| MYSTERY COMPANY BALANCE SHEET |
Common-Size Balance Sheet |
Sparklines
ABOUT THE BALANCE SHEET |
| Consolidated Balance Sheet – USD ($) $ in Millions |
2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 Optional
The balance sheet reports a firm’s total assets, and how these assets are financed, through a mix of debt and equity. |
| Cash and cash equivalents |
14,557 |
15,890 |
19,334 |
20,522 |
31,750 |
Remember the Accounting Equation: Assets = Liabilities + Shareholder’s Equity |
| Short-term investments |
2,859 |
3,918 |
6,647 |
10,464 |
9,500 |
| Total cash |
17,416 |
19,808 |
25,981 |
30,986 |
41,250 |
That mix of debt and equity used to finance a firm’s assets is called the firm’s CAPITAL STRUCTURE – You will see this term later! |
| Receivables |
5,612 |
6,423 |
8,339 |
13,164 |
16,677 |
A standard balance shee has three parts: assets, liabilities, and equity. The assets and liabilities are divided into short-term and long-term. |
| Inventories |
8,299 |
10,243 |
11,461 |
16,047 |
17,174 |
The balance sheet is the only financial statement which applies to a single point in time. |
| Total current assets |
31,327 |
36,474 |
45,781 |
60,197 |
75,101 |
| Property, plant and equipment |
22,730 |
30,053 |
42,441 |
68,573 |
95,770 |
There is a very important distinction between Short-Term and Long-Term |
| Accumulated Depreciation |
(5,763) |
(8,215) |
(13,327) |
(19,707) |
(33,973) |
Short-term assets and liabilities refer to a firm’s operations |
| Property, plant and equipment, net |
16,967 |
21,838 |
29,114 |
48,866 |
61,797 |
Short-term assets and liabilities are expected to be converted to cash or paid off within 1 year |
| Goodwill |
3,319 |
3,759 |
3,784 |
13,350 |
14,548 |
Short-term assets should more than offset short-term liabilities, which represents a firm’s liquidity |
| Intangible assets |
764 |
762 |
854 |
3,371 |
4,110 |
| Other long-term assets |
2,128 |
2,611 |
3,869 |
5,526 |
7,092 |
Long-term assets and liabilities last longer than a year and are considered fixed |
| Total non-current assets |
23,178 |
28,970 |
37,621 |
71,113 |
87,547 |
Stockholder’s equity is assumed to have an infinite life – very long-term |
| TOTAL ASSETS |
| 54,505 |
| 65,444 |
| 83,402 |
| 131,310 |
| 162,648 |
A firm’s short and long-term assets combined should more than offset a firm’s long-term liabilities, |
| Accounts payable |
16,459 |
20,397 |
25,309 |
34,616 |
38,192 |
which represents the solvency of a firm |
| Accrued liabilities |
9,807 |
10,384 |
13,739 |
18,170 |
23,663 |
| Deferred revenues |
1,823 |
3,118 |
4,768 |
5,097 |
6,536 |
Contrary to what your textbook states, the liquidity of a firm does NOT refer to the overall financial position (solvency) of a firm! |
| Total current liabilities |
28,089 |
33,899 |
43,816 |
57,883 |
68,391 |
While a lower liquidity could possibly be a precursor or early sign of financial distress, it does not mean the company is headed |
| Long-term debt |
8,265 |
8,235 |
7,694 |
24,743 |
23,495 |
for banckruptcy. You would need more information to determine that. |
| Capital leases |
4,224 |
5,948 |
7,519 |
13,183 |
16,292 |
You would have to look at the strength of the firm’s long-term assets to determine the solvency of the firm. |
| Deferred taxes liabilities |
1,531 |
2,016 |
1,787 |
1,994 |
2,386 |
Many firm’s go through periods of low liquidity and are more than able to rebound from this. |
| Other long-term liabilities |
1,655 |
1,962 |
3,301 |
5,798 |
8,535 |
Remember: Liquidity is only about short-term obligations, and Solvency is about the long-term obligations |
| Total non-current liabilities |
15,675 |
18,161 |
20,301 |
45,718 |
50,708 |
| Total liabilities |
43,764 |
52,060 |
64,117 |
103,601 |
119,099 |
| Liquidity Ratios |
: Current ratio and
Quick Ratio |
Solvency Ratios: Debt Ratio, Debt-to-Equity,
| Times Interest Earned |
| Common stock |
5 5 5 5 5
| Additional paid-in capital |
11,135 |
13,394 |
17,186 |
21,389 |
26,791 |
Healthy firm’s are normally both solvent and possess adequate liquidity. However, it is very possible for a healthy company |
| Retained earnings |
1,949 |
2,545 |
4,916 |
8,636 |
19,625 |
to have low liquidity. It is also possible for a firm with a very healthy liquidity to go bankrupt because it could not cover its |
| Treasury stock |
|
|
|
| (1,837) |
(1,837) (1,837) (1,837) (1,837)
long-term debt. |
| Accumulated other comprehensive income |
(511) |
(723) |
(985) |
(484) |
(1,035) |
| Total stockholders’ equity |
10,741 |
13,384 |
19,285 |
27,709 |
43,549 |
Long-term assets represent the value of a firm’s property, equipment and other capital assets and investments, minus depreciation |
| TOTAL LIABILITIES AND SHAREHOLDERS EQUITY |
54,505 65,444 83,402 131,310 162,648
what the firm owns – used for the production of goods or services |
| Short-term assets are a firm’s cash, short-term investments, receivables, and inventories, |
| a firm’s revenue from operations – used to facilitate day-to-day operational expenses and short-term investments. |
| Balance Sheet Analysis |
| List your observations from the Balance Sheet Analysis here: |
The textbook’s definitions of Income Statement and Balance Sheet are a little confusing. |
| Income Statement = Financial summary of a firms operating results |
| Balance Sheet = Summary of firm’s financial position |
| Just remember that the Income Statement summarizes the firm’s income |
| and the Balance Sheet balances the firm’s Assets with its Debt and Equity |
| The Common-Size Balance Sheet expresses the Balance Sheet as a percentage of
|
|
|
| Total Assets |
| Specifically, the asset part of the Balance Sheet is expressed in terms of Total Assets |
| and the Liabilities and Equity portion is expressed in terms of Total Liabilities and Shareholder’s Equity |
| But, since Total Assets = Total Liabilities and Shareholder’s Equity, it’s easier to just say it is a percentage of Total Assets. |
| (Divide everything by Total Assets or Total Liabilities and Shareholder’s Equity) |
