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Table of Contents

Contents Page

Introduction 2Company Overview 3

Financial Statement Analysis 3

1) Balance sheet 4

2) Profit and Loss Statement

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3) Cash flow Statement 9

Conclusion 12

Reference 13

Appendices 14

Appendix I 15

Appendix II 16

Appendix III 17

List of Figures

Figures Page

Figure 1: Comparative Balance Sheet of Pixel One………………………………. 5

Figure 2: Comparative Profit and Loss statement Pixel One………………………7

Figure 3: Cash flow of Statement of Pixel One…………………………………... 10

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Introduction

The business of event organisers need to learn on event management to make survive for

their own business (Fourie, 2009). In Thailand, the event organiser business provide

service to various types of customer and this kind of business can be both success and fail

depend on the financial management of the company whether how effective it is.

According to Palepu and Healy (2008), the top goal of every organisation is be able to

survive and continue their growth, which, the organisation must have the ability to

generate profit and always make their product sale. Besides, every organisation shall

develop and manage the good financial system administration by planning the activities

that can help achieve the financial goal and control it according to the plan (Henderson,

2011). Therefore, the budget consideration is important for both the business itself and

the investors that will invest to develop the business for increasing their growth.

In this study, the analysis of financial statement is demonstrated by focusing on a small or

medium business based event management project. The study begins with company

background that presents the details of a case company named Pixel one in brief. This

company is a small organisation regarded to event projects. The analysis of financialstatement is divided into three parts; balance sheet, Profit and Loss, and Cash flow

statement; each financial data of the case company was converted the amounts from Baht

currency into GBP, so, the amounts in each financial statement have to remain decimal

number in order to keep the validity. Finally, the conclusion is drawn in the last section.

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Company Overview

Pixel one is an event organiser that established on 2004 by beginning from a little group

of people with good idea and willful that try to use their potential both energy and spirit

to work no matter for the small or big piece of work for instance, the small party such as

wedding ceremony, graduation day, products promoting, grand opening, road show,

camp, festival, and city countdown, etc. Presently, Pixel One has operated for 7 years and

it was found that the company provides the good service which make their customers feel

very satisfy. The company usually gets the big project at least twice a year from the large

companies such as, Toyota and Honda. Although, Pixel One is the small firm that

consists of only 20 personnel but with the ability and plenitude, it results on the continual

growth of the company. Many companies trust in Pixel one to create the event which the

income of Pixel one in 2010 was about 28,686.79 GBP. Though, it is not the big amount

but if compared to year 2009 with the income 16,874.11 GBP, it can be seen that the

company’s revenues grow in higher level which is about 70%.

Financial Statement Analysis

In conducting events business daily, there will be many activities taking place and these

of economic activities relate to the gain and use of the capital and other resources of the

business. Thus, if there is no recording system and the information arrangement into

group and up to date, we will never know the result of performance or business status

(Palepu and Healy, 2008). Beside, people from external no matter, the institution or trade

creditor also unable to know the performance result of business so, they afraid to provide

credit or loan which result of the loss of opportunity. Thus, the business needs to have

accounting system to bring the list of activity to record in the system, classified and

report the summary to measure and evaluate the financial status and the business

performance called as financial statement (Henderson, 2011).

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Palepu and Healy (2008) indicated that the financial statement analysis is to use any tools

to evaluate the company’s performance. By considering the budget to know the status and

stability of the company and apply it in the investing decision.

In order to evaluate how the business of Pixel One exist in the events business market;

balance sheet, profit and loss, and cash flow statement will be applied in this study to

analyse the business performance by comparing the financial data between year 2009 and

2010. All of data in this study use GBP currency that was converted from Baht currency.

Each amount was rated by basing on Bank of Thailand at 4 November 2011

(1 GBP = 49.2648 Baht).

1) Balance sheet

Balance sheet consists of three main factors; Assets, Liabilities and Owner’s Equity

(Ittelson, 2009). The business owner and external investors might recognise the reliability

and stability of a business from a balance sheet. Particularly, the creditor could know how

the business has ability to pay its debts at the due date. Therefore, it can be supposed that

liquidity in business for paying a debt can be provided by balance sheet analysis. In the

case of Pixel One Company, the comparative balance sheet at the financial year of 2009and 2010 can be seen in figure 1.

