FIN 3513 Case 1
FIN 3513-001
LOGITECH INTERNATIONAL S.A.
by
Jeffrey Chan
Ioulia Miasnikova
Omar Mussa
Chandra Raharja
1. Using the Consolidated Balance Sheets for Logitech International S.A. (Logitech) for March 31, 2010 and 2009, prepare a common-size balance sheet.
2. Evaluate the asset, debt, and equity structure of Logitech, and explain trends and changes found on the common-size balance sheet. Logitech’s total assets changed from $1,421,530,000 in 2009 to $1,599,678,000 in 2010, with an increasing growth rate of 12.53%. However, Logitech lowered its liquidity level by decreasing the cash and cash equivalents, account receivable, inventory, and other current assets, for which the company would have a higher risk to pay off its short-term debt obligations. Since Logitech’s main products are computers and other digital platforms, the company’s property, plant, and equipment is relatively small compared to the total assets because the company does not need a high amount of PP&E to run its operations. This also implies that Logitech would have a lower depreciation cost in its income statement. On the other hand, the goodwill increased from 17.09% in 2009 to 34.06% in 2010, and other intangible assets increased from 2.26% to 5.96%, respectively. The value of intangible assets includes R&D, patents, copyrights, and brand equity. For example, the R&D efforts of Logitech create a new computer or develop new software which could potentially increase the company's intangible assets, in which its market value is higher than its book value. In 2009, the total liabilities were 29.81% of the total assets, and the total shareholders’ equity was 70.91% of the total assets. In 2010, the total liabilities were 37.51%, and the total shareholders’ equity was 62.49% of the total asset. This indicates that Logitech is not a high leverage company, with a debt-to-equity ratio of 0.42 in 2009 and 0.60 in 2010. However, this is unusual for a technological
LOGITECH INTERNATIONAL S.A.
by
Jeffrey Chan
Ioulia Miasnikova
Omar Mussa
Chandra Raharja
1. Using the Consolidated Balance Sheets for Logitech International S.A. (Logitech) for March 31, 2010 and 2009, prepare a common-size balance sheet.
2. Evaluate the asset, debt, and equity structure of Logitech, and explain trends and changes found on the common-size balance sheet. Logitech’s total assets changed from $1,421,530,000 in 2009 to $1,599,678,000 in 2010, with an increasing growth rate of 12.53%. However, Logitech lowered its liquidity level by decreasing the cash and cash equivalents, account receivable, inventory, and other current assets, for which the company would have a higher risk to pay off its short-term debt obligations. Since Logitech’s main products are computers and other digital platforms, the company’s property, plant, and equipment is relatively small compared to the total assets because the company does not need a high amount of PP&E to run its operations. This also implies that Logitech would have a lower depreciation cost in its income statement. On the other hand, the goodwill increased from 17.09% in 2009 to 34.06% in 2010, and other intangible assets increased from 2.26% to 5.96%, respectively. The value of intangible assets includes R&D, patents, copyrights, and brand equity. For example, the R&D efforts of Logitech create a new computer or develop new software which could potentially increase the company's intangible assets, in which its market value is higher than its book value. In 2009, the total liabilities were 29.81% of the total assets, and the total shareholders’ equity was 70.91% of the total assets. In 2010, the total liabilities were 37.51%, and the total shareholders’ equity was 62.49% of the total asset. This indicates that Logitech is not a high leverage company, with a debt-to-equity ratio of 0.42 in 2009 and 0.60 in 2010. However, this is unusual for a technological