KAMPALA INTERNATIONAL UNIVERSITY

COLLEGE OF ECONOMICS AND MANAGEMENT

COURSE : NANSINGULA DONAM

COURSE UNIT : CORPORATE FINANCE

COURSE CODE : ACC 3102

YEAR : THREE
SEMESTER : ONE
SESSION : DAY
LECTURER : MR. MABONGA ERIC

GROUP MEMBERS
Horizontal Analysis tool of analysing financial performance of a company

Horizontal analysis is used in the review of a company's financial statements over

multiple periods. It is usually depicted as percentage growth over the same line item in
the base year. Horizontal analysis allows financial statement users to easily spot trends
and growth patterns.

Horizontal analysis involves taking several years of financial data and comparing them
to each other to determine a growth rate. This will help an analyst determine if a
company is growing or declining, and identify important trends.

When building financial models, there will typically be at least three years of historical
financial information and five years of forecasted information. This provides 8+ years of
data to perform a meaningful trend analysis, which can be benchmarked against other
companies in the same industry.

Identify financial statements of Uganda Clays Ltd

1. Statement of comprehensive income

Uganda Clays
2019 2018
Ushs. ‘000 Ushs. ‘000
Revenue 30,736,629 30,064,000
Cost of sales (21,282,056) (19,404,016)
Gross profit 9,454,573 10,660,132
Rent and other incomes 857,084 553,341
Total income 10,311,657 11,213,473
Administrative Expenses (8,234,329) (6,047,065)
Selling and distribution expenses (1,469,616) (1,693,435)
Other operating expenses (1,351,865) (804,379)
(11,056,310) (8,544,879)
Operating profit/(loss) (744,653) 2,668,806
Finance costs (59,655) (172,788)
Profit/(loss) before tax (804,308) 2,495,806
Income (tax expense)/credit 715,845 (508,442)
Profit/(loss) for the year (88,463) 1,987,364
Ushs/share Ushs/share
Basic and diluted (loss)/earnings per share (0.10) 2.21

Horizontal Analysis of the statement of comprehensive income for Uganda

clays;

Uganda Clays
2019 2018
Ushs. ‘000 Ushs. ‘000 ABSOLUTE CHANGE % Change

Revenue 30,736,629 30,064,000 672,629 2%

Cost of sales - - -1,878,040 10%

21,282,056 19,404,016
Gross profit 9,454,573 10,660,132 -1,205,559 -11%

Rent and other incomes 857,084 553,341 303,743 55%

Total income 10,311,657 11,213,473 -901,816 -8%

Administrative Expenses -8,234,329 -6,047,065 -2,187,264 36%

Selling and distribution -1,469,616 -1,693,435 223,819 -13%

expenses
Other operating expenses -1,351,865 -804,379 -547,486 68%

- -8,544,879 -2,511,431 29%

11,056,310
Operating profit/(loss) -744,653 2,668,806 -3,413,459 -128%

Finance costs -59,655 -172,788 113,133 -65%

Profit/(loss) before tax -804,308 2,495,806 -3,300,114 -132%

Income (tax 715,845 -508,442 1,224,287 -241%

expense)/credit
Profit/(loss) for the year -88,463 1,987,364 -2,075,827 -104%

Basic and diluted -0.1 2.21 -2 -105%

(loss)/earnings per share
2. STATEMENT OF FINANCIAL POSITION

2019 2018
Ushs ‘000 Ushs ‘000
Capital and Reserves
Issued capital 900,000 900,000
Share premium 9,766,028 9,766,028
Retained earnings 15,783,734 14,212,773
Revaluation reserves 4,930,609 6,290,033
Proposed dividends 900,000
Total Equity 31,080,371 32,068,834

Non-current liabilities
Deferred income tax liability 6,134,250 7,9709,224
Borrowings: non-current portion 20,592,838 20,592,838
Retirement Benefit Obligation 73,775 76,021
Total Non-current liabilities 26,800,863 28,639,083
Total Equity and Non-current liabilities 57,881,234 60,707,917
REPRESENTED BY:
Non-current Assets
Property, plant and equipment 40,542,313 43,679,992
Right of use Assets 918,610 1,025,083
Total non-current assets 41,460,923 44,705,075
Current Assets
Inventories 4,719,680 8,787,128
Trade and other receivables 1,860,935 1,668,997
Staff loans 114,005 130,416
Current income tax recoverable 451,681 1,420,122
Cash and cash equivalents 3,130,863 2,195,314
Fixed deposits 10,499,236 6,332,094
Total current assets 20,776,400 20,534,051
Current liabilities
Trade and other payables 4,356,089 4,527,844
Rent tax payable = 3,365
Total current liabilities 4,356,089 4,531,209
Non-current Assets 16,420,311 16,002,842
Total 57,881,234 60,707,917