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Figure 1: Comparative Balance Sheet of Pixel One

According figure 1, the author uses vertical analysis in order to compare the amount in

the year of 2010 and 2009. Fridson and Alvarez (2011) state that financial analysts can

apply common-size balance sheet to evaluate how the liquidation of the business be. The

vertical analysis in balance sheet of Pixel One Company can provide the trend of business

in the future that can be identified as follow.

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The most assets of Pixel One Company are Property and Equipments that is around

43.59% in 2010 and 42.86% in 2009. It can be supposed that the company has little

invested in the part of building and office facility. As PixelOne is only a small

business that rent the building in central area of the city and invested most on

document and computer facility.

Accounts Receivable reduce from 21.56% of year 2009 to be 16.73% in 2010 which

shows that the company can collect more debt from debtors or it can be implied that

the company has strict policy on credit since the low competition of the business, the

company then reduce the time to provide credit to decrease the debtors rate.

Inventories of Pixel One in 2010 and 2009 found almost no change at approximately

14% of the total assets. Inventories or stock of the event organizers company usually

be the tools to set up the event such as stage decoration facility, souvenir that give in

each event that reduce. As the inventories remain the same amount in both years, it

shows that the company has stable purchasing policy, which the company evaluated

that it is good enough, and no need to change.

In 2010, creditors of Pixel One Company have lower proportion than 2009. There

are creditors 19.44% of total liabilities in 2010 while 23.04% is in 2009. That means

the company has the ability to pay back more debt from the past year.

Long-term liabilities of Pixel One in 2010 found a little higher from 2009 by in

2010, it was at 44.37% and 30.84% in 2009. This may result from the necessity of the

company to increase the effectiveness in their operation by using more liabilities.

Owner’s Equity in both years found not so much change by in 2010 was at 48.45%

while in 2009 was at 45.97%. This presented that in 2010 the company has more Net

assets and less total liabilities.

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2) Profit and Loss Statement

As stated by Wild et al. (2010), the performance result of the company in the aspect of

Net profit or Loss profit will result on the balance which is in case that the income is

more than the payment (Net profit) will make the Owner’s Equity increase. While in case

that the income is less than the payment (Net loss) the result will be inverse. Thus, profit

and loss statement is the financial statement that affect to the increase or decrease of the

Owner’s Equity that come from the operation in each of tranche and relate to the

increasing and decreasing of the assets.

Figure 2: Comparative Profit and Loss statement Pixel One

As presented in figure 2, the comparative data of profit and loss statement of Pixel One

Company can be analysed as vertical analysis. The amounts in 2010 and 2009 are

compared as percentage based sale revenues and can be identified as follow.

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i) Pixel One has the revenues in 2010 increase from 2009 for 70% (11,812.68 GBP)

which mean that the company has more income from previously. By the main income

of the company come from the events employer such as, meeting event, product

promoting event and department store grand opening.

ii) As the company has more income, it does not mean it will grow further accordingly.

The company may gain more income but the cost of sales usually higher too, which

can be seen in figure 2. It was found that in 2010, the amount is higher than in 2009

but when compared in ratio, it will be in the same level. This presented that the

company has no policy to reduce the cost of payment but still employs the old method

of management that why the growing rate is stable.

iii) Considering the cost of sales of Pixel One, it was found to be in the middle levelabout 54%, the company can find the way to reduce the cost of sales but still

emphasises on the high effectiveness of service to increase the Net profit.

iv) General and Administrative expenses in year 2010 and 2009 are in the similar ratio

which is about 12%. This means that the effectiveness of the operation still be in the

same level, no additional payment cost from new hire.

v) The analysis of the figures of Earnings before income tax of the company can be

used as beneficial to the investors to evaluate the effectiveness of the company’s

operation in the events management. Which the numbers in figure 2 presented that the

Earnings before income tax of the company increase only for 0.59% therefore, it can

be seen that the company has the ability to generate a little more of profits.

vi) Net profit in 2010 increased from 2009 only for 0.57% according to the cost of

Office supplies and Premium Insurance ratio that has been reduced.

The analysis of profit and loss statement of Pixel One found that the company has stable

growing rate though, the total amount of revenues will increase. Thus, it maybe resulted

from the old management that does not employ the policy to cut off the cost and mange

to reduce the payment cost. However, to know about the background of the money used

to manage the business, cash flow statement analysis will be another tool that helps the

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investors and the executives in their decision to develop further on their own business

(Wild et al., 2010).

3) Cash flow Statement

Cash flow statement presents the change of cash and the list that can compare to the cash

both in the part of incomes and expenses. It reflects the change of cash that affected by

the operating activity, investing activity and financing activity (Fourie, 2009). As

indicated by, the record of number can separate into minus number for the use of cash

and the positive number for the gaining of cash.

