How Buffett Interprets the Balance Sheet

• Cash and Equivalents:  
• A high number means either:

1. The company has competitive advantage generating lots of cash 
2. Just sold a business or bonds (not necessarily good)
3. A low stockpile of cash usually means poor to mediocre economics. 

•  There are 3 ways to create large cash reserve. 
1. Sell new bonds or equity to public 
2.  Sell business or asset 
3.  It has an ongoing business generating more cash than it burns (usually means durable competitive advantage)
• When a company is suffering a short term problem, Buffett looks at cash or marketable securities to see whether it has the financial strength to ride it out. 
• Important: Lots of cash and marketable securities + little debt = good chance that the business will sail on through tough times.
• Test to see what is creating cash by looking at past 7 yrs of balance sheets. This will reveal how the cash was created.

• Inventory

• Manufacturers with durable competitive advantages have the advantage that the products they sell do not change, and therefore will never become obsolete. Buffett likes this advantage.
• When identifying manufacturers with durable competitive advantage, look for inventory and net earnings that rise correspondingly. This indicates that the company is finding profitable ways to increase sales which called for an increase in inventory.
• Manufacturers with inventories that spike up and down are indicative of competitive industries subject to boom and bust.

• Net Receivables 
• Net receivables tells us a great deal about the different competitors in the same industry. 
• In competitive industries, some attempt to gain advantage by offering better credit terms, causing increase in sales and receivables.
• If company consistently shows lower % Net receivables to gross sales than competitors, then it usually has some kind of competitive advantage which requires further digging.

• Property, Plant & Equipment

• A company with durable competitive advantage doesn’t need to constantly upgrade its equipment to stay competitive. The company replaces when it wears out. 
• On the other hand, a company without any advantages must replace to keep pace.
• Difference between a company with a moat and one without is that the company with the competitive advantage finances new equipment through internal cash flows, whereas the no advantage company requires debt to finance.
• Producing a consistent product that doesn’t change equates to consistent profits. There is no need to upgrade plants which frees up cash for other ventures. Think Coca Cola, Johnson & Johnson etc.

• Goodwill

• Whenever you see an increase in goodwill over a number of years, you can assume it’s because the company is out buying other businesses above book value. 
• GOOD if buying businesses with durable competitive advantage.
• If goodwill stays the same, the company when acquiring other companies is either paying less than book value or not acquiring. Businesses with moats never sell for less than book value.

• Intangible Assets

• Intangibles acquired are on balance sheet at fair value.
• Internally developed brand names (Coke, Wrigleys, Band-Aid) however are not reflected on the balance sheet.
• One of the reasons competitive advantage power can remain hidden for so long.

• Total Assets & Return on Total Assets

• Measure efficiency using ROA
• Capital is barrier to entry. One of things that make a competitive advantage durable is the cost of assets needed to get in. This is why we calculate the Asset Reproduction Value along with the EPV.
• Many analysts argue the higher return the better. Buffett states that really high ROA may indicate vulnerability in the durability of the competitive advantage.
• E.g. Raising $43b to take on KO is impossible, but $1.7b to take on Moody’s is. Although Moody’s ROA and underlying economics is far superior to Coca Cola, the durability is far weaker because of lower entry cost.

• Current Liabilities
• Includes accounts payable, accrued expenses, other current liabilities and short term debt.
• Stay away from companies that ‘roll over the debt’ e.g. Bear Stearns
• When investing in financial institutions, Buffett shies from those who are bigger borrowers of short term than long term debt.
• His favorite ‘Wells Fargo’ has 57 cents short term debt for every dollar of long term
• Aggressive banks (like Bank of America) has $2.09 short term for every dollar long term
• Durability equates to the stability of being conservative.

• Long Term Debt coming Due

• Some companies lump their yearly long term debt due with short term debt on the balance sheet. This makes it seem like there is more short term debt than the real amount. 
• Important: Companies with durable comparable advantages need little or no LT debt to maintain operations. 
• Too much debt coming due in a single year spooks investors and can offer attractive entry points.
• However, a mediocre company in problems with too much debt due leads to cash flow problems and certain bankruptcy.

