Milestone 3

Samuel O. Owa (047805)

MBA Learner

Nexford University

ACC 6050: Accounting and Financial Reporting

Greg Harms

July 1, 2021
 Reviewing, Comparing, and Analyzing Financial Statements

International Accounting Frameworks

The format of LarfargeHolcim’s balance sheet, retrieved from:

https://www.lafargeholcim.com/sites/lafargeholcim.com/files/atoms/files/26022021-finance-

lafageholcim_fy_2020_report-full-en.pdf, differs in the order of arrangement when

compared with the format of Dangote cement’s balance sheet, retrieved from:

https://dangotecement.com/wp-content/uploads/2021/05/Dangote-Cement-PlcAnnual-Report-

and-Accounts-2020_interactive.pdf. This is because LarfargeHolcim adopted the US GAAP

which prescribes that current assets are to be recorded first, while Dangote Cement used the

IFRS balance sheet format which prefers that non-current assets are listed first. The two

companies used different ordering categories on the face of their respective balance sheets.

LarfargeHolcim, according to the US GAAP, listed its balance sheet items in their order of

liquidity (that is how easily and quickly its assets can be changed to cash). The items are

arranged in descending order (from most liquid to least liquid) that is: current assets, non-

current assets, current liabilities, non-current liabilities, and owners’ equity. Whereas,

Dangote’s IFRS balance sheet has the order reversed (from least liquid to most liquid): non-

current assets, current assets, owners’ equity, non-current liabilities, and current liabilities.

Financial Reporting Requirements

Description of the process the companies would have used to record transactions and

consolidate them into financial statements.

The companies make use of the accounting process (which entails that business data is

identified, recorded, and communicated with the use of business language. The activities

involved in the process include:

 Sorting of Source Documents: The companies will sort their transaction source

documents according to data type (accounting data) which will be tracked periodically
 (monthly, quarterly, or annually). Examples of source documents include Utility bills,

Invoices, and receipts among others.

 Journal Entry of Source Documents: After gathering and sorting the source

documents, the companies will record their business transactions chronologically

according to date order in the general ledger which is also known as the book of

original (prime) entry. A description of the transaction is made in the journal and

related business transaction data are categorized into related accounts. Business

transaction data are in separate accounts to be able to track the amounts as well as the

changes in the balance of the account. For every business transaction, entries are

made into the accounts that are related to the change in the business accounts. The

formal name for this process of inputting information into a general journal is known

as journalizing. For every Journal entry, there must exist at least two accounting

entries for each business transaction. This is known as the double-entry accounting

system.

 Posting of transactions into Ledgers: After journalizing business transactions, the

information in the journal is thereafter entered into general ledgers via a process

called posting. These general ledgers are arranged numerically and by account type.

 The companies would continue to journalize and post business transactions until all

transactions have been entered into both the general journal and general ledger.

 After all the entries are have been made up to date, all the balances in the general

ledger are then placed in numerical order in a form that is known as the trial balance.

The amounts on the totals of the trial balance must match, and some balances in some

accounts will be updated to create an adjusted trial balance before eventually

generating financial statements.

The process of recording business transactions up to creating a financial statement is summed

up in the flow chart below.

Accounting Cycle

Differences in Reporting Requirements between LarfargeHolcim and Dangote Cement

Dangote Cement adopted the use of IFRS in the preparation of its financial statements while

LarfargeHolcim adopted US GAAP in reporting its financial statements. Some key reporting

differences between Dangote’s IFRS financial statements and LarfargeHolcim’s US GAAP

financial statements are highlighted below:

 Consolidation: Dangote’s IFRS financial statements adopted a control model whereas

LarfargeHolcim’s GAAP financial statements adopted the risks-and-rewards model.

 Income Statement: Dangote’s Income statement did not segregate

extraordinary items while LarfargeHolcim’s income statement may show it below

the net income.

 Earnings-Per-Share Computation: LarfargeHolcim’s EPS computation averaged

the individual interim period incremental shares whereas, Dangote’s EPS calculation

did not average the individual interim period calculations.

