Logitech Case Study

Logitech International S.A.

Financial Statement Analysis

January 30, 2015

Case Study #1

2. After evaluating the common-size balance sheets for years 2009 and 2010 for Logitech we have found some interesting changes that have taken place. In 2010 there was a drastic change in current assets and current liabilities, which ultimately will have an effect on the firm’s current ratio. In 2009, current assets made up of 70% of total assets and in 2010 this declined to nearly 50%. Current liabilities also went up from 68% of total liabilities in 2009 to 73% in 2010. As a result the company’s current ratio also decreased from 3.45 in 2009 to 1.80 in 2010.

We also noticed that in 2010 debt was increasing in comparison to 2009 while shareholder’s equity was generally staying the same. The debt/equity ratio increased from .42 to .60. This means that Logitech seems to be leveraging their firm more now than they have in the past, which may be a dangerous situation considering as stated before that their quick ratio also dropped considerably.

Goodwill has increased tremendously from 2009 to 2010 with the acquisition of LifeSize and TV Compass. Goodwill jumped from 17% on the common-size balance sheet in 2009 to 35% in 2010. This means that Logitech is paying an even larger premium for the companies they acquired than they are worth.  Investors should be concerned by this great amount of goodwill purchased because the tangible net worth declined from 754,799,000 in 2009 to 446,253,000 in 2010 which is a 40% decrease and is automatically a red flag to investors.

3. From 2009 to 2010 accounts receivable declined which is a good thing for most companies because they are less prone to losing out on a certain percent of their sales. However, their allowance for doubtful accounts compared to their accounts receivables seems to be increasing. The ratio has actually increased from 3.01% to 3.13% from 2009 to 2010. Although this is a very small percentage change, it means...