• Long Term Debt

• Buffett says that durable competitive advantages carry little to no LT debt because the company is so profitable that even expansions or acquisitions are self financed.
• We are interested in long term debt load for the last ten years. If the ten yrs of operation show little to no long term debt, then the company has some kind of strong competitive advantage.
• Buffett’s historic purchases indicate that on any given year, the company should have sufficient yearly net earnings to pay all long term within 3 or 4 year earnings period. (e.g. Coke + Moody’s = 1yr)
• Companies with enough earning power to pay long term debt in less than 3 or 4 years is a good candidate in our search for long term competitive advantage. 

• BUT, these companies are targets for leveraged buy outs, which saddles the business with long term debt
• If all else indicates the company has a moat, but it has ton of debt, a leveraged buyout may have created the debt. In these cases the company’s bonds offer the better bet, in that the company’s earnings power is focused on paying off the debt and not growth. 
• Important: little or no long term debt often means a Good Long Term Bet

• Total Liabilities & Debt to Shareholders Equity Ratio

• Debt to shareholders equity ratio helps identify whether the company uses debt or equity (includes retained earnings) to finance operations.
• Company with a moat uses earning power and should show higher levels of equity and lower level of liabilities.
• Debt to Shareholders Equity Ratio : Total Liabilities / Shareholders Equity
• Problem with using as identifier is that economics of companies with durable competitive advantages are so great they don’t need large amount of equity or retained earnings on the balance sheet to get the job done. 
• Important: if the Treasury Share Adjusted Debt to Shareholder Equity Ratio is less than 0.8, the company has a durable competitive advantage.

• Retained Earnings: Buffett’s Secret

• One of the most important indicators of durable competitive advantage. Net earnings can be paid out as dividends, used to buy back shares or retained for growth.
• If the company loses more than it has accumulated, retained earnings is negative.

• If a company isn’t adding to its retained earnings, it isn’t growing its net worth.
• Rate of growth of retained earnings is good indicator whether it’s benefiting from a competitive advantage.
• Microsoft is negative because it chose to buyback stock and pay dividends
• The more earnings retained, the faster it grows and increases growth rate for future earnings.

• Treasury Stock

• Carried on the balance sheet as a negative value because it represents a reduction in shareholders equity.
• Companies with moats have free cash, so treasury shares are hallmark of durable competitive advantages.
• When shares are bought back and held as treasury stock, it is effectively decreasing the company equity. This increases return on shareholders equity.
• High return is a sign of competitive advantage. It’s good to know if it’s generated by financial engineering or exceptional business economics or combination.
• To see which is which, convert negative value of treasury shares into a positive and add it to shareholders equity. Then divide net earnings by new shareholders equity. This will give the return on equity minus effects of window dressing.

• Important: presence of treasury shares and a history of buyback are good indicators that company has competitive advantage

The Balance Sheet Summary Table
To continue seeing the full summary tables for the balance sheet and cash flow statement, just click any of the social buttons to unlock the content immediately.

Cash and Equivalents	lots of cash and marketable securities + little debt	Test to see what is creating cash by looking at past 7 yrs of balance sheets
Inventory	Look for an inventory and net earnings that are on a corresponding rise	inventories that spike up/down are indicative of  competitive industries prone to (boom/bust)
Net Receivables	consistently shows lower % net receivables to gross sales than competitors	d.c.a. no need to offer generous credit
Goodwill	increase in goodwill over number of years assume because company out buying companies >BV	d.c.a.’s never sell for less than BV
LT Investments	can have valuable assets on books at valuation < market price (booked at lowest price)	tells us about investment mindset of management (Looking for d.c.a.?)
Intangible Assets	Internally developed brands not reflected on BS
Total Assets + ROA (Measure efficiency using ROA)	Higher return the better (but: really high ROA may indicate vulnerability in durability of c.a.)	Capital = barrier to entry
ST Debt	financial institutions. Buffett shies from those who are bigger borrowers of ST than LT debt
LT Debt Due	d.c.a. need little or no LT debt to maintain operations
Total CL + Current Ratio	higher the ratio, the more liquid, the greater its ability to pay CL	d.c.a.’s don’t need ‘liquidity cushion’ so may have <1
LT Debt	LT debt load for last ten yrs. ten yrs w/ little LT debt = d.c.a.	earning power to pay their LT debt in <3/4 yrs = good candidates
Total Liabilities + Treasury Share-Adjusted debt to Shareholder Eq Ratio	If <.80, Good chance company has d.c.a.
Preferred + Common Stock	in search for d.c.a. we look for absence of preferred stock
Retained Earnings	Rate of growth of RE is good indicator
Treasury Stock	presence of treasury shares and a history of buyback are good indicators that company has d.c.a.	convert –ve value of treasury shares into +ve and add shareholder eq. Divide net earnings by new shareholders eq. give us return on equity minus dressing.
Return on Shareholder equity	d.c.a. show higher than average returns on shareholders equity	If company shows history of strong net earnings, but shows –ve sholder equity, probably d.c.a. because strong companies don’t need to retain

