financial status of Anheuser-Busch
.../www.anheuser-busch.com. DATA ANALYSIS Horizontal analysis of the income statement (attachment 1) showed a couple of key items to note. There was an increase in net income of 7.3% or $2075.9 million (M) with a couple of factors that contributed to this increase. Net revenues increased 4.3% or $58 M during 2003 yet cost of goods sold only increased by 3.9%. This provided a gross profit increase of 4.8% or $263M. Second, operating income increased 7.4% or $220M. Horizontal analysis of the current assets on the balance sheet (attachment 2) show that the total current assets increased by 4.0% or $570M. Inventory increased by 4.2%, this only accounted for $24M of the total assets. The most significant portion was the 49.7% increase in other current assets and 6.2% increase in the current portion of accounts receivables. Cash did increase by 1.2% but that will be analyzed on the statement of cash flows. Horizontal analysis of the long-term assets (attachment 2) shows that Investments in affiliated companies increased by 7.9% or $224M. The company increased its investment in plant and equipment by 1.6% or $135M. Between both current and long term assets, there were no decreases during 2003. Horizontal analysis of the liabilities (attachment 2) had three items worth noting. The other current liabilities decreased by 6.3% or $21M and post retirement benefits decreased by .8% or 4M. Most significantly accumulated other comprehensive loss decreased by –2.3% or –19.6M due to changes in shareholders equity. Horizontal analysis of the stockholders’ equity (attachment 2) shows retained earnings increased by 11.1% or $1,392M. The company also spent 17.5% more on treasury stock, a cost of $1931M. All totaled, stockholders’ equity decreased 11.2% or $341M. Horizontal analysis of the operating activities section on the statements of cash flows (attachment 3) shows a couple things worth noting. There was a 42.4% or $130M increase in the undistributed earnings of affiliated companies. If this expenditure did not occur, net cash provided by operating activities would have increased only 2.5% instead of 7.4%. Horizontal analysis of the investing activities section (attachment 3) shows the company had substantial investment activity. New acquisitions increased 726% or $138 M. The company’s 2003 Annual Report was researched in an attempt to find the cause of such a high increase. The main change was increased investments in leading international brewers in higher-growth beer markets. Horizontal analysis of the cash flows from financing activities section (attachment 3) shows a significant change in the companies cash position. There was a 20.6% increase in debt as well as significant decreases in the purchase of treasury stock and shares issued. 3.4% and 39.1% respectively. All totaled, the financing activity had a loss of $66M from the previous year. Primary findings on the statements of cash flows were that cash and cash equivalents decreased 91.6% or $24M. This can be attributed to the increase in undistributed earnings of affiliated companies. Along with horizontal analysis, other measures identified in the Warren, Reeve, and Fess Accounting textbook were used to analyze the company’s financial position. These measures help determine a company’s solvency and profitability. While most measures showed positive gains, some showed negative results. To get an indication of the company’s solvency, the acid-test ratio, number of days’ sales in inventory, ratio liabilities to stockholders’ equity and inventory turnover analysis measures were used. The measures showed mixed results. The acid-test shows the company’s ratio decreased by 1 tenth of a point (see figure 1). FIGURE 1 The company’s ability to manage its inventory was analyzed using inventory turnover and number of days’ sales in inventory measures. Theses measures showed huge differences as inventory turnover increased 3566 (see figure 2) but the number of days’ sales in inventory only increased 5 tenths of a day (see figure 3). The inventory turnover could be high because the quantity of inventory on hand is very low. This condition might result in the lack of sufficient goods on hand to meet sales orders. No data was researched to determine if the increase was due to acquiring, selling or replacing inventory or if it was scattered across all three. If the trend continues, deeper analysis may be warranted. FIGURE 2 FIGURE 3 The last solvency measure used was the ratio of liabilities to stockholders’ equity. This measure showed the company was not improve from 4.52 to 3.88 (see figure 4) indicating the owners lost slightly more claims against the company’s assets over its creditors. This decrease provides a slightly smaller margin of safety for long-term creditors. FIGURE 4 To get an indication of the company’s profitability, the rate earned on total assets, rate earned on stockholders’ equity, earnings per share on common stock and price-earnings ratio measures were used. Again, the measures showed mixed results. Interesting trend since the earnings per share increased while the market prices dropped. The company saw a rate decrease of 10.5% percent on the rate earned on total assets (see figure 5). This change is enormous indicating that the company is in a weaker position now than in the preceding year to borrow additional funds on a long-term basis. This coupled with the other measures shows the company is not improving its profitability. FIGURE 5 The company saw a 17.7% increase in the rate earned on stockholders’ equity (see figure 6). The tendency of the rate on stockholders’ equity to vary disproportionately from the rate on total assets, sometimes referred to as leverage, occurs because the amount earned on assets acquired...