“Sharp Ltd supplies, installs and maintains burglar alarms systems for business clients. The accountant has provided a horizontal analysis and is concerned about the firm's performance.” Sharp Ltd: comparison to previous year 2017 2018 2019 Accounts receivable 1.20% 9% 8% Inventory 9% 1.7% 5% Sales -3% 1.1% 5% Non-current assets 2% 4.0% 6% Borrowings 3% 10.0% 20% 1.“Provide a brief report on the results of the analysis. Comments should include any concerns you may have.”
“Sharp Ltd supplies, installs and maintains burglar alarms systems for business clients. The accountant has provided a horizontal analysis and is concerned about the firm's performance.”
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Sharp Ltd: comparison to previous year |
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2017 |
2018 |
2019 |
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1.20% |
9% |
8% |
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Inventory |
9% |
1.7% |
5% |
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Sales |
-3% |
1.1% |
5% |
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Non-current assets |
2% |
4.0% |
6% |
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Borrowings |
3% |
10.0% |
20% |
1.“Provide a brief report on the results of the analysis. Comments should include any concerns you may have.”
The analysis for accounts receivable, inventory, and sales compared to the previous are as follows:
Accounts receivable: The increasing percentage of receivables on a year on year basis mean that the company is lending more on credit and creating debtors. Although the percentage has slightly declined in 2019 with respect to 2018. This can have both positive and negative consequences since on one side the business is increasing but on the other side, the risk of repayment from these debtors also increases.
Inventory: The inventory with the firm has been reduced from 2017 to 2018. However, it again picked up in 2019 to 5%. This could be due to several reasons, one of the reasons could be unexpected sales in 2018 and lack of sufficient or change in the inventory control of the business.
Sales: Sales of S Ltd has increased over time from a negative 3% in 2017 to a positive 1.1% and further increased by 400 basis points to 5% in 2019. This is a positive sign overall since an increase in sales ensures that the borrowings and the assets are being utilized properly for enhancing the business of the firm.
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