Example of Business Transactions

S/No Transaction Transaction type

1 Purchase of Delivery Truck for $10,000 Asset
2 Rental payment $7500 Expense
3 Deposit of $20000 into business account for the purchase of inventory Owner's equity
4 Received delivery of marketing fliers worth $2,500 with payment due in 90days Liability
5 Sold 100 cups of Ice cream for $10,000 Revenue

Recording of Transactions

Description Dr Cr
Motor Vehicle $10,000.00
Equity $10,000.00
Being the cost of truck purchased
Description Dr Cr
Rent & Rates $7,500.00
Bank $7,500.00
Year 2021 rent payment
Description Dr Cr
Inventory $20,000.00
Equity $20,000.00
Being Purchase of inventory with owner's equity
Description Dr Cr
Marketing materials $2,500.00
Trade Payables $2,500.00
Being purchase of marketing materials on credit
Description Dr Cr
Staff Cost $10,000.00
Bank $10,000.00
Being sales proceeds from the sale of 100 cups of ice cream

Accounting Analytics

Accounting Tools for Financial Statements Analysis

The financial statements of a company can be evaluated based on past, current, and

future performance because they are a compendium of essential financial information about

all aspects of the business’s activities. Several techniques can be used to carry out financial

statement analysis Three essential analytical techniques of interest include horizontal

analysis, vertical analysis, and ratio analysis.

 Horizontal analysis as the name suggests, compares data horizontally, by analyzing

values of line items across two or more years. For example, the percentage change in

sales between two or more periods

  Vertical analysis takes a look at the vertical effects that line items have on other parts

of the business and also the business’s proportions. For example, the ratio of net

income to sales or cost of sales to sales.

 Ratio analysis uses important ratio metrics to calculate statistical relationships

between key different lines of the financial statement. Example current ratio relates

current assets with current liabilities

Ratio Calculation

Dangote LafargeHolcim
Ratio Formula
2020 2019 2020 2019
Current ratio Current Asset/Current Liability 0.66 0.65 1.33 1.34
Net Profit Ratio Net Income/Net Revenue 0.27 0.22 0.09 0.09
Return on Assets Net Income/Total Assets 0.14 0.12 0.04 0.04
Inventory Turnover Cost of Sales/Inventory 4.05 3.31 6.78 6.19
Gross Profit Ratio Gross Profit/Net Revenue 0.58 0.57 0.42 0.42

Current ratio: Larfage’s 1.33 ratio compared to Dangote’s 0.66 suggests how liquid the two

companies are when compared to one another. Dangote is not as liquid as Larfage is, hence,

Dangote may not able to settle its liabilities as fast and as easily as Lafarge will.

Net Profit ratio: Dangote (0.27) is far more profitable than Lafarge is and this means a larger

part of Dangote’s sales remains (in comparison to Lafarge’s) after off-setting all associated

costs used in generating the sales.

Return on Assets: This is a measure of how well the assets of the companies are used to

generate profit. It might be seen as management’s efficiency at using the companies assets.

Dangote’s 0.14 ROA says a lot about the company’s management’s performance at

generating profit from its assets compared to Larfarge’s 0.04. The higher the ROA the better.

Inventory Turnover: Dangote’s 4.05 and Lafarge’s 6.78 is a way to measure how fast the

companies sell their inventories. A low turnover means weak sales and possibly excess

inventory (which is also referred to as overstocking), while a high ratio, on the other hand,

may imply either strong sales or insufficient inventory. The former is desirable while the

latter may lead to lost business.

Gross Profit Margin: This measures the amount of money remaining after its cost of goods

sold is subtracted from its product sales. It is a\expresses as a percentage of sales and it shows

the amount of profit the Dangote (0.58) and Lafarge (0.42) made respectively before

deducting selling, general, and administrative expenses.

Income Statements Horizontal Analysis

LarfargeHolcim’s Income Statement Horizontal Analysis

LafargeHolcim (Grp)
2020 2019 % Y.O.Y
CHF'Million CHF'Million Grow th
Revenue 23,142.00 26,722.00 -13%
Production Cost of Goods Sold 13,453.00 15,441.00 -13%
Gross Profit 9,689.00 11,281.00 -14%
Distribution and Selling expenses 5,558.00 6,657.00 -17%
Admin Expenses 1,207.00 1,340.00 -10%
Share of profit of Joint venture 448.00 548.00 -18%
Operating Profit 3,372.00 3,832.00 -12%
Profit on dispoal and other non-operating income 15.00 302.00 -95%
Loss on dispoal and other non-operating expenses 60.00 117.00 -49%
Share of profit of Associate 15.00 12.00 25%
Financial Income 105.00 158.00 -34%
Financial Expenses 723.00 870.00 -17%
Net Income before taxes 2,724.00 3,317.00 -18%
Income Taxes 717.00 806.00 -11%
Net Income 2,007.00 2,513.00 -20%

