Horizontal analysis provides a line-by-line comparison of the accounts of a company with those of the previous year (Davies and Pain, 2002). The horizontal analysis shows an increase in turnover for both Bellway and Westbury over the three periods. Bellway turnover grew by 41% in 2004, while Westbury’s grew by 57% in 2004. This increase resulted from an increase in sales volume. More importantly is the cost of sales (COS) where cost of sales and turnover is rising in relative proportion to each other.
Westbury’s COS in 2003 was slightly higher than its turnover. Further, the horizontal analysis shows an increase in gross profit for Bellway to 53.7 % over the three years while Westbury’s gross profit improved to 60.4 %.
Operating profit for both Bellway and Westbury showed an increase of 60.2 % of turnover in 2004 over 2002 and 66.7% in 2004 over 2002 respectively. This growth in operating profit for Westbury was as a result of amortization of goodwill and exceptional items. The interest payable for Bellway registered a decrease of 22.8% in 2003 but increased in 2004. (See table 1). Westbury’s interest payable showed a significant increase in 2003 and 2004. This increase resulted from heavy borrowing as a result of acquisitions. Interest payable also increase by 248.9% in 2004.This resulted from other loans. (See table 2). In relation to taxation both Westbury and Bellway registered higher taxes as a result of increase sales. Bellway’s taxes increased to 64.8% in 2004 over 2002, while Westbury’s increased to 60.4% in 2004 over 2002.
Dividends were paid by both companies for the periods each realizing an upward trend in