Read more on the Balance Sheet Analysis  on my previous post - http://intelligentinvestor8.blogspot.my/2014/05/balance-sheet-analysis.html

Or, take a look on How Buffett read other financial statements:-

• How Buffett Interprets the Income Statement
• How Buffett Interprets the Balance Sheet 
• How Buffett Interprets the Cash Flow Statement

References:-

• Uncovering How Buffett Interprets the Financial Statements - Jae Jun

Balance Sheet Analysis - APOLLO vs LONBISC

Horizontal & Vertical Analysis

Table 1 - Table 4 in the appendix sections shows the trend of APOLLO’s and LONBISC’s  balance sheet from 2008 to 2013. Figure 1 and Figure 2 in the appendix depicts the trend of its growth in revenue, equity, receivables and inventories.

Cash

APOLLO's cash and cash equivalent grew by 578% in 5 years, or a CAGR of 46.67%. However, part of the cash is converted from marketable securities as the marketable securities become 0 on year 2013. In view of this, it will be more meaningful if we examine the growth rate for the cash & short term investment.  It show us a 98% of growth with a CAGR of 14.55%  This indicate that the business is generating cash. This is despite it have been giving reasonable good dividends (> 4% D.Y.) every year. 

LONBISC's cash and cash equivalent have a negative growth of -3.66% (CAGR -0.72%) over the last 5 years.  And, LONBISC pay a minimal dividend (DY 1.2%) with dividend payout ratio < 30% for past 5 years. LONBISC seem not able to generate cash from its business. And, the more worrisome part is LONBISC Cash/Total Debt is 12%. Does LONBISC have enough cash to serve it's debt?

Equity

APOLLO's equity increases by 30%, or a CAGR of 5.39%. Including the 4% dividend  yield, the total value created in term of book value and dividend yield is 9.39% a year since 5 years ago. This is below the return of the broad market over the same period of 12.5%.

LONBISC's equity increases by 95.88% and a 0 retained earnings. The increase is contribute from the increase if common stock (82.23%) and reserve (273.57%). This show that the company have been raising fund from equity but not create value through it operations.

Inventory

APOLLO’s inventory increased 72.56% (CAGR 11.53%), while the revenue increase 22.97% (CAGR 4.22%). However, the inventory is 7.76% of the total assets and it is align with its previous years records. In view of the revenue is growing up, I believe the inventory increased is due to higher anticipated sales. Anywhere, investor need to monitor closely on the revenue growth and inventory level on next financial result to confirm the assumption. 

LONBISC’s inventory increased 61.48% (CAGR 10.06%), while the revenue increase 109.88% (CAGR 15.98%). And, the inventory is only a 4.26% of the total assets and it is lowest in the history. It seem LONBISC have a better result in inventory management than LONBISC. 

Trade receivables

APOLLO’s Trade receivables on year 2013 is 14.33% of total asset is slightly higher compare to its historical range. It may mean its customers are taking a little bit longer to pay. However, the  growth in trade receivables at 16.08% (CAGR 3.03%) and is lower than the revenue growth rate of 22.97% (CAGR 4.22%). This show us the sales proceeds are collected and converted to cash, as evidence from the increase in cash and cash equivalent.

While, company’s B trade receivables is only 11.44% of total asset, but it is the highest if compare to its historical value. Its customers might take a little bit longer to pay. And, the growth in trade receivable is 391.51% (CAGR 37.50%) while the revenue is only increase 109.88% (CAGR 15.98%). The trend is worrying and it might show take the company might not able to collect the sales proceeds from its customers.

PPE

The amount of company’s A property, plant and equipment is increasing on 37.62% with  a CAGR of 6.60% and the growth rate is much more faster than the revenue growth rate of 22.97% (CAGR 4.22%). It show that the company need more CAPEX to increase sales, and might not able to turn the net profit to free cash flow easily.  