Dangote Cement’s Income Statement Horizontal Analysis

Dangote
2020 2019 % Y.O.Y
NGN'Million NGN'Million Grow th
Revenue 1,034,196 891,671 16%
Production Cost of Sales (437,970) (379,989) 15%
Gross Profit 596,226 511,682 17%
Admin Expenses (60,339) (54,124) 11%
Selling & Distribution expenses (153,719) (160,835) -4%
Other Income 4,754 2,980 60%
Impairment of Financial Assets (188) 190 -199%
Profit from operating activities 386,734 299,893 29%
Finance Income 29,814 7,160 316%
Finance Cost (43,988) (57,673) -24%
Share of profit of Associate 750 649 0.25
Profit before Tax 373,310 250,029 49%
Income Tax Expenses (97,242) (49,958) 95%
Profit for the year 276,068 200,071.00 38%
 How an Internal or External User will Identify if the companies are succeeding or not.

Horizontal analysis is useful for financial statement analysis when comparing

historical data, such as ratios, or line items, over many accounting periods. It can use either

absolute comparisons or percentage comparisons where the figures in each succeeding period

are expressed as a percentage of the figure in the baseline year, with the baseline figure being

listed as 100%. This is also referred to as base-year analysis.

The horizontal analysis aids investors and analysts in seeing what has been

responsible for a company's financial performance over several years and to identify trends

and growth patterns. This type of analysis avails analysts the opportunity to assess relative

changes in different line items over time and project them into the future. An analysis of the

income statement, balance sheet, and cash flow statement over time gives a complete picture

of operational results and reveals what is responsible for a company’s performance and

whether it is operating efficiently and profitably.

Emerging problems and strengths can be detected when an analysis of the critical

measures (such as profit margins, inventory turnover, and return on equity) of business

performance is carried out. For instance, earnings per share (EPS) might be rising because the

cost of goods sold (COGS) has been falling or because sales have been growing steadily.

Coverage ratios, like the cash flow-to-debt ratio and the interest coverage ratio, can reveal

how well a company can service its debt through sufficient liquidity and whether that ability

is increasing or decreasing. The horizontal analysis may also be used to compare growth rates

and profitability among multiple companies in the same industry.

 Part 1

Company Name: FinOps Culinary Services Limited

Location: Lagos, Nigeria

Product: Fast food meals and drinks

Adopted Accounting Standard: International Financial Reporting Standards (IFRS)

List of Business Accounts (Chart of Accounts)

Low High
Non-Current Assets 0000 0999
Restaurant Equipment
Current Assets 1000 1999
Receivables 1000 1099
Bank 1100 1199
Temporay Investments 1200 1299
Prepayments 1300 1399
Inventories 1400 1499
Current Liabilities 2000 2599
Payables 2100 2199
Accruals 2200 2299
Non-Current Liabilities 2600 2999
Long term loans 2600 2699
Equity & Reserves 3000 3999
Share capital 3100 3199
Revenue Reserve 3900 3999
Revenue 4000 4999
Sales-Food 4000 4099
Sales-Drink 4100 4099
Other Income 4500 4999
Hall rental 4600 4699
Cash Overage 4700 4799
Cost of Sales 5000 5999
COS-Food 5100 5199
COS-Drinks 5200 5299
Operating Expenses 7000 7999
Staff cost 7100 7199
Rent & Service Charge 7200 7299
Repairs & Maintenance 7300 7399
Sales & Marketing Expenses 7400 7499
Depreciation 7500 7599
Financial Charges 7600 7699
Journal Entries
1 Description Dr Cr
Restaurants Equipment 6,000,000.00
Equity 6,000,000.00

Being the cost Kitchen Equipment purchased for company use of business owner
2 Description Dr Cr
Rent & Rates 6,500,000.00
Bank 6,500,000.00
Year 2021 rent payment
3 Description Dr Cr
Cash 6,525,000.00
Bank 12,250,000.00

