Question

How to Analyze (A) company Common Size Balance Sheets?

COMMON SIZE BALANCE SHEETS AS OF December 31, December 31, 2018 2008 December 31, 1998 19.5% 5.8% 10.6% 10.3% 46.2% 33.3% 11.5% 16.8% 12.4% 74.1% 4.0% 53.6% 4.6% 3.2% 65.5% 38.0% 8.9% 6.9% 100.0% 10.3% 5.3% 10.4% 100.0% 4.6% 28.7% 1.2% 100.0% ASSETS 9 Current Assets: 10 Cash and Equivalents 11 Marketable Securities 12 Inventories 13 Accounts Receivable and Other 14 Total Current Assets 15 16 Net Property and Equipment 17 Goodwill 18 Other Assets 19 Total Assets 20 21 LIABILITIES AND EQUITY 22 Current Liabilities: 23 Accounts Payable 24 Accrued Expenses and Other 25 Unearned Revenue 26 Total Current Liabilities 27 28 Long-Term Debt 29 Other Long-Term Liabilities 30 Total Liabilities 31 32 Stockholders' Equity: 33 Common Stock 34 Treasury Stock 35 Additional Paid-in Capital 36 Other 37 Retained Earnings (Accum. Deficit) 38 Total Stockholders' Equity 39 Total Liabilities and Equity 23.5% 14.5% 4.0% 42.0% 43.2% 13.9% 0.0% 57.1% 17.4% 7.4% 0.0% 24.8% 14.4% 16.7% 73.2% 4.9% 5.9% 67.9% 53.6% 0.2% 78.6% 0.0% -1.1% 16.5% -0.6% 12.1% 26.8% 100.0% 0.0% -7.2% 49.6% -1.5% -8.8% 32.1% 100.0% 0.2% 0.0% 46.2% 0.0% -25.0% 21.4% 100.0%

Answer 1

Common Size statement Balance Sheet Analysis – With help of Balance Sheet analysis , Investor to see firm Capital Structure as well sas they can make important observation by analysing Balance Sheet , Total Asset vs Total Liability

In the present Question, we noticed that cash Balance ration has been reduced in 2018 as compared with 2008 . This represents company must pay off Liability and reduced payable amount .

Under current liability , we noticed that significant redcied in account payable balance ( 43% in 2008 ti 23 % in 2018 )

But company also borrowed money from bank to support capex growth (Expansion plan ) . Long term liability increased significantly ( 17% in 2018 vs 6% in 2008) , where as Net Property also increased ( 2018 -38% vs 2008-10%)

From current Asset – Good point to note that company % reduced a lot as well as reduction in Account receivable , this will definitely improve cash in flow to meet Current Liability obligation

Company at present in quite solvent position and No more cash burn . They are internally generating cash to meet short teem liability as well as repayment of Long term liability loan ( Interest part) .

Another important point to note that Accumulated retained Earnings now at +ve sign = 12.1% , earlier year it was –ve %