For LONBISC, the PPE  is increasing on 127.32% with  a CAGR of 17.85% and the growth is slightly faster than the  revenue growth of 109.88% (CAGR 15.98%). Company seem need CAPEX to increase revenue and might not able generate free cash flow easily.

Share Capital & Debt

Over the years, APOLLO’s share capital is constant and thus, there is no dilution of its earnings per share. And, there is no long term debt on APOLLO, it show that APOLLO is using it’s own generated fund to sponsor the growth.  This shows there is little risk in  investing in its stock.

But, LONBISC’s share capital is increasing on 82.23% and there is a huge dilution on its earnings. LONBISC is paring down it’s long term loan but the short term is loan is growing on 60.35%. It seem that LONBISC not able to generate fund to sponsor the growth and it might need additional fund (from equity or debt) to fund its growth. The risk in investing in LONBISC is higher than APOLLO

Investors of APOLLO have been collecting net income in the form of dividend each year. Whereas shareholders of B has to fork out more money overall into this company. LONBISC’s unabated increase in debts (debts include all long and short term borrowings, hire purchase, bankers acceptance, overdrafts, and term loans) is very alarming! 

Asset breakdown

Figure 3 and Figure 4 depicts the breakdown of the total assets of APOLLO and LONBISC respectively.The total assets of APOLLO is made up of 25.31% cash & short term investment, PPE 45%, receivables 14.33%, and inventories 7.76%. The total assets of LONBISC consists of 4.19% of cash & short term investment, PPE 74.34%, receivables 13.15%, and inventories 4.18%.  Why must LONBISC require such a high outlay of fixed assets and burdening its balance sheet?

APOLLO have better quality of its assets if compare to LONBISC.  

Ratio Analysis

Liquidity risk

APOLLO has excellent liquidity ratios with current ratio 13.77 times and a quick ratio 11.48 times More than 50% of the current asset is cash & cash equivalents and it has no problem at all to pay its short term obligations.

LONBISC’s current ratio and quick ratio is 0.62 and 0.49 respectively. Both ratios are fall below 1.0, and it indicate that LONBISC might have difficulity to repay all its current liabilities. LONBISC is in very high risk if the economy turns for the worse, and if there is another currency crisis with this type of liquidity ratio.

Long Term Financial Strength

APOLLO debt/equity ratio is 0 (< 2) and financial leverage ratio is 1.11(< 3), and in fact APOLLO has no short-term nor long-term loan at all. APOLLO hence will have no trouble paying creditors as well as obtaining additional long-term funding when needed. Instead it has excess cash of about 56m, or 70 sen per share which can be distributed to shareholders without any significant adverse effect on its operations.

LONBISC debt/equity ratio is 0.13 (< 2) and financial leverage ratio is 1.88(< 3). The financial leverage of LONBISC is not fully leverage yet and LONBISC might able to raise more fund from debt in future. Although this ratio is still not that big compared to the benchmark of 2 or 3, but the fact that B doesn’t produce any FCF to service the interest payment is alarming.

It clearly show that APOLLO have a better long term financial strength than LONBISC.

Conclusions

APOLLO has a healthy balance sheet. The trend of APOLLO’s balance sheet shows a healthy growth of its cash, equity, receivables and inventories. It has no debt, with high liquidity and financial strength ratios. The quality of its assets is high. Hence APOLLO presents a low risk investment option.

While LONBISC balance sheet is not as healthy as APOLLO, the trend of cash and receivables is worrying and it might need to raise cash via equity or debt if the situation not improving.  

