A Look at Vodafone Group Plc (ADR) (VOD)’s Balance Sheet

Page 1 of 2

LONDON — If you are new to investing, or are just baffled by some of the terms that make up a balance sheet, then read on. Here, I’ll peel back some of the layers in the 2013 year-end statements of Vodafone Group Plc (ADR) (NASDAQ:VOD).

First of all, I will start by noting the balance sheet is only one of three main financial statements. Both the cash flow and income statements are as important, and should be viewed in conjunction to gain the full picture.

Vodafone Group Plc (ADR) (NASDAQ:VOD)

The first thing to bear in mind is that the balance sheet by its very definition must balance, and the sum of everything the company owns or is due — its assets — will always be equal everything it owes — its liabilities. Vodafone has set its balance sheet out to neatly show this with both assets and liabilities totaling 143 billion pounds.

Companies do not always balance their balance sheets in this manner. The alternative is to show all assets and liabilities offset against each other to give net assets on one side and balance that against the amount invested in the business (generally, equity and the level of retained profits). If Vodafone Group Plc (ADR) (NASDAQ:VOD) did this then the balance sheet would show a balance of 72 billion pounds instead.

Goodwill, anyone?
Let’s take a look at some of the terms on the balance sheet that may not be decipherable on first glance. The most notorious of these is goodwill. This is purely an accounting invention. Vodafone has acquired companies in the past but paid more for them than the balance sheet of the companies in question would suggest they are worth. Vodafone Group Plc (ADR) (NASDAQ:VOD) suggests that the reason it’s paid more is because they highlighted synergies, but in truth the group simply saw enough long-term potential to take the risk.

Vodafone Group Plc (ADR) (NASDAQ:VOD) shows its goodwill at 30 billion pounds, but the true picture can be found in the notes where we can see goodwill costing 104 billion pounds in April 2011 had 59 billion pounds written off as at the same date. A further 8 billion pounds were written off in the current year with exchange movements making up the balance.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

Top 10 Business Schools in US: 2014 Rankings

Top 20 Female Billionaires in 2014

6 Movies That You Should Watch to Better Understand The Cold War

Top 15 Best Paying Jobs for Women in 2014

Top 6 Things Rich People Do Differently Every Day

5 Retirement Mistakes To Avoid (and Einstein’s Famous Quote)

11 Smartest People in the World

6 Films About the Financial World You Need To Watch (While “The Wolf” is Not Around)

Warren Buffett and Billionaires Are Crazy About These 7 Stocks

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

Top 9 Most Popular Free iPhone Apps

Top 10 Least Expensive Private Business Schools in the US

Top 15 Most Expensive Countries in the World – 2014

Top 6 Tax Scams and How to Protect Yourself

Top Businesses to Invest In

Top 5 Things You Might Be Doing Wrong With Your Business

Top 5 Strategic Technology Trends in 2014

Top Rags to Riches Stories

Parenting Behavior That Promotes Future Leaders

Top 5 Mistakes Made by Small Businesses

Top 5 Most Common and Potentially Devastating Financial Blunders

Top 5 Highest Paying Jobs for Web Designers

Top 6 Most Respected Professions that Also Pay Well

Top 5 Pitfalls Investors Should Avoid

Top 6 Lawyers and Policy Makers Under 30

Top 6 New Year’s Resolutions for Entrepreneurs

Top 7 Locations to Check in on Facebook

Top 5 Mistakes made by Rookie eBay Sellers

Top 7 eBook Publishers in 2013

Top 6 Health Industry Trends in 2014

5 Lessons for Entrepreneurs from Seth Godin

Top 5 Success Tips from Jordan Belfort – the Wolf of Wall Street

Best Master’s in Finance Degree Programs

Top 6 Earning Celebrities Over 50

The most expensive sports to play

Top 7 Earning Celebrities Under 25

Best 7 Online Courses to Take: Free Finance MOOCs

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!