What are non-current assets?
Non-current assets consist of a wide range of items, including fixed assets.
ARBL has invested Rs.16.07 Crs in non-current assets with a long-term view. This could include purchasing listed equity shares, acquiring minority units in other enterprises, investing in bonds or mutual funds, etc.
The next item on the agenda is long term loans and advances, amounting to Rs.56.7Crs. These have been provided to affiliated companies, personnel, merchants and other entities.
The final item in the Non-current assets section is ‘Other Non-current assets’, which has a value of Rs. 0.122 Crs. This category encompasses various miscellaneous long-term items.
– –What are current assets?
Current assets are those that can readily be converted to cash, and the company expects to exhaust them within one year. These assets provide resources for a company’s ordinary operations and expenses.
The typical current assets found in a business are cash and equivalents, inventories, receivables, short-term loans and advances, and accounts receivable.
The first item among the Current assets is Inventory, valued at Rs.335.0 Crs. This includes finished and incomplete goods stored by the company as well as raw materials in stock. These are all items not yet sold, which have gone through different stages of production until transformation into their final form. The Note 14 associated with the company’s inventory can be seen below:
It’s clear that ‘Raw material’ and ‘Work-in-progress’ make up a large portion of the inventory value.
The next on the list is Trade Receivables, also known as Accounts Receivables. This quantity reflects the sum of money that must be paid to our company by its retailers, customers and other involved parties. The figure stands at Rs.452.7 Crs for ARBL.
The next line item is Cash and Cash equivalents, shown as Rs.294.5 Crs in Note 16. This figure comprises cash on hand and demandable funds, as well as short-term highly liquid investments with a maturation date of fewer than three months from its purchase date. The company holds its funds in several types of accounts, as can be seen below.
The following line item is short-term loans and advances that the firm has lent out, projected to be retrieved within a one-year period. This figure is Rs.211.9 Crs and includes various items like payments given out to providers, credits extended to clients, employees’ loans, taxes advanced (e.g. income tax, wealth tax) etc.
Lastly is ‘Other current assets’, which are deemed of lesser importance and tagged ‘Other’; this sum amounts to Rs.4.3 Crs and closes the list of Assets on the Balance sheet.
Total Assets = Fixed Assets + Current Assets
= Rs.840.831 Crs + Rs.1298.61 Crs
= Rs. 2139.441 Crs, which corresponds precisely to the company’s liabilities.
We have now examined the total Balance sheet, including every item on the Assets side. We should take another look at the balance sheet as a whole:
As mentioned above, the balance sheet equation holds for ARBL’s balance sheet,
Asset = Shareholders’ Funds + Liabilities
– – Linking the P&L and Balance Sheet
Let us turn our attention to the Balance Sheet and P&L statement and how they are linked.
The diagram shown above displays the line items for a standard P&L report on the left and some standard Balance Sheet items on the right. Having already learned about their definitions from previous chapters, we will now explore how these figures link to each other.
Consider Revenue from Sales at the outset. When a company makes a sale, it incurs outgoings. Say, for instance, it launches an advertising campaign for its wares – this will decrease their cash flow as they have to put money into it. If the sale is on credit, the Receivables (Accounts Receivables) get higher.
Operating expenses involve the acquisition of raw material, finished goods and other related costs. When a business incurs such outlays to create goods, it typically entails raising its Trade payables (accounts payable) as well as altering its Inventory level. The Inventory level is contingent on how long it takes the company to sell its wares.
When companies purchase physical assets or invest in Brand building programmes (invisible assets), the cost of these is divided over the items’ economic useful life. This increases the amount of depreciation shown on the Balance sheet, which is compiled on a flow basis. As such, annual depreciation accumulates and is referred to as Accumulated depreciation.
Other income can be generated from interest, sales of subsidiaries and rent. Using these methods to invest may influence the level of this type of income.
When the company takes on debt, either short term or long term, the finance cost/borrowing cost increases to cover it. This is where the money goes when debt rises, and vice versa.
Recalling that Profit after Tax (PAT) contributes to the company’s surplus which is encompassed in Shareholders Equity.