Appendix 

Year	2013	2012	2011	2010	2009		CAGR
Assets
Current asset
Cash and cash equivalent	976.56%	220.73%	275.49%	163.75%	100.00%		77%
Marketable securities	0.00%	115.78%	102.31%	142.56%	100.00%		-100%
Trade Account Receivables	172.48%	123.13%	108.72%	96.14%	100.00%		15%
Other receivables	0.00%	290.76%	116.39%	203.08%	100.00%		-100%
Inventories	162.95%	141.05%	154.53%	119.34%	100.00%		13%
Tax refundable	5.66%	6.23%	19.55%	47.90%	100.00%		-51%
Total current assets	146.02%	123.52%	119.41%	122.66%	100.00%		10%
Cash & Short Term Investment	151.34%	132.04%	129.15%	145.84%	100.00%		11%
Non-current assets
Property, plant and equipment	126.50%	129.51%	127.72%	108.53%	100.00%		6%
Investment properties	103.03%	104.63%	106.22%	99.03%	100.00%		1%
Leasehold land use rights	12.16%	26.18%	27.97%	127.09%	100.00%		-41%
Goodwill	-	-	-	-	-		-
Deferred tax	352.00%	372.00%	144.00%	28.00%	100.00%		37%
Other non-current assets	30.88%	21.20%	6.73%	7.27%	100.00%		-25%
Total non-current assets	105.78%	108.10%	105.54%	98.20%	100.00%		1%
Total Assets, TA	121.73%	114.21%	111.04%	107.90%	100.00%		5%
Liabilities
Current liabilities
Short-term loan
Trade Account Payable	408.73%	212.57%	246.33%	180.54%	100.00%		42%
Other payables and accruals	2.15%	90.92%	89.50%	81.39%	100.00%		-62%
Current tax payable	829.80%	132.32%	98.48%	483.84%	100.00%		70%
Other current liabilities	0.00%	305.88%	394.12%	4058.82%	100.00%		-100%
Total current liabilities, CL	149.69%	128.78%	136.90%	135.53%	100.00%		11%
Non-current liabilities
Long-term loan
Retirement benefits	92.68%	85.37%	79.08%	72.91%	100.00%		-2%
Deferred tax	112.21%	116.36%	113.53%	105.43%	100.00%		3%
Total non-current liabilities	110.14%	113.09%	109.89%	101.99%	100.00%		2%
Total liabilities	120.98%	117.39%	117.29%	111.18%	100.00%		5%
Equity
Share capital	100.00%	100.00%	100.00%	100.00%	100.00%		0%
Share premium	-	-	-	-	-		-
Other reserves	-	-	-	-	-		-
Retained earnings	133.68%	124.02%	117.91%	113.04%	100.00%		8%
Total common equity, E	121.81%	113.85%	110.33%	107.52%	100.00%		5%
	-	-	-	-	-
Total liabilities and common equity	121.73%	114.21%	111.04%	107.90%	100.00%		5%
	-	-	-	-	-
Par value of share, RM	100.00%	100.00%	100.00%	100.00%	100.00%		0%
NOSH	100.00%	100.00%	100.00%	100.00%	100.00%		0%
	-	-	-	-	-
Excess Cash	151.61%	132.57%	127.91%	147.49%	100.00%		11%
Excess Cash (Per Share)	151.61%	132.57%	127.91%	147.49%	100.00%		11%

Table 1: Horizontal Analysis of APOLLO

 

