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Xerox Analysis Report

In: Other Topics

Submitted By bethisland
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Horizontal analysis is an approach used by potential investors who want to examine the trend in profitability of a specific company. Investors could look at items such as sales and see a rise or decline but most prefer to look deeper into the company, as horizontal analysis is “only a first indication of the financial position of the company” (Hann, P. 2011). Because of this, vertical analysis is often required as more evidence to back up these claims.
Generally the first item looked at on the Horizontal Analysis is Revenues. For Xerox, going back three years, it appears as though they have an upward trend in sales right now. They jumped from 102.9% in 2011 to 103.5% in 2012. The rise in sales in both upward and steady.
Next, an investor might be likely to look at the Horizontal data for Gross Profit for a firm. Here the investor will discover that the percentage in profit has dropped from 2011 to 2012. It was a large dip from 99.57% to 94.20% at last tally, in 2012. This means the company is experiencing a downward trend. To discover the reasons why, the investor might then want to take a look at the cost of sales for Xerox. The cost of sales in Xerox’s case is significantly higher than their actual sales, and this has been an upward trend as well, since the cost of sales for this company also appears to be steadily climbing.
Cost of sales is an important piece of information for an investor to have. “Professional investors pay close attention to the cost of sales because when in increases it reduces a company’s earnings and earnings drive stock prices” (TeenVestor, n.d.). The stocks of businesses, which have expenses that are consistently higher than their sales, are not generally considered good investments. The operating expenses would be the next logical place to look to determine why the cost of sales is increasing. Xerox however, has a decrease in...

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