Horizontal Analyses

Horizontal Analysis Statement of Operations Accounts

Sales
Cost of Goods Sold
Gross Profit
Operating Expenses
Salaries
Employee Benefits
PHIC, SSS, HDMF Premium
Contribution
Depreciation
Electricity
Communications Expense
Office Supplies Expense
Repairs and Maintenance
Fuel
Advertising Expense
Doubtful Accounts Expense

2018
100%
100%
100%

2019
120%
111%
134%

2020
142%
130%
161%

2021
168%
153%
192%

2022
192%
182%
206%

100%
100%

101%
100%

102%
100%

104%
100%

105%
100%

100%
100%
100%
100%
100%
100%
100%
100%
100%

101%
100%
103%
100%
100%
100%
103%
100%
120%

102%
102%
154%
100%
100%
100%
106%
100%
142%

104%
102%
160%
100%
100%
100%
110%
100%
168%

105%
102%
219%
100%
100%
100%
115%
100%
192%

100%
100%
100%
100%

100%
100%
102%
192%

42%
100%
105%
266%

0%
100%
107%
347%

0%
100%
110%
384%

100%
100%

76%
220%

52%
318%

28%
425%

4%
476%

Amortization of Cooperative
Development Cost
Security Expenses
Total Operating Expenses
Operating Income
Finance Costs
Interest Expense
Net Surplus (Deficit)

There is an increasing trend in sales due to the projected annual increase in demand and
the projected increase in price. Cost of goods sold, on the other hand, though also increasing,
shows less percentage increase compared to sales. This is because the increase in price and
demand more than compensates the increase in price of raw materials. As a result of a bigger

percentage increase in sales relative to cost of goods sold, gross profit also shows an increasing
trend. While there is an increasing trend in the operating expenses primarily because of inflation,
finance cost is decreasing per year because of the annual payments on long-term debt. Because
increase in gross profit and decrease in finance costs outweigh the net increases in operating
expenses, net surplus shows an increasing trend, reaching to more than four times of that on the
first year of operations by the end of five years. Overall, the business has a strong result on
operations. There is a big increase in net surplus per year which translates to substantial
economic benefit to the community. Also, cost of debt will be lower as the firm becomes less
risky in the eyes of creditors. Furthermore, grants will be easier received since the donor will
have more trust in the cooperative because of its good operations. This will aid in future
expansion and growth.
Horizontal Analysis Statement of Financial Condition Account
2018
Assets
Current Assets
Cash
Accounts Receivable, net
Raw Materials Inventory
Finished Goods Inventory
Office Supplies
Total Current Assets
Noncurrent Assets
Plant, Property, and Equipment
Cooperative Development Cost
Total Noncurrent Assets
Total Assets
Liabilities
Current Liabilities
Accounts Payable
Salaries Payable
Withholding Tax Payable

2019

2020

2021

2022

100%
100%
100%
100%
100%
100%

72%
120%
100%
157%
100%
122%

112%
142%
100%
186%
100%
154%

235%
168%
100%
179%
100%
196%

438%
192%
100%
128%
100%
243%

100%
100%
100%
100%

89%
29%
89%
105%

79%
0%
78%
115%

68%
0%
68%
129%

58%
0%
57%
147%

100%
100%
100%

103%
102%
100%

107%
104%
100%

112%
106%
100%

117%
109%
100%

Other Payables
Interest Payable
Total Current Liabilities
Noncurrent Liabilities
Long Term Debt
Total Noncurrent
Liabilities
Total Liabilities
Fund Balance
Member Equity
Grants and Donations
Fund Balance - Unappropriated
Fund Balance - Appropriated
Total Fund Balance
Total Liabilities and Member
Equity

100%
100%
100%

101%
76%
96%

110%
52%
93%

112%
28%
90%

123%
4%
88%

100%

75%

50%

25%

0%

100%
100%

75%
81%

50%
63%

25%
44%

0%
26%

100%
100%
100%
100%
100%

100%
100%
510%
807%
115%

100%
100%
1102%
1593%
137%

100%
100%
1892%
2607%
167%

100%
100%
2779%
3655%
200%

100%

105%

115%

129%

147%

There is accumulation of cash by the end of the fifth year resulting to more than four
times of the balance on the first year. The entity is becoming more equity-funded due to the
increase in net surplus and the eventual payment of the long-term debt. The unappropriated and
appropriated fund balances are now 28 and 38 times than that on 2018 because of strong result of
operations and mandatory accumulation of funds. It makes the cooperative more stable and
desirable in the eyes of creditors, investors, and donors. This could translate to an even better
result on operations which means more help may be extended to the community. With large
percentage increase in cash, decrease in liabilities, and increase in equity, the cooperative is
going towards a financial condition which is open to expansion and growth activities. Therefore,
the entity may consider purchasing an addition to machinery and other equipment in the future.
Vertical Analyses
Vertical Analysis Statement of Operations Accounts

Sales
Cost of Goods Sold
Gross Profit
Operating Expenses
Salaries
Employee Benefits
PHIC, SSS, HDMF Premium
Contribution
Depreciation
Electricity
Communications Expense
Office Supplies Expense
Repairs and Maintenance
Fuel
Advertising Expense
Doubtful Accounts Expense

Amortization of Cooperative Development

Cost
Security Expenses
Total Operating Expenses
Operating Income
Finance Costs
Interest Expense
Net Surplus (Deficit)

