Financial Statement Analysis: Jeddah International College Answer Paper

Jeddah International College
Answer Paper
Project (Fall 2019)
Student Name…………………………………….
Students I.D ……………
Section Due Date Course Code
… 16/12/2020 FIN 343
Financial Statement Analysis
Number of pages including this page:

3
Instructor's Name: GRADE
Mrs Dniah Raqaban

Below is the balance sheet for Circuit City Stores, prepare an overall analysis for the balance sheet, and
identify whether the balance sheet is considered to be (strong/week/steady). Support your answer with
justification
Circuit City Stores (CCYTQ) BALANCE SHEET ($ in millions)

ASSETS 2/28/Year 7 2/28/Year 6 2/28/Year 5 2/28/Year 4
Cash and cash equivalents $ 296 $ 141 $ 316 $ 880
Short-term investments 1 600 522 125
Accounts receivable 489 424 221 231
Inventories 1,574 1,637 1,698 1,455
Other current assets 80 82 76 54
TOTAL Current assets 2,440 2,884 2,833 2,745
Property, plant, and equipment 2,485 2,220 2,019 1,820
Accumulated depreciation (1,448) (1,300) (1,179) (1,093)
PPE, net 1,037 920 840 727
Goodwill and other intangibles 136 141 254 247
Long-term investments 0 0 0 0
Other noncurrent assets 132 62 142 121
TOTAL Noncurrent assets 1,305 1,123 1,236 1,095
TOTAL Assets $ 3,745 $ 4,007 $ 4,069 $ 3,840
LIABILITIES
Accounts payable $ 912 $ 922 $ 850 $ 636
Short-term debt 0 0 22 0
Current portion of long-term debt 12 7 7 1
Accrued expenses 318 380 287 171
Other current liabilities 365 404 456 508
TOTAL Current liabilities 1,607 1,713 1,622 1,316
Long-term debt 57 50 52 20
Deferred income taxes 36 0 0 0
Other noncurrent liabilities 542 453 440 425
TOTAL Noncurrent liabilities 635 503 492 445
TOTAL Liabilities 2,242 2,216 2,114 1,761
STOCKHOLDERS’ EQUITY
Preferred stock 0 0 0 0
Common stock, par 84 86 87 94
Additional paid-in capital 320 344 459 720
Retained earnings 981 1,336 1,365 1,240
Other stockholders’ equity 118 25 44 25
TOTAL Stockholders’ equity 1,503 1,791 1,955 2,079
TOTAL L & SE $ 3,745 $ 4,007 $ 4,069 $ 3,840
Analysis of Balance Sheet

This report covers detailed financial analysis of balance sheet of Circuit City Stores.
Current Assets
Current assets are such assets that are consumable or whose benefit via sale can be availed within
one year. Current assets have been dropped from $2,884M during Year 6 to $2,440M during FY
7, decline of 15.39%. They have reduced majorly due to sharp decline of short term investments
of $600M during FY 6 to merely $1 during FY 7. Reduction in short term investments suggests
that organization has taken out cash to meet its working capital requirements. Similarly,
inventories are also reduced from $1,637M during FY 6 to $1,574M during FY 7, a decline of
3.8%. Inventories have been reduced maybe due to large sale or small production as compared to
last year. Account receivables have been increased from $424M during FY 6 to $489M during
FY 7, an increase of 15.3%. Increase in account receivables depicts that Circuit City Stores is
offering relax terms to its customers.
Overall decline in current assets is not a good sign for organization.
Non-Current Assets:
Non-current assets are those long term assets that are consumable or whose benefit can be
availed for more than one year. These have been increased from $1123M during FY 6 to
$1305M during FY7 majorly due to increase Property, Plant & Equipment (PPE) and other non-
current assets. PPE has been increased from $2220M during FY 6 to 2485M during FY 7, an
increase of 11.9%. While other non-current assets have been increased from $62M during FY 6
to $132M during FY 7.
Increase in non-current assets is a positive sign as it signals to information users that
organization is building non-current assets to improve production processes etc.
Current Liabilities
Current liabilities are those obligations that are to be paid by an organization within an year.
These have been reduced from $1713M during FY 6 to $1607M, reduction of 6.1%, during FY 7
due to decline in accounts payable, accrued expenses and other current liabilities. Decline in
current liabilities is a good sign as it shows that Circuit City Stores has satisfactory repayment
behavior of its dues with suppliers etc. Major decline is observed in accrued expenses from $380
during FY 6 to $318 during FY 7, a decline of 16.3%.
Decline in current liabilities is a positive sign for Circuit City Stores.
Non-Current Liabilities
Non-Current liabilities are those obligations that are payable in more than one year. These have
been increased from $503M during FY 6 to $635M, an increase of 26.2%. They have been
increased majorly due to increase of other non-current liabilities from $503M during FY 6 to
$635M during FY 7, an increase of 19.6%.
Increase in non-current liabilities is not a good sign for an organization.
Stockholder’s Equity
Stockholder’s equity suggests ways of company being financed through shares, preference shares
etc. It has been reduced from $1,709M during FY 6 to $1,503M during FY 7, a decline of 16%.
It reduced majorly due to decline in retained earnings from $1,336M during FY 6 to $981M
during FY 7, a decline of 26.5%. Reduction in retained earnings suggests that either organization
has made large drawings or incurred losses during FY 7.
Conclusion
Balance sheet of Circus City Stores is reflecting positive aspects like increase in long term assets
and decline in current liabilities and posting negative picture as well with respect to increase in
long term liabilities, reduction in stockholders’ equity and decline in current assets. Therefore, I
would suggest that balance sheet of this organization is weak keeping in view above mentioned
facts and figures.

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Jeddah International College

Project (Fall 2019)

Students I.D ……………

Section Due Date Course Code

… 16/12/2020 FIN 343

Financial Statement Analysis

Number of pages including this page:

Instructor's Name: GRADE

Mrs Dniah Raqaban

Circuit City Stores (CCYTQ) BALANCE SHEET ($ in millions)

Analysis of Balance Sheet

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