For the business of Pixel One which is an event organiser, it was found to operate the

business with low cost by hiring small amount of personnel but giving the effective work

results. However, it was found that the cash in held is not equal to the net profit in each of

financial year therefore; the business analysis from the cash flow statement is another

way to know about the background of the cash and the business profits (See figure 3).

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Figure 3: Cash flow of Statement of Pixel One

According to figure 3 above, in 2010 Pixel One Company had net decrease cash in held

around 436.42 GBP that made total cash at the end of year 2010 decreased from 4,851.33

GBP in 2009 into 4,414.91 GBP in 2010. The analysis of cash flow statement will make

the investors know that the company has brought the cash to use in which aspect of

activity since, the evaluation from net profit only cannot make they know whether the

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business has the financial liquidity or how much of their ability to pay for debt (Adams,

2006). Therefore, the cash flow budget of Pixel One can be analysed as follow:

i) The business used cash in their operating activities in 2010 more than 2009 by

cash generated from operation in 2010 equal to 57,728.81 GBP while in 2009 was

33,918.72 GBP. The main expenses of the business are that wages/salaries, utilities,

premium insurance, advertising interest and tax income that made net cash

generated from operating activities of the business in 2010 is 7,074.01 GBP while

in 2009 is around 4,922.38 GBP. The company has the amount of expenses mostly

in their operating activity of purchasing products that have to import the equipment

to use in event organising. The payment cost in this part included the hiring of external labor for interior which is the part beyond the administrative expenses.

ii) The business has spent more cash on investing activities especially, the

current asset like office equipments for instance, the decoration and office repairing

to build up the good work environment for the employees. It was found that the

business has invested in 2010 at the amount of 4,445.36 GBP which more than

2,594.14 GBP in 2009 almost double times. The investment on this aspect found to

be in the small ratio if compared to the total cash outflows since, the company

mostly emphasizes more on using cash to operating activity.

iii) The business has spent the cash in financing activities in the part of dividends

only by it was found that the dividends that paid out in 2010 was the cash at the

amount of 3,065.07 GBP while in 2009 was 1,802.50 GBP. As the dividends in

year 2010 was paid more than 2009, it indicated that in 2010, the business had total

revenues and profits more than in 2009 at approximately ratio of 3:2.

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Conclusion

From the analysis of balance sheet, profit and loss, and cash flow, it was found that the

business administration of Pixel One tends to have the stable growth if the executives still

employ the old policy method. By it was found that the total of revenues of the company

is 70% higher but Net profit still in the constant ratio. However, from the information in

balance sheet, it made us know that in 2010 Pixel One can pay higher debt than in 2009

and be able to collect more debt from the debtors as well. Besides, the summary of

information from cash flow statement found that the company has the minus cash in held,

which resulted on the decreasing of the amount of cash in 010 from 2009. The company

shall have the policy to manage the cost in operating activity especially, in the

purchasing products ratio therefore, the executives shall seek for the low cost product

source so; they can generate the higher cash and net profit of the company.

Although, the business of Pixel one company will have more revenues in 2010 compared

to 2009 for 70% but when calculating the ROI value of each year in comparison, it can be

found that the return of investment has increased for 1%. By in year 2009, the ROI value

is equal to 14% while in 2010, the ROI is equal to 15%. As a result of the low value of ROI, it can be seen that the company gains not so good return from the investment and

the management shall process to reduce some cost such as, Administrative expenses and

advertising expense to increase the return of investment. Beside, the company also needs

to find additional income to increase more revenues or the cost of services. However,

since the event organizer company can provide service in various ways and the company

can add more options to provide services other than they ever do such as, changing the

customer group to be general people by set up the meeting or seminar to provide business

knowledge, training by inviting the speaker orientation, publicize the knowledge and

collecting fee from attendants. Therefore, the company executives shall not consider only

the information from financial budget in composition to their business decision because

all businesses possess risk. The calculation of ROI return then becomes the primary

financial tool to assist the executive to make the investment decision.

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Reference

Adams, D. (2006). Management Accounting for the Hospitality, Tourism and Leisure

Industries: a strategic approach (2nd ed). London: Thompson.

Henderson, S. (2011). The development of competitive advantage through sustainable

event management. Worldwide Hospitality and Tourism Themes, Vol. 3. No. 3, pp.245 – 257.

