Anheuser-Busch Companies, Inc. Executive Summary
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Anheuser-Busch Companies, Inc.
Executive Summary
The purpose of this report is to analyze the financial statements of Anheuser-Busch for the years 2005, 2006 and 2007, in order to determine the companys financial health, on-going concern prospects and credit worthiness. Appendix 1 shows the vertical and horizontal analyses of the balance sheets and income statements.
The balance sheet vertical analysis, based on the percentage of net assets for each year, revealed that investments in affiliated companies have increased from 20.8% in 2005 to 23.4% in 2007. Also, plant & equipment decreased from 54.6% to 51.5% over these years. This indicates that the company has increased investments in their subsidiaries but has in turn decreased the long term assets of the main company. As for liabilities, the research draws attention to the fact that from 2005 to 2007, retirement benefits decreased from 8.5% to 5.8% and debt increased from 48.2% to 53.3%; however, total liabilities increased from 77.8% to 81.6%. This does show there is some level of rising debt even though some smaller debts such as retirement benefits are decreasing. Retained earnings increased from 94.8% to 104.5% and treasury stock increased from 92.2% to 109.1% which shows that the company has been keeping more earnings in the company for possible investment purposes rather than paying dividends and retaining more stock internally. Another sign of increasing liabilities versus equity is that the total shareholders equity decreased from 24.1% in 2006 to 18.4% in 2007.
The balance sheet horizontal analysis shows the changes for the years 2006 and 2007 from the baseline year 2005. This analysis revealed that the cash increased from 2005 to 2007 by 25.4% and other assets decreased by 32.1%. In fact, most assets except for plant & equipment and other assets increased during these years. This is a healthy sign that most assets are increasing. Tax liabilities and retirement benefit liabilities decreased; however, all the other liabilities increased during these years. Salary liabilities and other long term liabilities increased almost 50% from 2005. This could signify that the company is waiting longer to pay employees due to the increase to salary accruals. Also, it may show that the company is finding other ways to finance long term debt.
The vertical analysis of the income statement revealed very stable rates for all years. This is a prime indicator that the company is operating at a stable level from year to year and thus increases support of a definite going concern. The horizontal analysis of the income statement yields increases in net sales by 11%, cost of sales by 12.8%, operating income by 16.4% and net income by 21.3% from 2005 to 2007. This shows that even though cost of sales has increased, their