Analysis of Solvency, Liquidity, and Balance Sheet

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Table of Contents

Composition of the company’s balance sheet
Receivables
Fixed assets (PPE)

Composition of the company’s balance sheet

Raffles Education Corporation Limited

	2010 (SGD millions)	2011 (SGD millions)	2012 (SGD millions)
Total assets	1,047	1,136	1,170
Total liabilities	449	529	629
Total stakeholders’ equity	598	607	541
Total liabilities and equity	1,047	1,136	1,170

Informatics Education Ltd

	2010 (SGD millions)	2011 (SGD millions)	2012 (SGD millions)
Total assets	27	39	38
Total liabilities	11	23	18
Total stakeholders’ equity	15	16	20
Total liabilities and equity	27	39	38

TMC Education Corporation Ltd

	2010 (SGD millions)	2011 (SGD millions)	2012 (SGD millions)
Total assets		17	17
Total liabilities		7	10
Total stakeholders’ equity		10	7
Total liabilities and equity		17	17

Analysis of the values of the balance sheet shows that there was an increase in the values of the total assets over the past three years. The value increased from SGD1, 047 million in 2010 to SGD1, 170 million in 2012. The main component of the total assets is the non – current assets. It takes over 80% of the share of total assets. Further, it can be observed that the value of total current assets is more than the value of net property, plant and equipment. The current asset takes over 19% of the total assets. The amount of net property, plant and equipment takes the reminder of the share of total assets. Further, it can be observed that the components of total assets did not take the same trend over the years. Some increased while others fluctuated over the three years. The total liabilities increased over the three years. The value increased from SGD449 million in 2010 to SGD629 million in 2012. The increase in total liabilities can be attributed to increase total current liabilities increased from SGD257 million in 2010 to SGD553 million in 2012. Finally, the non current liabilities increased between 2010 and 2011 thereafter it declined. The stakeholder’s equity fluctuated over the three year period. There was an increase in 2011 followed by a decline in 2012. Thus, significant changes can be observed in the values of total current assets and total current liabilities. This can be attributed to increase in the working capital of the company. Finally, it can be observed that the balance sheet values of Raffles Education are higher than those of its competitors. Thus, it can be concluded that Raffles education performs better than the two competitors.

Receivables

	2011 (SGD millions)	2012 (SGD millions)
Trade and other receivables	77	135

It is the policy of the company to initially enter the value of receivables at fair value of the consideration to be paid in future less the amount of transaction cost. The value is successively recorded at amortized cost. The management creates an allowance for doubtful receivables on a case by case basis. However, this is based on historical transactions with customers. The receivables of the company are on 30 days credit terms. From the table presented above, it can be observed that the value of trade and other receivables increased from SGD77 million in 2011 to SGD135 million in 2012. The make-up of the trade and other receivables is presented in the table below.

	2011 (SGD thousands)	2012 (SGD thousands)
Trade receivables	4,135	3,695
Other receivables	72,993	131,544
Receivables from sale of interest in subsidiary		21,888

It can be observed that there was a substantial increase in the amount of other receivables from SGD72,993 thousand in 2011 to SGD131,544 thousand in 2012. The increase resulted in a cash outflow amounting to SGD94,326 thousand in 2012. Thus, it can be observed that the growth in the value of the receivables affects the cash flow of the institution negatively. Trade receivables declined over the two year period. However, the amount of allowance for doubtful trade receivables increased from SGD1,534 thousand in 2011 to SGD1,930 thousand in 2012. The increase can be an indication of an increase in the amount bad debts on the books of the company.

Fixed assets (PPE)

The make-up of property plant and equipment of the company is presented in the table below.

	2011 SGD 000	2012 SGD 000
Freehold land	35,228	17,038
Leasehold land, building and improvements	110,870	123,136
Plant and equipment	832	1,061
Furniture, fittings and equipment	8,337	5,552
Computer equipment	4,068	3,412
Motor vehicles	868	545
Construction in progress	2,944	18,635
Total	163,147	169,379

The amount of property plant and equipment increased from SGD163,147 thousand in 2011 to SGD169,379 thousand in 2012. It can be observed that a large proportion of PPE is made up of leasehold land, building and improvements followed by freehold land. The amount of PPE as a percentage of the total assets was 14.35% in 2011 and 14.44% in 2012. The total non-current assets accounts for about 80% of the total assets. The massive capital investment is consistent with the strategy of the institution which is growth and expansion. Further, the company had a number of additions, disposals and write offs during the year. The values are presented in the table below.

At cost	2011 SGD 000	2012 SGD 000
Addition	53,276	45,621
Disposal	2,133	2,222
Write off	16	310

In 2011, a large proportion of additions relates to furniture, fittings and equipment while in 2012 it relates to leasehold land, building and improvements. The changes are aimed at aligning the PPE of the institution to its strategies. The PPE for the competitors are presented in the table below.

	2011 SGD millions	2012 SGD millions
Informatics Education Ltd.	1	2
TMC Education Corporation Ltd	7	2
Raffles Education Corporation Limited	163	169

When compared to its peers, it can be observed that Raffles Education has a larger value of PPE. This gives the company a competitive advantage.

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Analysis of Solvency, Liquidity, and Balance Sheet

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