Ittelson, T.R. (2009). Financial Statements: A Step-by-Step Guide to Understanding and

Creating Financial Reports. Career Press, USA.

Fourie, W. (2009). Event Management . Lambert Academic Publishing.

Fridson, M.S. and Alvarez, F. (2011). Financial Statement Analysis: A Practitioner'sGuide. John Wiley & Sons, USA.

Palepu, K.G. and Healy, P.M. (2008). Business analysis & valuation: using financial

statements. Cengage Learning, USA.

Wild, J.J., Subramanyam, K.R., and Halsey, R.F. (2010). Financial Statement Analysis.

McGraw-Hill/Irwin, USA.

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Appendices

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Appendix I: Balance Sheet of Pixel One Company

PIXEL ONE

Balance Sheet

At December 31, 2010 and 2009

1 ( £ ) GBP = 49.2648 Baht

(£)

2010 2009

Assets

cash and cash equivalents 4,414.91 4,851.33

Marketable securities 4,445.36 3,552.23

Account Receivable (Net) 11,062.66 12,047.13

Inventories 9,479.38 7,936.70

Prepaid premium insurance 345.07 263.88Prepaid rent 213.13 274.03

Total current assets 29,960.52 28,925.30

Land 3,491.33 3,653.72Property and Equipments 28,823.81 23,952.18

Less: Accumulated depreciation of

investment properties

(8,119.38) (9134.30)

Land, properties and equipments - Net 20,704.42 14,817.87

Other assets- Others 11,976.09 8,484.75

Total non-current assets 36,171.85 26,956.35

Total assets 66,132.37 55,881.65

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Appendix II: Profit and Loss statement of Pixel One Company

PIXEL ONE

Profit and Loss Statement

At December 31, 2010 and 2009

1 ( £ ) GBP = 49.2648 Baht

Liabilities and Owner’s Equity

Current Liabilities

Creditors 4,800.58 4,851.33

Accrued salaries and wages 1,644.17 1,593.43Income tax payable 5,293.84 5,967.75

Accrued utilities 1,999.40 2,151.64

Long-term liabilities 10,961.17 6,495.51

Total Liabilities 24,699.16 21,059.65

Owner’s Equity

Ordinary Shares 11,164.15 9,134.30

Retained earnings 30,269.06 25,576.05

Total Owner’s Equity 41,433.21 25,687.70

Total Liabilities and Owner’s Equity 66,132.37 55,881.65

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(£)

2010 2009

Sale Revenues 28,686.79 16,874.11

Cost of sales 15,675.48 9,219.56

Gross Profit 13,011.31 7,654.55Operating Expenses : General and Administrativeexpenses

Advertising

RentOffice supplies

Premium Insurance

Utilities

Doubtful DebtDepreciation- office

equipmentsEarnings before income taxIncome taxes

Net Profit (Loss)

3,618.20

1,091.04

456.72284.18

202.98

157.31

314.63583.58

6,302.672,646.923,655.75

2,127.28

641.43

268.95177.61

202.98

98.45

186.75343.04

3,608.051,554.862,053.19

Appendix III: Statement of cash flow of Pixel One Company

PIXEL ONE

Statement of Cash flow

At December 31, 2010

1 ( £ ) GBP = 49.2648 Baht

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2010 2009

£ £

Cash flows from operating activities:Cash inflows

Cash generated from service operation

Cash Outflows

Purchasing products

Salaries and WagesRent

Premium insurance

UtilitiesIncome tax

Advertising

Office suppliesNet Cash generated from operating activities

Cash flows from investing activities:

Cash inflows

Cash outflows

Office equipmentsMarketable securities

Net Cash generated from investing activities

Cash flows from financing activities:Cash inflows

Cash outflows

Dividends

Net Cash generated from financing activities

Net increase (decrease) in cash held

Cash, beginning of year

Cash, end of year

57,728.81

(32,944.39)

(4,749.84)(852.54)

(487.16)

(466.86)(5,967.75)

(2,182.08)

(568.36)7,074.01

-

(3,552.23)(893.13)

(4,445.36)

-

(3,065.07)

(3,065.07)

(436.42)

4,851.33

4,414.91

33,918.72

(19,364.73)

(2,801.19)(852.54)

(487.16)

(304.48)(3,491.33)

(1,329.55)

(365.37)4,922.38

-

(2,070.44)(523.70)

(2,594.14)

-

(1,802.50)

(1,802.50)

525.73

4,325.60

4,851.33

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Assignment Completed Kwang

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