Receivables 2,705,000.00
Revenue: Food 13,962,000.00
Revenue: Drink 7,518,000.00
Being Revenue from items sold to customers
4 Description Dr Cr
Inventory: Food 5,500,000.00
Inventory: Drinks 3,500,000.00
Bank 5,500,000.00
Trade Payables 3,500,000.00
Being purchase of inventory

5 Description Dr Cr
Staff Cost 5,400,000.00
Bank 5,400,000.00
Being staff emoluments
6 Description Dr Cr
Repirs & Maintenance 245,675.00
Cash 245,675.00
Being repair of restaurant equipment
7 Description Dr Cr
COS: Food 6,562,140.00
COS: Drinks 2,255,400.00
Inventory: Food 6,562,140.00
Inventory: Drinks 2,255,400.00
Being cost of goods sold
8 Description Dr Cr
Financial charges 1,152,350.00
Accrued Expenses 1,152,350.00
Being Interest charges
9 Description Dr Cr
Pre-paid expenses 250,000.00

Bank 250,000.00
Being insurance premium
10 Description Dr Cr
Depreciation 1,154,820.00
Accumulated Depreciation 1,154,820.00
Being Depreciation charged for the year
11 Description Dr Cr
Insurance 600,000.00
Pre-Paid expenses 600,000.00
Being Car insurance charged
12 Description Dr Cr
Insurance 600,000.00
Pre-Paid expenses 600,000.00
Being Car insurance charged
13 Description Dr Cr
Cash 5,350,000.00
Hall rental 5,350,000.00
Being Hall rental income
14 Description Dr Cr
Restaurant equipment 1,523,000.00
Bank 1,523,000.00
Being the cost restaurant equipment purchased
15 Description Dr Cr
Cash 232,000.00
Cash Overage 232,000.00
Being excess cash amount
16 Description Dr Cr
Trade Payables 3,575,000.00
Bank 3,575,000.00
Being Payment to vendors
17 Description Dr Cr
Temporary Investment 8,575,000.00
Equity 8,575,000.00
Being Cash placement in 90 days Treasury bill IFO the company the director
18 Description Dr Cr
Long term Loans 5,575,000.00
Long term Loans 5,575,000.00
Being 24 Assets Finance facility for restaurant Cooling system
Trial Balance showing the effect of opening balances and the journal entries of the
above transactions
New Transactions
Opening Bal Dr Cr Balance
Non-Current Assets
Restaurant Equipment 2,345,000.00 13,098,000.00 1,154,820.00 14,288,180.00
Current Assets

Receivables 2,705,000.00 2,705,000.00

Bank 2,752,350.00 24,357,000.00 22,993,675.00 4,115,675.00
Temporay Investments 2,500,000.00 8,575,000.00 11,075,000.00
Prepayments 3,250,000.00 250,000.00 3,500,000.00
Inventories 6,745,050.00 9,000,000.00 8,817,540.00 6,927,510.00
Current Liabilities
Payables (1,545,750) 3,575,000.00 3,500,000.00 (1,470,750)
Accruals (237,200) 1,152,350.00 (1,389,550)

Non-Current Liabilities
Long term loans 5,575,000.00 (5,575,000)
Equity & Reserves
Share capital (15,809,450) 14,575,000.00 (30,384,450)
Revenue Reserve - -
Revenue -
Sales-Food 13,962,000.00 (13,962,000)
Sales-Drink 7,518,000.00 (7,518,000)
Other Income
Hall rental 5,350,000.00 (5,350,000)

Cash Overage 232,000.00 (232,000)

Cost of Sales -
COS-Food 6,562,140.00 6,562,140.00
COS-Drinks 2,255,400.00 2,255,400.00
Operating Expenses -
Staff cost 5,400,000.00 5,400,000.00
Rent & Service Charge 6,500,000.00 6,500,000.00
Repairs & Maintenance 245,675.00 245,675.00
Sales & Marketing Expenses -
Depreciation 1,154,820.00 1,154,820.00
Financial Charges 1,152,350.00 1,152,350.00
- 84,830,385.00 84,830,385.00 -
Statement of Financial Position
FinOps Culinary Se rvice s Limite d
State me nt of Financial Position as at M ay 31st 2021
NGN'000
Non-Curre nt Asse ts
Restaurant Equipment 14,288

