Balance Sheet Analysis - Crocs Week 6
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Balance Sheet Analysis
Introduction
In the ever-evolving landscape of finance, dissecting a company's financial health is paramount
for investors, stakeholders, and business analysts alike. Crocs, the globally recognized footwear
company, has undergone extensive scrutiny through a detailed financial analysis. By delving into
both horizontal and vertical balance sheet data, this examination aims to unravel the company's
performance trends, strengths, and potential red flags. This exploration provides valuable
insights into Crocs' strategic decisions, operational efficiency, and overall financial stability,
offering a comprehensive understanding of the company's position in the market.
Croc’s performance based on the horizontal (% growth) balance sheet.
Analyzing the horizontal (% growth) balance sheet of Croc’s Company provides insights into its
performance trends over the years. Let's assess the trends based on the provided data:
Accounts Receivable (61.9% Increase from 2021 to 2022):
The substantial uptick in accounts
receivable suggests that Crocs may have relaxed its credit policies or employed aggressive sales
strategies, leading to increased sales on credit. This move likely broadened the customer base
and diversified revenue streams, indicating a proactive market approach.
Total Current Liabilities (33.1% decrease from 2021 to 2022):
The rise in total current
liabilities might imply increase short-term debt or strategic investments needing immediate
funding. While it raises concerns about short-term obligations, a detailed analysis of these
liabilities is crucial to understanding their nature and impact on the company’s financial health.
The areas that are deteriorating:
Total Equity (17.3% Increase from 2021 to 2022):
The sharp increase in equity signals that
Crocs' reduced liabilities have outpaced its assets. Factors like accumulated losses, dividends, or
share buybacks might be influencing this trend. While a decrease in equity isn't inherently
negative, it necessitates meticulous evaluation to maintain a healthy balance between debt and
equity financing for sustainable growth and financial stability.
Total Assets (38.1% Increase from 2021 to 2022):
The substantial growth in total assets
underscores significant business expansion or acquisitions. Crocs seems to be investing
strategically, possibly entering new markets or diversifying its product offerings. This indicates a
forward-looking growth strategy and a commitment to long-term sustainability.
Croc’s performance based on the vertical (common size) balance sheet.
The vertical (common size) balance sheet analysis serves as a powerful tool, allowing us to
dissect Croc’s financial structure and performance. Here's a detailed assessment of the trends
based on the provided data:
Improving Areas:
Accounts Receivable (11.82% of Total Assets in 2022):
The steady decrease in accounts
receivable relative to total assets reflects Crocs' stability in credit policies. This consistent
proportion signifies effective receivables management, ensuring a reliable cash flow cycle and
financial stability. Crocs' proficiency in managing outstanding payments contributes to a
dependable revenue stream and enhanced liquidity.
Current Assets (43.1% of Total Assets in 2022):
The substantial increase in current assets
highlights Crocs' enhanced liquidity and efficient working capital management. With 43.1% of
total assets in liquid or near-liquid form, the company is well-positioned to meet short-term
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