FINANCIAL STATEMENTS ANALYSIS AS TOOLS OF FINANCIAL PERFORMANCE OF MANUFACTURING COMPANIES IN RWANDA CASE STUDY: BRALIRWA LTD (2019-2022)

Abstract

A manufacturing industries is regarded as technically efficient if it is able to obtain maximum outputs from given inputs or minimize inputs used in the production of given outputs. The main gap in this study was lack and inadequate financial statement analysis in terms of comparative analysis, common size analysis and trend that lead to poor performance of manufacturing industries. The main objective the study was to assess the contribution of financial statements analysis as tool of the financial performance of manufacturing industries and specific objectives were the followings: To analyze the effectiveness of financial statements analysis practices in Bralirwa Plc. For 2019 to 2020, based on these findings, the comparative income statement given on table 4.1 shows that Bralirwa Plc has been decreased of revenue by 0.17%. The cost of sales has decreased by 2.26%. This has resulted an increase of gross profit by 3.78%. Results from operating activities have increased by 85.86%, the increase in gross profit is not efficient to cover the operating expenses. There is also an increase of Profit before income tax by 351.34% which lead to an increase of Profit of the year by 655.45%.For 2021 to 2022, based on these findings, the comparative income statement given above shows that Bralirwa Plc has been an increase of revenue by 27.56%. The cost of sales has increased by 18.64%. This has resulted an increase of gross profit by 40.20%. Results from operating activities have increased by 35.11%, the increase in gross profit is efficient to cover the operating expenses. There is also an increase of Profit before income tax by 39.67% which lead to an increase of Profit of the year by 28.65%. It is concluded from the above analysis that there is sufficient progress in the performance of the Bralirwa Plc and the overall profitability of the company is good. Based on these findings, the common size income statement given in table 4.3, shows that Bralirwa Plc has been decreased in cost of sales from 65.36% in 2019 to 54.52% in 2022 which caused the high increase of gross profit from 34.64% in 2019 to 45.48% in 2022. The operating expenses also reduced which impact the increase of results from operating activities from 10.59% in 2019 to 26.75% in 2022. The profit before tax increased from2.86% in 2019 to 22.70% in 2022 that implicate the increase of profit and total comprehensive income for the year from 1.18% in 2019 to 14.30% in 2022The findings shows a brief analysis of the info contained by the table 4.4. I will be referencing to the recent year (2022) in the following comments: Non-current assets accounted for 72.90 % of the total assets, while current assets accounted for the remaining 27.10%. The firm has heavily invested in long-term assets (good capital budgeting for future cash flows) compared to the short-term investment (working capital). The Current liabilities account for 52.50% of the total assets, while the long-term liabilities account for 19.07%. For conclusion, this research project was organized in four chapters; the first chapter was the general introduction which included, background of the study, statement of the problem, objectives of the study, research questions, research hypothesis, the scope of the study, the significance of the study, and organization of the study. The second chapter was review of related literature which included the theoretical literature, empirical literature, theoretical framework, critical and research gap, and empirical framework. For recommendation, this study has shed more light on adoption of financial statements analysis and financial performance. Based on the findings and the main emerging issues from the study, the following recommendations were suggested by the researchers. Bralirwa Plc as manufacturing industries should use financial statement analysis as tool for checking its financial performance. Bralirwa Plc managers should ensure that such financial statement analysis practices adopted is done appropriately for making good financial decision. Bralirwa Plc managers need to implement effective management with the aim of ensuring continuous financial performance.