Year	2013	2012	2011	2010	2009		CAGR
Assets
Current asset
Cash and cash equivalent	172.16%	121.07%	149.62%	135.39%	100.00%		15%
Marketable securities	-	-	-	-	-		-
Trade Account Receivables	343.29%	257.72%	199.54%	147.25%	100.00%		36%
Other receivables	57.44%	65.44%	183.00%	90.15%	100.00%		-13%
Inventories	88.07%	81.12%	102.46%	95.48%	100.00%		-3%
Assets held for dales	-	-	-	-	-		-
Total current assets	157.92%	126.33%	237.33%	113.25%	100.00%		12%
	-	-	-	-	-
Cash & Short Term Investment	184.56%	121.07%	653.68%	135.39%	100.00%		17%
	-	-	-	-	-
Non-current assets	-	-	-	-	-
Property, plant and equipment	164.46%	151.74%	114.87%	110.87%	100.00%		13%
Prepaid land lease payments	0.00%	0.00%	0.00%	97.74%	100.00%		-100%
Investment properties	-	-	-	-	-		-
Investments in associates	0.00%	0.00%	0.00%	137.63%	100.00%		-100%
Intangible assets	100.00%	100.00%	100.00%	100.00%	100.00%		0%
Investments	14.98%	14.28%	18.59%	89.88%	100.00%		-38%
Total non-current assets	151.19%	140.31%	107.21%	111.06%	100.00%		11%
	-	-	-	-	-
Total Assets, TA	152.61%	137.35%	134.78%	111.53%	100.00%		11%
	-	-	-	-	-
Liabilities	-	-	-	-	-
Current liabilities	-	-	-	-	-
Short-term loan	169.68%	137.44%	125.48%	77.78%	100.00%
Hire purchase creditors	94.04%	127.69%	122.02%	115.54%	100.00%		-2%
Trade Account Payable	147.54%	132.38%	166.07%	172.11%	100.00%		10%
Current tax payable	0.00%	4.40%	4.00%	2466.00%	100.00%		-100%
Liabilities related with investment held for sale	-	-	-	-	-		-
Other current liabilities	109.48%	87.26%	106.90%	0.00%	100.00%		2%
Total current liabilities, CL	156.75%	133.19%	155.49%	98.68%	100.00%
	-	-	-	-	-
Non-current liabilities	-	-	-	-	-
Long-term loan	120.46%	146.29%	130.87%	175.47%	100.00%		5%
Retirement benefits	78.56%	55.27%	60.92%	86.85%	100.00%		-6%
Deferred tax	266.49%	114.57%	95.89%	59.71%	100.00%		28%
Total non-current liabilities	107.87%	107.85%	100.99%	135.34%	100.00%
	-	-	-	-	-		-
Total liabilities	141.07%	125.06%	138.01%	110.44%	100.00%
	-	-	-	-	-
Equity	-	-	-	-	-		-
Share capital	182.23%	169.93%	123.02%	123.02%	100.00%		16%
Share premium	-	-	-	-	-		-
Other reserves	163.21%	145.11%	120.28%	107.55%	100.00%		13%
Retained earnings	-	-	-	-	-		-
Total common equity, E	171.74%	156.24%	121.51%	114.48%	100.00%		14%
Share application monies	-	-	-	-	-		-
Minority interest	137.14%	126.37%	154.22%	105.55%	100.00%		8%
Total Equity	164.40%	149.91%	131.39%	112.59%	100.00%		13%
	-	-	-	-	-		-
Total liabilities and common equity	152.58%	137.32%	134.75%	111.50%	100.00%		11%

Table 2: Horizontal Analysis of LONBISC

 

Year	2013	2012	2011	2010	2009
Assets
Current asset
Cash and cash equivalent	25.31%	6.10%	7.83%	4.79%	3.15%
Marketable securities	0.00%	17.44%	15.85%	22.73%	17.20%
Trade Account Receivables	14.33%	10.91%	9.90%	9.01%	10.12%
Other receivables	0.00%	1.10%	0.45%	0.81%	0.43%
Inventories	7.76%	7.16%	8.07%	6.41%	5.80%
Tax refundable	0.14%	0.16%	0.52%	1.30%	2.93%
Total current assets	47.54%	42.86%	42.62%	45.06%	39.63%
Cash & Short Term Investment	25.31%	23.54%	23.68%	27.52%	20.36%
Non-current assets
Property, plant and equipment	45.02%	49.12%	49.82%	43.57%	43.32%
Investment properties	5.36%	5.80%	6.06%	5.81%	6.33%
Leasehold land use rights	0.44%	1.00%	1.10%	5.13%	4.35%
Goodwill	0.00%	0.00%	0.00%	0.00%	0.00%
Deferred tax	0.03%	0.04%	0.02%	0.00%	0.01%
Other non-current assets	1.61%	1.18%	0.38%	0.43%	6.35%
Total non-current assets	52.46%	57.14%	57.38%	54.94%	60.37%
Total Assets, TA	100.00%	100.00%	100.00%	100.00%	100.00%
Liabilities
Current liabilities
Short-term loan	0.00%	0.00%	0.00%	0.00%	0.00%
Trade Account Payable	2.78%	1.54%	1.84%	1.38%	0.83%
Other payables and accruals	0.03%	1.50%	1.51%	1.42%	1.88%
Current tax payable	0.64%	0.11%	0.08%	0.42%	0.09%
Other current liabilities	0.00%	0.02%	0.03%	0.30%	0.01%
Total current liabilities, CL	3.45%	3.17%	3.46%	3.53%	2.81%
Non-current liabilities
Long-term loan	0.00%	0.00%	0.00%	0.00%	0.00%
Retirement benefits	0.60%	0.59%	0.56%	0.53%	0.79%
Deferred tax	6.13%	6.78%	6.80%	6.50%	6.65%
Total non-current liabilities	6.73%	7.36%	7.36%	7.03%	7.44%
Total liabilities	10.18%	10.53%	10.82%	10.56%	10.24%
Equity
Share capital	31.22%	33.27%	34.22%	35.22%	38.00%
Share premium	0.00%	0.00%	0.00%	0.00%	0.00%
Other reserves	1.77%	0.00%	0.00%	0.00%	0.00%
Retained earnings	56.84%	56.20%	54.96%	54.23%	51.76%
Total common equity, E	89.82%	89.47%	89.18%	89.44%	89.76%
Total liabilities and common equity	100.00%	100.00%	100.00%	100.00%	100.00%

