I am pursuing a bachelor of business administration with a concentration in finance. After I graduate I plan to look for an entry level position at a small bank such as blue shore financial. During this time I plan on licensing myself and taking the CFP exam. As of right now I am working at A restaurant called Colony Northwoods. I plan on working here until I can finish my schooling and launch my career.

BFIN 241 Finance report:

Ballard-Power-Systems-Financial-Analysis-ReportDownload

The financial statement and analysis section of report:

Income Statement Analysis (Horizontal and Vertical)

The previous full 5 years of financial statements, being 2014 to 2018, for Ballard Power Systems was analyzed. Over that time frame, Ballard has had a steady increase of most of their key financial attributes, with a few key differences. When looking at the horizontal analysis of their income statements, they’ve had an average increase of about 46%, over the 5 year, of their contribution margin. This indicates they are increasing the profitability of the products and services they sell. In contrast however, they have also seen an average of about a -153% decrease in net income over the same time. This indicates they have some issues with their financing and fixed expenses that are depleting their gross income. When looking at the vertical analysis of their income statements, they average 25.19% 

While inspecting the vertical analysis of Ballard’s income statements over the past 5 years, it’s clear they are not making enough revenue to cover their expenses. They have an average net income of -22.96% of their revenue over the 5 years. Their costs of goods sold is an average of 74.8% of their revenue which only leaves about 25% to cover the entirety of their fixed expenses, financial expenses, and income taxes. That has however, been on the decline recently as it’s gone from 85.09% in 2014 to 69.28% in 2018 That is why though they have had a negative percentage for their net income every one of the past 5 years. However, the positive that results from this is that Ballard has been able to use a tax shield and have only paid an average of 0.62% of their revenue to taxes. This is a major factor as to why  Ballard has not suffered more over the last 5 years. Another thing of note, was that in 2018 the loss of investment in joint ventures and associates was only 1.19% of revenue. That was what  their CEO attributed to their lower than predicted performance in 2019 to, so it must have drastically increased in 2019. It has been on the rise as of the previous two years but the average over the 5 years was 0.42% only.

Balance Sheet Analysis (Horizontal and Vertical)

For Ballard’s horizontal balance sheet, their total assets increased significantly with a slight drop from from 2016 to 2017 and the same trend applies for their total liabilities and equity.  Ballard has an average increase, over the 5 years, for total current assets of 61.45% and for non-current assets 32.86% while they only has an average of 19.11% and 7.45% for its current liabilities and total liabilities. That means Ballard doesn’t depend much on debt to finance their capital. Ballard also has an average of 46.04% for its equity in which foreign currency reserve has the highest rate of 93.68% in Ballard equity. 

Within Ballard’s current assets, cash and cash equivalents account for the highest percentage of total assets where the average change throughout 5 years was 34.48%. While in the non-current assets goodwill and intangibles assets have the highest value on Ballard’s total asset with an average of 22.02% and 10.27% respectively. For the liability side, trade and other payables account for the highest value of Ballard current liabilities with 10.10% and the same goes for its finance lease liability with 3.97%. Within equity, share capital and accumulated deficit were likely the main focuses of Ballard with 546.08% and -639.14% respectively.  

Balance Sheet Ratios

The Balance sheet ratios show a complete overview of how Ballard systems inc. is doing overall. It shows the relationships of the financial information over the last 5 years. Most importantly, Ballards Current ratio took a big spike in 2018 from 2.61 to 5.48 along with its quick ratio from 2.17 to 4.87. This shows that Ballard might be meeting it’s short term obligations and that it is in its growth stage, although this does not mean much in the long term. The profit margin has been negative over the last 5 years from as low as -42.68% in 2014 to as high as -6.64% in 2017, either way they have not been able to make a gross profit. This could mean that they are relying heavily on investments and paying heavy production costs.

 The ROE and ROA have also been on the negative side throughout the previous 5 years but have still been making improvements. In 2014 The ROE was as low -37.14% and the ROA was -23%. These are some heavy losses but they have managed to increase the ROE and ROA up to -9.67% (ROE) and -7.89% (ROA). Either way, this means the shareholders are not getting the return they want and this might make them give up on the company because of these red flags. Ballards receivable turnover has been okay in a few years sitting at 5.23 in 2014, 5.71 in 2016 and 5.26 in 2017. It has also been fairly low in 2015 at 2.22 and has gone back down in 2018 at 2.28. This is another red flag for the company because it could mean that they are not financially viable and have issues with credit policies, problems with collection etc.  The collection periods have all been quite long to go along with it. 

Something positive about Ballards balance sheet ratio is that they have managed to keep their Debt-to-Total-Assets ratio below 1. The highest it has gone was in 2014 at 0.38 and as recent as the public knows, it has been as low as 0.18 from 2018. This is a good sign because it shows that they are not funding they are holding higher assets than debt and have been able to fund their debt obligations.

Comparatives

Comparatively Ballard is a first mover in the fuel cell industry. They have made pushes into the Chinese market with a partnership to Weichai in 2018. A large part of the worlds fuel cell shipments comes out of Asia and with their local partners having already committed to 2000 commercial fuel cell vehicles Ballard has the capacity for higher growth than their competitor Nuverra. They are also at an advantage compared to Nuverra since the field of fuel cells is not as saturated as the oil energy sector is and also enjoys much support from the federal government. Bloom energy is comparatively in a strong position though as they seem to have received  heavier invest and are partnered in more projects with other companies. But Ballard has the advantage of having been in the industry for far longer and having the experience to back it up. With their current partnership trend while Ballard growth is not as explosive as Bloom’s it seems to have more staying power than Bloom’s according to their stock fluctuations.