HORIZONTAL ANALYSIS FOR THE STATEMENT OF FINANCIAL POSITION OF

UGANDA CLAYS 2018/18

2019 2018
 ABSOLUTE %
Ushs ‘000 Ushs ‘000 CHANGE change
Capital and Reserves
Issued capital 900,000 900,000 0 0%
Share premium 9,766,028 9,766,028 0 0%
Retained earnings 15,783,734 14,212,773 1,570,961 11%
Revaluation reserves 4,930,609 6,290,033 -1,359,424 -22%
Proposed dividends   900,000 -900,000 -100%
Total Equity 31,080,371 32,068,834 -988,463 -3%

Non-current liabilities
Deferred income tax liability 6,134,250 79,709,224 -73,574,974 -92%
Borrowings: non-current portion 20,592,838 20,592,838 0 0%
Retirement Benefit Obligation 73,775 76,021 -2,246 -3%
Total Non-current liabilities 26,800,863 28,639,083 -1,838,220 -6%
Total Equity and Non-current
57,881,234 60,707,917
liabilities -2,826,683 -5%
REPRESENTED BY:
Non-current Assets
Property, plant and equipment 40,542,313 43,679,992 -3,137,679 -7%
Right of use Assets 918,610 1,025,083 -106,473 -10%
Total non-current assets 41,460,923 44,705,075 -3,244,152 -7%
Current Assets
Inventories 4,719,680 8,787,128 -4,067,448 -46%
Trade and other receivables 1,860,935 1,668,997 191,938 12%
Staff loans 114,005 130,416 -16,411 -13%
Current income tax recoverable 451,681 1,420,122 -968,441 -68%
Cash and cash equivalents 3,130,863 2,195,314 935,549 43%
Fixed deposits 10,499,236 6,332,094 4,167,142 66%
Total current assets 20,776,400 20,534,051 242,349 1%
Current liabilities
Trade and other payables 4,356,089 4,527,844 -171,755 -4%
Rent tax payable 3,365 -3,365 -100%
Total current liabilities 4,356,089 4,531,209 -175,120 -4%
Non-current Assets 16,420,311 16,002,842 417,469 3%
Total 57,881,234 60,707,917 -2,826,683 -5%

However, other financial tools include;

Leverage Analysis
Leverage ratios are one of the most common methods analysts use to evaluate
company performance. A single financial metric, like total debt, may not be that
insightful on its own, so it’s helpful to compare it to a company’s total equity to get a
full picture of the capital structure. The result is the debt/equity ratio.

Common examples of ratios include:

Debt/equity

Debt/EBITDA

EBIT/interest (interest coverage)

Dupont analysis – a combination of ratios, often referred to as the pyramid of ratios,

including leverage and liquidity analysis

Growth Rates

Analyzing historical growth rates and projecting future ones are a big part of any
financial analyst’s job. Common examples of analyzing growth include:

Year-over-year (YoY)
Regression analysis

Bottom-up analysis (starting with individual drivers of revenue in the business)

Top-down analysis (starting with market size and market share)

Other forecasting methods

Profitability Analysis

Profitability is a type of income statement analysis where an analyst assesses how

attractive the economics of a business are. Common examples of profitability measures
include:

Gross margin

EBITDA margin

EBIT margin

Net profit margin

Liquidity Analysis

This is a type of financial analysis that focuses on the balance sheet, particularly, a
company’s ability to meet short-term obligations (those due in less than a year).
Common examples of liquidity analysis include:

Current ratio

Acid test

Cash ratio

Net working capital

Efficiency Analysis

Efficiency ratios are an essential part of any robust financial analysis. These ratios look at
how well a company manages its assets and uses them to generate revenue and cash
flow.

Common efficiency ratios include:

Asset turnover ratio

Fixed asset turnover ratio

Cash conversion ratio

Inventory turnover ratio

 Cash Flow

As they say in finance, cash is king, and, thus, a big emphasis is placed on a company’s
ability to generate cash flow. Analysts across a wide range of finance careers spend a
great deal of time looking at companies’ cash flow profiles.

The Statement of Cash Flows is a great place to get started, including looking at each of
the three main sections: operating activities, investing activities, and financing activities.