Table 3: Vertical Analysis of APOLLO

 

Year	2013	2012	2011	2010	2009
Assets
Current asset
Cash and cash equivalent	3.98%	3.11%	3.92%	4.29%	3.53%
Marketable securities	0.00%	0.00%	0.00%	0.00%	0.00%
Trade Account Receivables	11.44%	9.54%	7.53%	6.71%	5.09%
Other receivables	1.95%	2.47%	7.04%	4.19%	5.19%
Inventories	4.26%	4.36%	5.61%	6.32%	7.38%
Assets held for dales	0.29%	0.00%	13.20%	0.00%	0.00%
Total current assets	21.92%	19.49%	37.30%	21.51%	21.18%
Cash & Short Term Investment	4.27%	3.11%	17.12%	4.29%	3.53%
Non-current assets
Property, plant and equipment	75.72%	77.63%	59.89%	69.85%	70.27%
Prepaid land lease payments	0.00%	0.00%	0.00%	1.25%	1.42%
Investment properties	0.40%	0.72%	0.57%	0.00%	0.00%
Investments in associates	0.00%	0.00%	0.00%	4.00%	3.24%
Intangible assets	1.85%	2.06%	2.10%	2.54%	2.83%
Investments	0.10%	0.11%	0.15%	0.85%	1.05%
Total non-current assets	78.08%	80.51%	62.70%	78.49%	78.82%
Total Assets, TA	100.00%	100.00%	100.00%	100.00%	100.00%
Liabilities
Current liabilities
Short-term loan	26.32%	23.69%	22.04%	16.51%	23.68%
Hire purchase creditors	1.58%	2.39%	2.33%	2.66%	2.57%
Trade Account Payable	6.29%	6.28%	8.02%	10.05%	6.51%
Current tax payable	0.00%	0.00%	0.00%	1.23%	0.06%
Liabilities related with investment held for sale	0.00%	0.00%	6.04%	0.00%	0.00%
Other current liabilities	1.16%	1.02%	1.28%	0.00%	1.61%
Total current liabilities, CL	35.36%	33.38%	39.72%	30.46%	34.43%
Non-current liabilities
Long-term loan	7.15%	9.65%	8.79%	14.25%	9.06%
Retirement benefits	3.44%	2.69%	3.02%	5.21%	6.69%
Deferred tax	0.90%	0.43%	0.37%	0.28%	0.52%
Total non-current liabilities	11.49%	12.77%	12.18%	19.73%	16.26%
Total liabilities	46.85%	46.15%	51.90%	50.19%	50.68%
Equity
Share capital	20.81%	21.57%	15.91%	19.23%	17.43%
Share premium	0.00%	0.00%	0.00%	0.00%	0.00%
Other reserves	22.94%	22.66%	19.14%	20.69%	21.45%
Retained earnings	0.00%	0.00%	0.00%	0.00%	0.00%
Total common equity, E	43.75%	44.23%	35.05%	39.91%	38.88%
Share application monies	0.00%	0.00%	1.08%	0.00%	0.00%
Minority interest	9.40%	9.62%	11.96%	9.90%	10.46%
Total Equity	53.15%	53.85%	48.10%	49.81%	49.34%
Total liabilities and common equity	100.00%	100.00%	100.00%	100.00%	100.02%

Table 4: Vertical Analysis of LONBISC

 

 

Figure 1: APOLLO 5-Year Trends of Growth

Figure 2: Company B 5-Year Trends of Growth

Figure 3: Breakdown of Assets of APOLLO

Figure 4: Breakdown of Assets of Company B

References:-

• Balance Sheet Analysis
• Balance Sheet - Comparative Analysis
• Balance Sheet analysis of Apollo Vs London Biscuits kcchongnz