The Interpretation of Financial Statements – Ratio Analysis using Safe Bulkes (SB) as an example

I recently finished reading Benjamin Graham’s 1937 classic The Interpretation of Financial Statements.  Graham explains the financial statement concepts in clear English.  At the end of the book he walks the reader through the analysis of a balance sheet and income statement using the ratio method.  His example was Bethlehem Steel Corporation.

I will do the same with Safe Bulkers (SB).

A number of the ratios used in the analysis of an industrial company’s income account and balance sheet are presented herewith by the use of a single example – namely the financial statements of the Safe Bulkers corporation for 2011.  Various items in the Balance Sheet and Income account are numbered.  This will facilitate the explanation as to the method of computing ratios.  For example margin of profit, the first ratio computed in this study, is operating income divided by sales.  On the Income Account operating income is item No. 4 and sales is item No. 1.  The method of computing margin of profit is expressed at (4) ÷

0image007

(1) or in actual amounts $108,936,000 ÷

0image007

$172,036,000 = 63.3%

SAFE BULKERS

Income Account Year Ended December 31, 2011

(1)

Revenues

$172,036,000

Commissions

(3,128,000)

(2)

Voyage, vessel operating, general and administrative expenses

(36,542,000)

Early redelivery income

207,000

(3)

Depreciation

(23,637,000)

(4)

Operating Income

$108,936,000

Add – interest, dividends, and other misc income

0

(5)

Total Income

$108,936,000

(6)

Deduct-Interest charges

(19,202,000)

(7)

Net Income

$89,734,000

(8)

Deduct-Dividends on Preferred Stock

0

(9)

Net for Common Stock

$89,734,000

Deduct-Dividends on Common Stock

$42,536,652

(10)

Transferred to Surplus

$47,197,348

BALANCE SHEET

SAFE BULKERS

December 31st, 2011

ASSETS

Current Assets:

(11)

Cash, time deposits

$28,121,000

(12)

Other current assets

9,838,000

(13)

Accounts and notes receivable

0

(14)

Inventories

0

(15)

Total Current Assets

$37,959,000

Advances for vessel acquisition and vessels under construction

$122,307,000

Restricted cash non-current

5,423,000

Long-term investment

50,000,000

Other non-current assets

6,226,000

(16)

Vessels

?

(17)

Less reserve for depreciation and depletion

0

(18)

Vessels, net

$655,356,000

Total Long Term Assets

$ 839,312,000

Total Assets

$877,271,000

LIABILITIES

Current Liabilities:

Current portion of long-term debt

$18,486,000

Other current liabilities

$33,187,000

(19)

Total Current Liabilities

$ 51,673,000

(20)

Long-term debts, net of current portion

$465,805,000

(21)

Other non-current liabilities

$27,951,000

Total Non-current Liabilities

$493,756,000

(22)

Common stock 70,894,420 shares, no par value?

0

(23)

Shareholder equity (Surplus)

$331,842,000

Total Shareholder Equity

$331,842,000

Total Liabilities

$877,271,000

Margin of Profit

Operating income divided by Sales.

Formula: (4) ÷

0image007

(1)

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Published in: on April 18, 2012 at 3:28 pm  Leave a Comment  

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