2018
100.00
%
61.58%
38.42%

2019
100.00
%
56.76%
43.24%

2020
100.00
%
56.02%
43.98%

2021
100.00
%
55.89%
44.11%

2022
100.00
%
58.33%
41.67%

10.26%
0.84%

8.65%
0.70%

7.38%
0.59%

6.32%
0.50%

5.63%
0.44%

0.85%
2.53%
0.16%
0.33%
0.58%
1.35%
0.30%
0.06%
2.00%

0.72%
2.11%
0.13%
0.27%
0.48%
1.13%
0.25%
0.05%
2.00%

0.61%
1.82%
0.17%
0.23%
0.41%
0.95%
0.22%
0.04%
2.00%

0.53%
1.54%
0.15%
0.19%
0.34%
0.80%
0.19%
0.04%
2.00%

0.47%
1.35%
0.18%
0.17%
0.30%
0.70%
0.18%
0.03%
2.00%

0.18%
6.94%
26.37%
12.04%
0.00%
2.68%
9.37%

0.15%
5.79%
22.46%
20.79%
0.00%
1.70%
19.09%

0.05%
4.88%
19.36%
24.62%
0.00%
0.98%
23.64%

0.00%
4.12%
16.72%
27.39%
0.00%
0.45%
26.94%

0.00%
3.62%
15.07%
26.61%
0.00%
0.06%
26.55%

The vertical analysis on the statement of operations further supports the results of the
horizontal analysis. It can be seen that gross profit is increasing as a percentage of sales for the
same reason stated in the horizontal analysis. The increase in demand and selling price more than
compensates the increase in cost of goods sold. Furthermore, percentage of finance cost to sales
is decreasing because of annual payments of debt. As a result, net income percentage to sales
also show an increasing trend, reaching up to 27.35% of sales on the fifth year. Moreover, the
results above show that in the near future the entity may have to hire more employees and

increase investments in machinery and equipment due to an increase in demand. This may result
to percentages similar or even less desirable than that on 2018, depending on the degree of
investment on expansion. The entity must make sure that it has accumulated enough funds or has
other sources of funds available to finance this. After this phase though, the entity will once
again recover like what it experienced in its first few years of operations.
Vertical Analysis Statement of Financial Condition Account

Assets
Current Assets
Cash
Accounts Receivable, net
Raw Materials Inventory
Finished Goods Inventory
Office Supplies

Total Current Assets

Noncurrent Assets
Plant, Property, and Equipment
Cooperative Development Cost
Total Noncurrent Assets
Total Assets
Liabilities
Current Liabilities
Accounts Payable
Salaries Payable
Withholding Tax Payable
Other Payables
Short Term Borrowings
Current Portion of Long Term
Debt
Interest Payable
Total Current Liabilities

2017

2018

2019

2020

2021

2022

34.22%
0.00%
0.99%
5.47%
0.02%

14.43%
5.48%
1.16%
26.30%
0.02%

8.24%
6.28%
1.11%
39.56%
0.02%

12.74%
6.85%
1.02%
43.06%
0.02%

27.21%
7.21%
0.91%
36.89%
0.02%

47.83%
7.26%
0.80%
23.21%
0.01%

40.69%

47.38%

55.21%

63.69%

72.22%

79.11%

58.93%
0.38%
59.31%
100.00
%

52.40%
0.22%
52.62%
100.00
%

44.73%
0.06%
44.79%
100.00
%

36.31%
0.00%
36.31%
100.00
%

27.78%
0.00%
27.78%
100.00
%

20.89%
0.00%
20.89%
100.00
%

4.16%
1.94%
0.11%
0.74%
0.00%

3.77%
2.22%
0.12%
0.85%
0.00%

3.73%
2.17%
0.11%
0.83%
0.00%

3.56%
2.03%
0.10%
0.83%
0.00%

3.30%
1.85%
0.09%
0.75%
0.00%

3.06%
1.68%
0.08%
0.72%
0.00%

0.00%
2.29%
9.23%

0.00%
2.26%
9.23%

0.00%
1.64%
8.48%

0.00%
1.03%
7.56%

0.00%
0.49%
6.49%

0.00%
0.06%
5.61%

Noncurrent Liabilities
Long Term Debt

27.47%

21.65%

15.55%

9.53%

4.23%

0.00%

Total Noncurrent Liabilities

Total Liabilities

27.47%
36.70%

21.65%
30.88%

15.55%
24.03%

9.53%
17.09%

4.23%
10.72%

0.00%
5.61%

Fund Balance
Member Equity
Grants and Donations
Fund Balance - Unappropriated
Fund Balance - Appropriated
Total Fund Balance
Total Liabilities and Member
Equity

0.14%
68.67%
-5.51%
0.00%
63.30%
100.00
%

0.14%
67.67%
1.23%
0.08%
69.12%
100.00
%

0.13%
64.78%
10.40%
0.66%
75.97%
100.00
%

0.12%
59.56%
22.02%
1.20%
82.91%
100.00
%

0.11%
52.91%
34.50%
1.77%
89.28%
100.00
%

0.09%
46.77%
45.32%
2.20%
94.39%
100.00
%

The figures above also show increasing reliance on equity as the long-term debt are paid
and earnings are accumulated. In the long-run, however, as a cooperative in this type of
community, there is a limit to the entitys source of financing from paid-up members equity.
This means that in the coming years, depending on the degree of expansion, the cooperative will
have to resort to short-term or another long-term debt. In a business perspective, this is better
financially since cost of debt is cheaper than the cooperatives cost of equity. This will result to
higher earnings per share for members.