Total Non-curre nt Asse ts 14,288

Curre nt Asse ts
Cash & Cash Equivalenst 4,116
Temporary Investments 11,075
Trade Receivables 2,705
Inventories 6,928
Prepayments 3,500
Total Curre nt Asse ts 28,323

Total Asse ts 42,611

Share holde rs Equity

Share Capital 30,384
Revenue Reserve 3,792
Total Share holde rs Equity 34,176

Non-Curre nt Liabilitie s
Long Term Loans 5,575

Total Non-Curre nt Liabilitie s 5,575

Curre nt Liabilitie s
Trade Payables 1,471
Accruals 1,390

Total Curre nt Liabilitie s 2,860

Total Liabilitie s 8,435

Total Liability & Share holde rs' Equity 42,611

Income Statement

FinOps Culinary Services Limited

Income Statement for the Period ended 31st May 2021
NGN'000
Revenue 21,480
Cost of Sales (8,818)
Gross Profit/(Loss) 12,662
Other Income 5,582
Operating Income 18,244

Operating Expenses (12,146)

EBITDA 6,099
Depreciation (1,155)
EBIT 4,944
Financial Charges (1,152)
EBT 3,792
Statement of Changes in Equity
FinOps Culinary Services Limited
Statement of Changes in Equity
Retained
Share capital Earnings Total Equity
NGN'000 NGN'000 NGN'000
For the period ended 31/05/2021

As at Beginning of Period - - -
Share Capital 30,384 - 30,384
Profit/Loss for the period - 3,792 3,792
Total comprehensive income as at period end - - -
30,384 3,792 34,176

Statement of Cash Flows

FinOps Culinary Services Limited
S ta te me n t o f Ca s h flo w fo r th e p e rio d e n d e d Ma y 3 1 s t 2 0 2 1
NGN'000
Cash Flow from Operating Activites
Net Profit 3,791.62
Adjustments:
Depreciation 1,154.82
Add/Less Changes in Current Assets
Temporary Investments 8,575.00
Trade Receivables 1,363.33
Inventories 250.00
Prepayments 182.46
Add/Less Changes in Current Liabilities
Trade Payables 75.00
Accruals 1,152

Net Cash Flow from Operating Activities 16,545

Cash flow from Investing Activities

Purcahse of Fixed Asets (9,606)

Net Cash flow from Investing activities (9,606)

Cash Flow From Financing Activities

Loans (5,575)

Net Cash flow from Financing Activities (5,575)

Net Cash Flow 1,363.32

Opening Cash Balance 2,752.35

Cash and Cash Equivalents 4,115.67

Ratio Calculation
Type of Ratio Formula Ratio Calculation
Workings Ratio
Current ratio Current Asset 28,323
9.90
Current Liability 2,860
Workings Ratio
Net Profit Ratio Net Income 3,792
0.18
Net Sales 21,480
Workings Ratio
Return on Assets Net Income 3,792
0.09
Total Assets 42,611
Workings Ratio
Inventory Turnover Cost of Sales 8,818
1.27
Inventory 6,928
Workings Ratio
Gross Profit Ratio Gross Profit 12,662
0.59
Net Sales 21,480

Part 2

How Working With Multiple Currencies Can Have An Effect On Financial On

Financial Statements

Now that FinOps Culinary Services now has an international business presence in London

and the United States of America, it has two other different currencies (pounds sterling the US dollar)

that are now part of its business operations. To report its financial transactions, the company is not

allowed via its financial statements and annual reports, the company is precluded from using more

than one currency, in other words, the company can only use one currency for reporting. To issue a

financial statement that is reported in a single currency, the company needs to carry out currency

translation, which according to Anastasia B. (September, 2019), is “the process of quoting the amount

of money in one currency in the denomination of another currency. FinOps requires this process as an

integral part of recording its financial transactions because it is usually used in the statement of

financial positions (balance sheets).

Currency translations will aid FinOps in creating financial statements in a single

currency. Thereby also assisting it in meeting governing tax authorities' requirement of the

use of only one denominated currency as part of its recording procedure. The use of a single

currency in financial statements will make these statements easier to read, understand, and
analyze as it will be close to being impossible to draw reasonable conclusions from a

financial statement that is reported in more than one currency.

