Financial Statement Analysis - Essay Example

The company’s revenue was up and down during period. A clearer picture of these changes is provided in the charts labelled Figure 1. The information in Figure 1 shows that Dixon Retail experience higher levels of turnover in nominal terms than Home Retail during the five year period. The trend was similar up to 2012. However, Home Retail’s revenue continued to decline in 2013 while Dixon Retail’s Revenue increased. When the figures are adjusted for inflation the picture is somewhat different.

(See Table 2 in the Appendix.) Figure 2 illustrates the trend for both companies in real terms. The information in Figure 2 shows similar trends for both companies for both companies over the first four years – a slight decline in revenue in real terms between 2009 and 2010; a significant decline between 2010 and 2011; and a moderate decline and increase between 2012 and 2013 for Home Retail and Dixon Retail respectively. A companies cost of sales is the cost of raw materials and other costs necessary to get the goods to the customer.

The common size cost of sales for Home Retail group shows a continuous increase from 65.69% of turnover in 2009 to 68.37 in 2013. This is an indication of rising costs of goods without a similar increase in price. The information for Dixon Retail was somewhat different as the common size cost of sales ranged from 92.48% to 94.86%. These two percentages were recorded in 2012 and 2013 respectively. Figure 3 shows the information for both companies. Figure 3 shows a bar graph of common size costs.

The graph shows that the common size costs for Home Retail showed an upward trend while that for Dixon Retail remained fairly stable with an obvious slight decline in 2010. A company’s gross profit represents the difference between its sales revenue (turnover) and its cost of sales. The gross profit as a percentage of sales was much higher for Home Retail – above 30% than for