More Context with the Company Board
Posted by eliza d on Wed, Nov 12, 2008 @ 10:33 AM
Information is only useful when contextualized.
The last post included the Company Board for Apple’s 2008 year end financial result; you can look at the income statement in the context of the balance sheet; and you can look at the balance sheet in the context of the income statement.
Visual Finance: Balance Sheet and Income Statement for Apple, 2008
The Company Board is especially useful when considering metrics that utilize both the Income Statement and the Balance Sheet.
Return on Assets is the ratio between Profit (bottom line of the Income Statement) and Assets (everything in the blue and green areas of the Balance Sheet). If you take out cash and short term investments, you can see that Apple’s ROA is virtually 100%!. The Company Board has contextualized the information.
Another way the Company Board creates context is in comparing data from year to year.
Visual Finance: Balance Sheet and Income Statement for Apple, 2007
Looking at 2008 in the context of 2007, you can see that Apple has increased both sales and profits by about 35%.
The 2008 balance sheet is about 50% larger than 2007, and the increase is spread across both current and fixed assets. However, most of the volume increase is in cash and short-term investments.