Steps for Currency Translation

Currency translation can be achieved in three distinct steps highlighted below:

 Determination of FinOps’ functional currency for its business

 Re-measurement of the financial statements of the business in the functional currency

 Recording the Gains or losses on the translation of currencies

 Recording of the gains and losses on the translation of currencies Functional

Currency Determination
Determination of Functional Currency The functional currency of FinOps is the currency

in which it prepares its financial statement which is this case is the Nigerian Naira because

the company is headquartered in Nigeria. Although, the functional currency is usually that of

the company where the business's main headquarters are, there are other ways that the

functional currency may be decided. An alternative to the use of the main headquarter is the

adoption of a currency in which the majority of the business operations are carried out.

Re-measurement of Financial Statements of the businesses in its functional Currency:

After the determination of its functional currency, the next step is for Finops to ensure that its

financial statements are reported only in the selected currency. Each aspect of the financial

statements will be translated into a single currency and this involves calculating the total of

the following items:

 The company’s assets and liabilities

 Specific items in the income statement (Revenue, expenses, gains, and losses)

 Business allocations such as depreciation and amortization

 Cash flows
The company will essentially keep track of the dates on which any or all of the above-listed

transactions occur. While currency translation often majorly takes place at the end of a

financial year, the rates used are determined by the date of the transaction in some cases.

Recording of the gains and losses on the translation of currencies: A currency translation

will usually lead to translation adjustments which must be recorded on the company’s

balance sheet. The gains or losses sequel to translation is mentioned in the equity section of

the balance sheet. Additionally, FinOps has required to records the adjustment in its profit or

loss statement of comprehensive income.

Steps That FinOps will take to reduce the risk of loss when working with multiple

currencies.

According to Craig Anthony (August, 2020), “currency risk is the risk that one currency

will move against another currency, negatively thereby affecting an investment's overall

return”. In other words, the rate of exchange between the two currencies can move adversely

and erode the returns of foreign investment. Investors can accept currency risk and hope for

the best, or they can employ hedging strategies to mitigate or eliminate the risk. The steps

FinOps can take to reduce the risk of loss while working with multiple currencies include:

 By making investments into two currencies or other investments to offset any losses

that may arise from currency exchange rates

 At the start of an investment, by buying contracts or options against loss

 By making use of phone apps and other electronic resources to manage investments in

real-time

 By purchasing contracts in foreign market futures

 By short selling of currency investments

 Accounting for Business Segments.

Product Line Performance Review

Product Line Foods Drinks Total
Revenue 13,962 7,518 21,480
Cost of Sales 7,518 2,255 9,773
Gross Profit 6,444 5,263 11,707
Gross Profit Margin 46% 70% 55%
Product's Contribution to FinOps Sales 65% 35% 100%
Product's Contribution to FinOps' Cost of Sales 77% 23% 100%
Product's Contribution to FinOps' Gross Profit 55% 45% 100%

The two products of FinOps are analyzed, subject to specific available financial

information in terms of their contribution to the overall profitability of the business. The

performance review was done with a strong focus on product profitability and individual

contribution to the company’s operational success or otherwise.

Sales: 65% of the company’s sales came from Foods while Drinks was responsible for only

35%. In terms of sales value volume, food is the most important product.

Cost of Sales: Food generated 77% of the company’s total cost of sales while drinks

contributed only 23% of the cost.

Gross Profit Margin: Drinks’ gross profit margin is 70% which means that 70% of the sales

amount is contributed towards off-setting the company’s operating expenses and its eventual

net income. On the other hand, Foods have 46% gross profit margin, which means only 46%

of sales amount remains to cover operating expenses. Although Drinks are more profitable

than Foods, 55% of the company’s gross profit came from foods.

How to Carry out Performance Review of an Individual Segment of FinOps

Analyzing FinOps’ financial performance is a rather subjective measure of

determining how well it is using the assets from its primary mode of business to generate
revenues. The financial performance of the company may also be used as a general measure

of the company’s overall financial health over a given period as it can tell its investors about

the general well-being of a firm. It's a snapshot of the company’s economic health and the job

its management is doing. To review the financial performance of an individual part of Finops

(for example Drinks), the financial statements that will be used for the evaluation of the

individual part, as well as the company’s overall financial performance, will include the

balance sheet, the income statement, and the statement of cash flows.

