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Balance Sheet and Market Value of Visa Company's Liabilities and Equity

Part I.

Refer to Visa's most recent balance sheet. Review the 'liabilities and equity side' of the balance sheet.
(a) Short term liabilities (or debt) and long term liabilities

What is the total of the short term liabilities (aka short term debt) and the long term liabilities (aka long term debt) on the balance sheet of the company Visa?

(b) Equity

The market value of equity is by definition equal to the number of shares outstanding times the market price per share. What is the number of shares outstanding and the recent price per share? What is the market value of equity of Visa? If you have a problem finding out the number of shares outstanding you may go to http://finance.google.com and insert the name Visa. The market value of equity of Visa is what is called 'Mkt Cap' (that is, Market Capitalization). An alternative site is http://finance.yahoo.com where again you insert the name Visa and get the market capitalization.

Part II

1. Compute the debt ratio of Visa (total liabilities divided by the total liabilities plus equity) and the debt to equity ratio, (total liabilities divided by total equity). Also, show these two ratios for short-term liabilities only and for long-term liabilities only (instead of total liabilities use just short-term liabilities and long-term liabilities). Show all of your work and calculations.

2. Give your recommendation as to whether or not you consider these ratios to be too small or too large. Should Visa company increase its debt or take steps to pay off its debt?

3. Compute the debt to equity ratios to two other companies in the same industry as Visa. Which of these three companies has the highest debt to equity ratio, and why do you think it chose to have a relatively high ratio? Which of these three companies has the lowest debt to equity ratio, and why do you think it chose to have a relatively lower ratio?

Solution Preview

Balance Sheet and Market Value of Visa Company's Liabilities and Equity
Part I.

Refer to Visa's most recent balance sheet. Review the 'liabilities and equity side' of the balance sheet.
(a) Short term liabilities (or debt) and long term liabilities

What is the total of the short term liabilities (aka short term debt) and the long term liabilities (aka long term debt) on the balance sheet of the company Visa?
Value in $mn
The details are as follows for the current year:
Current Port. of LT Debt/Capital Leases =$51
Long Term Debt =$55
Total Debt=$ 106
(b) Equity

The market value of equity is by definition equal to the number of shares outstanding times the market price per share. What is the number of shares outstanding and the recent price per share? What is the market value of equity of Visa? If you have a problem finding out the number of shares outstanding you may go to http://finance.google.com and insert the name Visa. ...

Solution Summary

This solution provides the steps to prepare the Balance Sheet and determine the market value of Visa Company's liabilities and equity.

$2.19