A REVIEW OF APEX PRINTING COMPANY FINANCIAL STATEMENTS ANALYSIS Student’s Name: Institution: Course: Date:
Introduction • • • • • Apex Printing is a printing company that deals with printing of materials though use of canvas, papers, banners as well as on apparel clothing. The company is seeking possible financial support through different strong potential investors. In this regard, the following presentation is a review of the financial statements of the company, and an in-depth analysis of the assets, liabilities, cash and profits for Apex Printing company for the year 2012 and 2013. This analysis can be used by the stockholders and investors to understand the overall wellbeing and progress of Ape Printing company, evaluate the financial strength of the company as well as its performance in terms of business value. The three main financial statements being analysed in this presentation are the balance sheet, the income statement and the cash flow statement. Apex’s Assets • • • • • Assets are resources with economic value owned or controlled by a company with expectations of future earnings or profits. Assets increase the company’s value. In the same manner, assets are used to generate cash flows for the company, reduce debts or liabilities as well as increase revenue for the company. In 2012, Apex’s total current assets amounted to $14.5 million and an increase of up to $20.45 million was realised in 2013. Current assets are economic resources that are expected to be converted into cash within a short term period. These include cash, accounts receivables, and inventory. The long-term assets are non current assets which the company does not intend to convert into cash within the next period of one year. The total long term assets amounted to $137.15 million in 2013, an decrease from the initial amount of $160 million recorded in 2012. These include land, building & equipment, les the accumulated depreciation of buildings and equipment intangible assets. Total assets for Apex in 2012 was $174.5 million and in 2013, the total assets depreciated to 157.6 million. The total assets are reported in the Apex’s balance sheet as follows:
Cont’d 000$ 000$ Assets 2013 2012 Cash 6,000 5,700 Accounts Receivable 2,350 2,300 Inventory 12,100 6,500 Total Current Assets 20,450 14,500 Land 25,000 20,000 Building & Equipment 300,000 300,000 Less: Accumulated Depreciation – Building & Equipment (187,850) (160,000) Total Long Term Assets 137,150 160,000 Total Assets 157,600 174,500
Liabilities and Stockholder’s Equity • • • • • • • • Liabilities are the legal obligations or debts of the company which are as a result of its business operations. Liabilities of Apex company include Accounts payable, salaries, interest payable, short term notes payable, and taxes payable. The total current liabilities from the Apex balance sheet was $18.1 million in 2013, an increase from $11.2 million recorded in 2012. The total long term liabilities owed by Apex Printing was the Mortgage payable which accounted to $54.95 million in 2013, a decrease from $100 million in 2012. The Total Shareholder’s Equity which included Common Stock and retained earnings recorded in 2012 was $63.3 million and this increased to 84.55 million in 2013. The Total Liabilities and Shareholder’s Equity recorded in 2013 was $157.6 million, a decrease from $174.5 million recorded in 2012. As such, the financial position of the company has improved for the past one year. The Liabilities of the company are as shown in the following table:
Cont’d Liabilities and Stockholder’s Equity 000$ 000$ Accounts Payable 4,600 3,500 Salaries Payable 0 2,100 Interest Payable 1,500 0 Short Term Notes Payable 12,000 0 Taxes Payable 0 5,600 Total Current Liabilities 18,100 11,200 Mortgage Payable 54,950 100,000 Total Long Term Liabilities 54,950 100,000 Common Stock 60,000 60,000 Retained Earnings 24,550 3,300 Total Stockholder’s Equity 84,550 63,300 Total Liabilities and Stockholder’s Equity 157,600 174,500 Cash • • • • • • The cash equivalent of Apex Printing is recorded in the current assets of the financial statement as $6 million in 2013, an improvement from the initial cash amount of $5.7 million recorded in 2012. The revenue recorded in 2012 was $475 million and the revenue in 2013 was $450 million. From the statement of cash flows, the Net Cash Flow from operating activities recorded in 2013 was $55.35 million. The Net Cash Flow from Operating activities recorded in 2013 was $5 million used for land purchase. The Net Cash Flow from Financing Activities recorded in 2013 was $50.05 million which is accounted for by the cash paid for mortgage and cash paid for dividends. The Net increase in cash in 2013 was $300,000 whereas the initial cash balance as at December 31, 2012 was $5.7 million. In this regard, the resulting cash balance as at December 31, 2013 was $6 million.
Statement of Cash Flows: For the Period Ended December 31,2013 000$ 000$ Cash Flow from Operating Activities Net Income 26,250 Adjustment to reconcile net income to net cash provided by operating activities Depreciation Expense 27,850 Increase in accounts receivable (50) Increase in inventory (5,600) Decrease in salaries payable (2,100) Increase in interest payable 1,500 Decrease in Taxes payable (5,600) Increase in Short Term notes Payable 12,000 Increase in accounts payable 1,100 Net Cash Flow from Operating Activities 55,350 Cash Flows from investing Activities Cash Paid to Purchase Land (5,000) Net Cash flow from Investing Activities 5,000 Cash Flows from Financing Activities Cash paid for mortgage (45,050) Cash paid for dividends (5,000) Net Cash Flow From Financing Activities (50,050) Net increase in Cash 300 Plus:Cash Balance at December 31, 2012 5,700 Cash Balance at December 31, 2013 6,000
Profits • • • • • • • Profits or net income is as a result of revenues less expenditure. The profits recorded by Apex Printing company belong to the company’s stockholders. The revenue recorded in 2012 was $475 million and the revenue in 2013 was $450 million. The gross margin amounted to $97.85 million in 2013 and $74.5 million in 2012, which is as a result of the costs of good sold and depreciation expense. The company also incurred selling, general and administrative expenses, interest expense as well as income taxes. From the income statements, the Net income recorded in 2013 was $26.25 million as compared to $6.5 million recorded in 2012. The income statement is as show in the following table:
Cont’d Apex Printing Income Statement For the Periods Ended December 13, 2013 and 2012 000$ 000$ 2013 2012 Revenue 450,000 475,000 Less: Cost of Goods Sold (324,300) (374,500) Less: Depreciation Expense (27,850) (26,000) Gross Margin 97,850 74500 Selling, General and Administrative Expenses (29,100) (32,000) Income Before Interest & Taxes 68,750 42,500 Interest Expenses (7,500) (6,000) Income Before Taxes 61,250 36,500 Income Taxes (35,000) (30,000) Net Income 26,250 6,500
Conclusion The above financial statement analysis is aimed to help investors make informed decisions as they plan to invest in Apex Printing company. From the above analysis, Apex Printing Company recorded a decrease in assets from 2012 to 2013, as well as a decrease in total liabilities from 2012 to 2013. In the same regard, the analysis found out that Apex Printing Company recorded an increase in the net income from $6.5 million in 2012 to $26.25 million in 2013. This increase in the net income is more than thrice the initial net income in 2012. As such, the stockholders and investors gained through increased net income and earnings.