For information and reference only – not to be submitted as your own work.
This extract shows how an investor-style financial statement analysis can be laid out for an RMIT Financial Accounting and Statement Analysis task. It follows the pattern of the live RMIT Shark Tank investor report question. For the reasoning behind each step, read the companion guide to vertical, horizontal and ratio analysis for a Shark Tank investor report.
The company below, “Company X”, is fictional. Every figure is illustrative, built to be internally consistent so you can check the arithmetic. Your own report must use the allocated company’s real statements from the database your course specifies. If you want the full workflow handled by a specialist, see our financial statement analysis support.
What this sample covers
- Common-size (vertical) analysis of the income statement and balance sheet.
- Year-on-year (horizontal) analysis across three financial years.
- Ten ratios across liquidity, profitability, efficiency and solvency, with the formula shown, plus one competitor column.
- A short interpretation and an investor recommendation paragraph.
- The Excel formulas behind the tables and a slide outline with script lines.
- Harvard in-text citations and a reference list.
The brief asks for a report of roughly 1,000 words, a formula-driven spreadsheet and a slide deck with script. The table maps those deliverables to this extract. Weightings are our own illustration, because we are not reproducing any marking scheme.
| Deliverable | Where it appears in this extract | Indicative emphasis (illustrative) |
|---|---|---|
| Report: introduction and conclusion | Introduction, Recommendation | 20% |
| Report: vertical and horizontal analysis | Sections 1 and 2 | 30% |
| Report: ratio analysis with competitor | Section 3 | 25% |
| Excel workbook with visible formulas | Excel formulas table | 15% |
| Slides with script | Slide outline table | 10% |
Introduction (extract)
Company X is a fictional listed manufacturer on an ASX-style exchange. This report analyses its financial statements for FY2023 to FY2025 (all amounts in $ million, illustrative) to decide whether it deserves a place in an investor’s portfolio. The analysis follows the standard sequence of common-size statements, trend analysis and ratio analysis described by Subramanyam (2014), and it assumes the statements are presented in line with AASB 101 (AASB n.d.).
The pitch to investors is simple. Company X is growing revenue and converting more of each dollar into profit, but it is doing so while tying up more cash in customers and stock. The sections below test that story with numbers.
1. Vertical analysis
Vertical analysis expresses each line as a percentage of a base: revenue for the income statement and total assets for the balance sheet. It removes the effect of size, so years (and competitors) can be compared fairly.
Income statement, % of revenue (illustrative)
| Line item | FY2023 ($m) | FY2023 % | FY2024 ($m) | FY2024 % | FY2025 ($m) | FY2025 % |
|---|---|---|---|---|---|---|
| Revenue | 820.0 | 100.0 | 905.0 | 100.0 | 968.0 | 100.0 |
| Cost of goods sold | 492.0 | 60.0 | 533.0 | 58.9 | 561.0 | 58.0 |
| Gross profit | 328.0 | 40.0 | 372.0 | 41.1 | 407.0 | 42.0 |
| Operating expenses | 205.0 | 25.0 | 228.0 | 25.2 | 242.0 | 25.0 |
| EBIT | 123.0 | 15.0 | 144.0 | 15.9 | 165.0 | 17.0 |
| Interest expense | 14.0 | 1.7 | 17.0 | 1.9 | 18.0 | 1.9 |
| Profit before tax | 109.0 | 13.3 | 127.0 | 14.0 | 147.0 | 15.2 |
| Income tax (30%) | 32.7 | 4.0 | 38.1 | 4.2 | 44.1 | 4.6 |
| Net profit | 76.3 | 9.3 | 88.9 | 9.8 | 102.9 | 10.6 |
Balance sheet, % of total assets (illustrative)
| Line item | FY2023 ($m) | FY2023 % | FY2025 ($m) | FY2025 % |
|---|---|---|---|---|
| Cash | 60 | 7.5 | 48 | 5.2 |
| Receivables | 95 | 11.9 | 132 | 14.3 |
| Inventory | 110 | 13.8 | 142 | 15.3 |
| Total current assets | 280 | 35.0 | 340 | 36.7 |
| Total assets | 800 | 100.0 | 926 | 100.0 |
| Total current liabilities | 160 | 20.0 | 208 | 22.5 |
| Total liabilities | 360 | 45.0 | 443 | 47.8 |
| Total equity | 440 | 55.0 | 483 | 52.2 |
Reading the tables. Cost of goods sold fell from 60.0% to 58.0% of revenue, so gross margin widened by two points. Operating expenses held at 25.0%, which means almost the whole gain flowed through to EBIT (15.0% to 17.0%). On the balance sheet, receivables and inventory together rose from 25.6% to 29.6% of total assets, while cash fell from 7.5% to 5.2%. Growth is absorbing working capital.
2. Horizontal analysis
Horizontal analysis measures change over time. Year-on-year change is (current year minus prior year) divided by prior year. An index uses FY2023 as the base of 100.
| Item | FY2024 change | FY2025 change | FY2025 index (FY2023 = 100) |
|---|---|---|---|
| Revenue | +10.4% | +7.0% | 118.0 |
| Gross profit | +13.4% | +9.4% | 124.1 |
| Operating expenses | +11.2% | +6.1% | 118.0 |
| EBIT | +17.1% | +14.6% | 134.1 |
| Net profit | +16.5% | +15.7% | 134.9 |
| Receivables | +24.2% | +11.9% | 138.9 |
| Inventory | +16.4% | +10.9% | 129.1 |
| Total assets | +8.1% | +7.1% | 115.8 |
| Short-term debt | +30.0% | +15.4% | 150.0 |
| Cash | -13.3% | -7.7% | 80.0 |
Net profit grew faster than revenue in both years (index 134.9 against 118.0), a sign of operating leverage. The warning sign is receivables, which grew faster than sales in both years (index 138.9 against 118.0). Short-term debt rose by half over the period while cash shrank by a fifth.
