we see a negative trend in terms of future investments, share capital, account
receivables etc. The following discuss this in details:

1. The share holder’s funds see a decline of 5% and the total liabilities increased by 5%.
2. The share capital sees no change in number (Rs 25000 both years), and an overall decline in
percentage (6%) as part of the company’s total claim. This also caused a decrease in cash
reserves of the company. This has also affected the organizations future long term
investments (decline by 35%).
3. The company increased the reserves and surplus amounts by 37%. They invested more of
their profits into the company to maintain operations.
4. The account receivables and Inventories increased by 34% and 116% in 2019 as compared to
2018 respectively. This indicates that the cash inflow is low. People are yet to pay for their
purchases from the corporation and the inventory size is huge.