There are several ways to measure the financial performance of FinOps’ segment as

well part as well as the whole company’s, but all the measures are being taken in aggregate.

Line items, such as revenue from operations, operating income, or cash flow from operations

can be used, as well as total unit sales. Additionally, a deeper look at the financial statements

for marginal growth rates or any declining debt may be away.

Statement of Financial Position (Balance Sheet): The balance sheet of FinOps is indeed a

snapshot of its finances as of a particular date. It gives an overview of how well the

company’s assets and liabilities have been managed. Information like long-term vs. short-

term debt can be found on the balance sheet as well as information about the type and kind of

assets the company owns and what percentage of assets are liabilities financed or

stockholders' equity financed.

Statement of Profit or Loss (Income Statement): FinOps’ income statement gives a

summary of the company’s operations for the entire year. It starts with sales or revenues and

ends with net income. It is also known as the profit and loss statement. The statement

provides the gross profit margin, the cost of goods sold, operating profit margin, and net

profit margin. It also gives an overview of the number of shares outstanding, as well as a

comparison against the performance of the prior year.

Cash Flow Statement: The cash flow statement can best be described as a combination of

both the income statement and the balance sheet. Arguably, the cash flow statement seems
like the most important financial statement because it gives a reconciliation between net

income and cash flow. This is one can how much the company spent on capital expenditure,

repurchasing of shares, and dividends. It also shows the sources and uses of cash flow from

operations, investing, and financing.

Deciding whether or not to close a segment of your FinOps

The decision to close a segment of FinOps will be the sequel to the company

struggling to achieve its operational, financial, and business goals and objectives. And the

best way to make an evidence-based decision will be to carry out a profitability analysis of

the business segments of FinOps to see which one is generating a positive contribution to the

company’s bottom-line and which one is contributing negatively to the overall company

performance. This exercise will help isolate if such exists, the segment that’s feeding on the

profits of the other segments which will be recommended for closure as the company will be

better off without it. Breaking a business into segments is an essential elemental step in

determining profitability for a particular unit and when segment financial data of FinOps are

being analyzed, the focus will be on their margins for review.

In addition to financial appraisal, the company may adopt the use of Balanced

Scorecards to properly evaluate its segment performances. A balanced scorecard is a strategy

that business management can adopt to balance the health of its business. The balanced

scorecard focuses on strategic goals. By reviewing consolidated financial statements and

individual segments, companies can assist in the overall health of an organization

 References

Alicia Tuovila. (March 21, 2021). Horizontal Analysis. Retrieved from:

https://www.investopedia.com/terms/h/horizontalanalysis.asp

Anastasia Belyh. (September 23. 2019). Financial Statements: How Does Currency

Translation Work. Retrieved from: https://www.cleverism.com/financial-statements-

currency-translation-work/

Brian Misamore. (June 9, 2016). Balance sheets 101: what goes on a balance sheet?.

Retrieved from: https://online.hbs.edu/blog/post/balance-sheets-101-understanding-

assets-liabilities-and-equity

Craig Anthony. (August 9, 2020) .Three Strategies to Mitigate Currency Risk. Retrieved

from: https://www.investopedia.com/articles/investing/041916/3-strategies-mitigate-

currency-risk-eufx.asp

Dangote Cement. (n.d). Dangote Cement Plc Annual Report and Accounts 2020. Retrieved

from: https://dangotecement.com/wp-content/uploads/2021/05/Dangote-Cement-

PlcAnnual-Report-and-Accounts-2020_interactive.pdf

Daniel Liberto. (November 14. 20). (Investopedia. (n.d). Chart of Accounts. Retrieved from:

https://www.investopedia.com/terms/c/chart-accounts.asp

LafargeHolcim.(n.d). Integrated Annual Report 2020. Retrieved from:

https://www.lafargeholcim.com/sites/lafargeholcim.com/files/atoms/files/26022021-

finance-lafageholcim_fy_2020_report-full-en.pdf

Matt Gavin. (August 30, 2019). Gaap vs. Ifrs: what are the key differences and which should

you use?. Retrieved from: https://online.hbs.edu/blog/post/gaap-vs-ifrs

Investing.com. (n.d). LARFAGEHOLCIM Ltd (3420). Retrieved from:

https://www.investing.com/equities/LarfageHolcim-ltd-balance-sheet