3. Ratio analysis
Ratios use closing balances to keep the workings transparent; state this assumption in your own report. Debt-to-equity is defined here as total liabilities divided by total equity. “Competitor Y” is a second fictional firm, shown for FY2025 only (illustrative).
| Group | Ratio | Formula | FY2023 | FY2024 | FY2025 | Competitor Y FY2025 |
|---|---|---|---|---|---|---|
| Liquidity | Current ratio | Current assets / current liabilities | 1.75 | 1.66 | 1.63 | 1.90 |
| Liquidity | Quick ratio | (Current assets – inventory) / current liabilities | 1.06 | 0.98 | 0.95 | 1.20 |
| Profitability | Gross margin | Gross profit / revenue | 40.0% | 41.1% | 42.0% | 38.5% |
| Profitability | Net margin | Net profit / revenue | 9.3% | 9.8% | 10.6% | 8.1% |
| Profitability | Return on assets | Net profit / total assets | 9.5% | 10.3% | 11.1% | 8.4% |
| Profitability | Return on equity | Net profit / total equity | 17.3% | 19.3% | 21.3% | 14.2% |
| Efficiency | Asset turnover | Revenue / total assets | 1.03x | 1.05x | 1.05x | 1.04x |
| Efficiency | Receivable days | Receivables / revenue x 365 | 42.3 | 47.6 | 49.8 | 41.0 |
| Solvency | Debt-to-equity | Total liabilities / total equity | 0.82 | 0.88 | 0.92 | 0.69 |
| Solvency | Interest cover | EBIT / interest expense | 8.8x | 8.5x | 9.2x | 7.6x |
Interpretation. Profitability is clearly ahead of Competitor Y: net margin of 10.6% against 8.1%, and ROE of 21.3% against 14.2%. Part of that ROE gap comes from higher leverage (0.92 against 0.69), so an investor should not read it as pure operating strength. Asset turnover is flat at about 1.05x, which tells us the profit gain came from margin, not from using assets harder.
Liquidity is the weak spot. The quick ratio dropped below 1.0 in FY2024 and again in FY2025, and receivable days lengthened by about seven and a half days over two years (42.3 to 49.8), against 41.0 for Competitor Y. Interest cover of 9.2x is comfortable, so the debt is serviceable for now.
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Excel formulas behind the tables
The marker needs to see formulas, not pasted values. This layout assumes FY2023 to FY2025 sit in columns B to D, with revenue in row 5, receivables in row 12 and total assets in row 20 (illustrative layout).
| Purpose | Example formula | Note |
|---|---|---|
| Vertical analysis, income statement | =B6/B$5 | Lock the revenue row with $ so the formula copies down |
| Vertical analysis, balance sheet | =B12/B$20 | Base is total assets |
| Year-on-year change | =(C5-B5)/B5 | Format as percentage, one decimal |
| Index to base year | =D5/$B5*100 | Lock the column of the base year |
| Current ratio | =B15/B25 | Current assets over current liabilities |
| Receivable days | =B12/B5*365 | Closing balance method |
| Interest cover | =B8/B9 | EBIT row over interest row |
Recommendation (extract)
On this evidence, Company X merits a conditional “invest”. Margins have widened every year, net profit is up 34.9% over two years on 18.0% revenue growth, and returns on assets and equity are above the peer. The conditions are working-capital discipline and leverage. If receivable days keep lengthening and short-term debt keeps rising faster than cash, the quick ratio will fall further below 1.0 and the growth story becomes a funding story. We would invest, and ask management for a clear plan to bring receivable days back under 45 (an illustrative target).
Slide outline and script lines
| Slide | Visual | Script line (illustrative) |
|---|---|---|
| 1. The pitch | Company X headline numbers | “Revenue of $968 million, up 18% in two years, and profit growing twice as fast.” |
| 2. Where the money comes from | Pie chart of cost and margin split, FY2025 | “Of every revenue dollar, 42 cents is gross profit and about 11 cents reaches shareholders.” |
| 3. Growth trend | Line chart of revenue and net profit index | “Net profit index is 134.9, against 118.0 for revenue.” |
| 4. Peer comparison | Clustered bar chart of net margin and ROE | “We beat the peer on margin and on return on equity.” |
| 5. The risk | Bar chart of quick ratio and receivable days | “Customers are paying us about a week slower than two years ago.” |
| 6. Decision | Recommendation box | “We recommend investing, subject to a plan to tighten collections.” |
Further help
If you are comparing methods, our earlier financial statement analysis and valuation sample shows a different course and approach. For structure and polish, see our report writing help and wider accounting assignment help. All samples are in the samples library, and the warranty policy explains what our service covers.
About the expert
This extract was prepared with guidance from Bryan Chen, an accounting expert with a Ph.D. in Accounting from the SMU School of Accountancy, who works on accounting case studies, dissertations and essays.
References
Australian Accounting Standards Board (n.d.) AASB 101 Presentation of Financial Statements, compilation no. 4, 30 June 2021. Available at: https://standards.aasb.gov.au/node/58
Subramanyam, K.R. (2014) Financial statement analysis. 11th edn. New York: McGraw-Hill Education. Available at: https://www.mheducation.com/highered/product/Financial-Statement-Analysis-Subramanyam.html
