Horizonal Analysis of Fiancial Statements

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Horizontal Analysis of the Balance Sheet and Income Statement A comparative income statement and balance sheet for the period were established for the company for three years 2008 to 2010 to show comparative percentages of the years under review. Horizontal analysis examines the changes, which will occur over the period and will help in predicting the organization’s future performance. Appendix 3, LPH year on year increase in net income had negative growth for 2008 and 2009 but at a decreasing rate. By 2010, the company was able to have positive returns. Operating income moved along the same path for the period albeit at a lower rate. The company’s invest ment in its self-insurance fund and interest income contributed significantly to the difference between operating income and net income. Revenue fell off by 12% in 2009 however; it increased by 22% in 2010. The company was able to increase it domestic and commercial rate after an application was made to the Fair Trading Commission. Fuel expenses grew at a faster rate than sales, fuel costs although seeing a fall off in 2009 by 20.52% rose by 29% in 2010. These costs continue to a major challenge for the company as referenced in the 2010’s annual report. Likewise, generation expenses will also increase when fuel increases as oil is the largest expense in that process. Due to efficiencies in the generating plant, the increases in costs were lower than that of fuel. Distribution expenses rose significantly in 2010 by 10.12% from 1.18% in 2009.This was as a result of Hurricane Tomas in 2010 as the distribution network was significantly impacted when several power lies were damaged. Appendix 4 showed the comparative balance sheet statements. Cash rose significantly from 22% in 2008 to 105% in 2009 and fell off again in 2010 at 50%. During that period, it was noted that the collection of accounts receivable contributed

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