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  • In this video we will discuss the "liabilities" in the equity section of the balance sheet,

  • IFRS and various ratios. Liabilities are classified as "current" or "long-term".

  • Current liabilities are obligations that are expected to be paid within the next

  • twelve months or the operating cycle (whichever is longer). Long-term

  • liabilities are obligations that are not expected to be paid within the next

  • twelve months or the operating cycle, but in the more distant future. Walt Disney's

  • current liabilities as of October 2nd 2010 are comprised of accounts payable

  • and accrued liabilities for 6 billion 109 million dollars. This

  • balance represents amount due to suppliers and other obligations still

  • unpaid but due soon. Current portion of borrowings for 2 billion 350 million

  • dollars needs to be paid in the near future. Un-earned royalties and other

  • advances are money received from third parties that have not been earned by the

  • Walt Disney. Walt Disney's obligations that need to be paid in the more distant

  • future (or past the 12 months following the balance sheet date) are

  • various borrowings for the amount of 10 billion 130 million

  • dollars, deferred income taxes for 2 billion 630 million

  • and other long term liabilities for 6 billion 104 million. The

  • stockholders equity section of the balance sheet is generally comprised of

  • two sections which are: "Contributed capital" and "Retained earnings". Capital

  • stock is an account increased by the par or stated value of the shares issued.

  • Additional paid-in capital account holds the "excess" amount paid over the "par

  • stated value". For example, if the par value of a common stock is $1 and the

  • market price is $10, for the issuance of one share, "Common stock" will increase by

  • $1 and "Paid in excess of par" will increase by $9. Retained earnings is the

  • corporations un-distributed earnings or net income less declared dividends.

  • Sometimes we will see "Accumulated other comprehensive income"

  • which is the aggregate amount of the other comprehensive income items such as

  • unrealized gains or losses from market value fluctuations for pension funds,

  • also possible for foreign currency exchange transactions. We may also see

  • "Treasury stock" which is the amount of money paid to repurchase corporation's

  • own common stock. "Non controlling interests" (or minority interest) is the

  • portion of the equity of subsidiaries not wholly owned by the reporting

  • company. This information will be reported in the stockholders equity

  • section if it is applicable to the corporation. Disney's shareholders equity

  • section shows that the company has preferred and common stock. Please note

  • that the company states the par value and the number of authorized and issued

  • shares. Par value refers to the stock value stated in the

  • corporate charter (it is also known as a legal capital) and enforces some

  • restrictions for the Corporation's management. They are defined and may vary

  • depending on the state of incorporation. To minimize these limitations

  • corporations may select low amounts such as 1 cent or 0.1 cent. Authorized

  • number of shares this is the maximum number of shares that a corporation can

  • issue. The number is stated in the corporate charter as well. Issued shares

  • is the number of shares that already have been issued. This way we can make a

  • judgment what portion of the authorized shares the company has already issued. If

  • all the authorized stock has been issued then no more money can be raised from

  • equity. We can see that as of October 2nd, Disney has not issued any of the

  • preferred stock. Disney's common stock has 1 cent par value. On October 2nd,

  • its authorized shares are 4.6 billion and issued shares are 2.7 billion. The

  • balance in the common stock account is 28 billion 736 million.

  • This balance combines the "par" and the "excess of par" in its total.

  • This conclusion can be made because 2.7 billion shares times 1 cent is much less

  • than the shown balance. Disney's retained earnings as of October 2nd is 34 billion

  • 327 million. "Accumulated other comprehensive loss"

  • equals to 1 billion 881 million dollars. Treasury stock is accounted for it cost

  • on October 2nd Disney had 803.1 million shares for the total cost of 23

  • billion 663 million. Please note that the

  • Treasury stock decreases the total equity. Non-controlling interest is for

  • the total of 1 billion 823 million dollars. I wanted to

  • show you an equity section that better separates the "legal capital" (which was

  • par value times the number of shares issued). Let's look at a Las Vegas Sands

  • corporation. You can see that the balance in the common stock account equals the

  • number of roughly 708 million shares times the $0.001

  • dollars par value. The amount of "Cash collected from the issuance of stock"

  • would be the sum of the "common stock" and "Capital in excess of par value" account balances

  • or 5 million 445 thousand and 413 dollars

  • IFRS versus GAAP. Both IFRS and GAAP allow the use of

  • title balance sheet or statement of financial position. IFRS however

  • recommends the use of statement of financial position. Both IFRS and GAAP

  • require disclosures about accounting policies and judgments used by

  • management. Under IFRS current assets are usually listed in the reverse order of

  • liquidity. For example under GAAP cash is listed first but under IFRS it is listed

  • last. IFRS has many differences in terminology. For example in the equity

  • section, common stock is called "share capital ordinary".

  • Advantages and disadvantages of raising funds through debt. The

  • advantages are that the funds are raised without giving up any ownership rights.

  • The interest that is paid is an expense which decreases profits which are taxed,

  • therefore it decreases the amount of tax income tax paid in improves cash flow.

  • The disadvantages are that the corporation has to have cash to pay the

  • periodic interest payments (the "least" frequency would be once a year) and the

  • principle has to be repaid at maturity. When equity is used to raise cash the

  • new owners have a right to vote on major issues and to receive assets upon

  • liquidation as well as dividends. Dividends may be paid (or not) depending

  • on the Board of Directors decision so the "pro-s" are that the corporation may

  • decide to share (or not) some of the profits and do not have to deal with

  • repayment of principal. The downside is that more opinions have to

  • be considered. Some important ratios that are used are: current ratio which is

  • computed as we divide the "total current assets" by the "total current liabilities".

  • It measures corporations ability to pay its immediate obligations. If the company

  • has a current ratio of more than a 1 it is considered as "favorable". More

  • conservative analysts look for a current ratio of 2. For the purposes of this

  • course we will consider current ratio of 1 and more to be "favorable". If current

  • ratio is too high (for example, 4 or more), analysts usually criticize management

  • for lost opportunities. "Debt Ratio" is "total liabilities" divided by "total

  • assets" it measures the portion of assets financed by debt (previously discussed).

  • The trend analysis shows consecutive periods compared to base period. You can

  • see the Disney's total assets increased by 3% in 2008,

  • 4% in 2009 and 14% in 2010 compared to 2007. All asset accounts increased

  • compared to 2007 except for Goodwill and Intangibles (in 2009 where they decreased by 3%).

  • You can also analyze the changes in the

  • non current liability and equity accounts compared to 2007. Current

  • liabilities increased by 2% in 2008, decreased by 22% in 2009 and 3% in 2010.

  • Liabilities will decrease as the corporation pays in a more accelerated

  • pattern and will increase when they enter in additional obligation or slow

  • down their payments. Common stock increased each year which means that

  • Disney issued more stock. Retained earnings increased which tells us that the

  • corporation had successful and profitable years and not all profits have been paid

  • as dividends. The common size balance sheet shows the proportions of the

  • various accounts compared to total assets. You can see that current assets

  • represented 33% of the total assets for a News Corp and only 18% for Disney.

  • Property, plant and equipment net of depreciation represents 26% for Disney

  • and 11% for News Corp. This approach can be applied to all accounts for the same

  • company in different periods or comparison of different companies.

  • If different companies are being analyzed please consider the industry under scrutiny.

  • Thank you for watching.

In this video we will discuss the "liabilities" in the equity section of the balance sheet,

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B1 中級

財務諸表分析 第2章 第3部 (Financial Statement Analysis, Chapter 2 Part 3)

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    陳虹如 に公開 2021 年 01 月 14 日
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