Carrefour Case Analysis

The purpose of this analysis is to highlight how Carrefour has financed its growth over the last four years i. e. 1968 through 1971 with the help of the Statement of Sources and Uses (Exhibit 1). In addition, the financing needs for the projected growth of the company will be reported and analyzed briefly. For this purpose Pro-forma Income Statements (Exhibit 2) and Pro-forma Balance Sheets (Exhibit 3) have been prepared for the next four years (1972 through 1975). From 1968 to 1971, Carrefour has used trade notes extensively as a source of cash. Other significant sources of funds are Other Current Liabilities, Accounts Payable, Shareholder's Equity and Long term debt. Most of the sources have been utilized to fund Building and also to generate more cash for the firm. A good portion of the sources have also been used to create more Inventories from 1968 to 1971. Land has been acquired during these four years as also other fixed assets and current assets. As is seen from the Pro-forma Balance Sheet, Carrefour would have to take significant amounts of Long Term Debt(at 10% Interest rate) in order to finance its expansion outside France. According to the projections, LT Debt would have to be increased to around 89% from 1971 to 1972 and 96% from 1972 to 1973 respectively. This means Carrefour would also have to pay huge amounts of interest on these debts. With revenue growth of 35% Carrefour would be able to support its debt and still earn fair amounts of profit including dividend payouts. However, huge amount of debt and interest expense might be risky and could lead to negative earnings if the actual revenue growth falls below the expected value of 35%. Exhibit 1 CARREFOUR STATEMENT OF SOURCES AND USES – 1968 to 1971 | |Â   |1968 |1971 |Change |Source/Use | |Intangible Assets |0 |1 |1 |Use | |Land |14 |28 |14 |Use | |Buildings & Equipment |50 |202 |152 |Use | |Other Fixed Assets 21 |49 |28 |Use | |Total Fixed Assets |85 |279 |194 | | | less: Depreciation |10 |63 |53 |Source | |Net Fixed Assets |75 |216 |141 | | |Investments & Advances |5 |19 |14 |Use | |Inventory |30 |107 |77 |Use | |Acounts Receivable |2 | 4 |2 |Use | |Other Current Assets |58 |124 |66 |Use | |Cash |18 |151 |133 |Use | |Total Current Assets |108 |386 |278 | | |TOTAL ASSETS |188 |622 |434 | | | | | | | | |Shareholders' Equity |39 |112 |73 |Source | |Special Provisions |0 |1 |1 |Source | |Long-term Debt |26 |64 |38 |Source | |Accounts Payable |0 |77 |77 |Source | |Trades notes (noninterest) |100 |244 |144 |Source | |Other Current Liabilities |23 |124 |101 |Source | |Total Current Liabilities |123 |445 |322 | | |TOTAL LIABILITIES & EQUITY |188 |621 |433 | | | | | | | | |Master Check(Sources-Uses) |Â   |Â   |0 | | Exhibit 2 CARREFOUR PROFORMA INCOME STATEMENT |Past 3 yr avg of % of sales taken for| | |all items except Revenues and Int | | |Rates | | |Actual | |Actual |Actual |Actual |Actual |Pro Forma |Pro Forma |Pro Forma |Pro Forma | | | |1968 |1969 |1970 |1971 |1972 |1973 |1974 |1975 | | |Intangible Assets |0 |4 |1 |1 |5 |7 |9 |12 |0. 004 |0. 001 |0. 000 |0. 002 | |Land |14 |20 |25 |28 |50 |67 |90 |122 |0. 020 |0. 017 |0. 013 |0. 016 | |Buildings & Equipment |50 |82 |136 |202 |266 |359 |485 |654 |0. 080 |0. 094 |0. 090 |0. 88 | |Other Fixed Assets |21 |38 |52 |49 |95 |129 |174 |235 |0. 037 |0. 036 |0. 022 |0. 032 | |Total Fixed Assets |85 |140 |213 |279 |411 |555 |749 |1011 | | | | | |less: Depreciation |10 |22 |35 |63 |97 |142 |204 |287 |0. 100 |0. 069 |0. 112 |0. 094 | |Net Fixed Assets |75 |118 |178 |216 |314 |412 |545 |724 | | | | | |Investments & Advances |5 |10 |12 |19 |27 |36 |49 |66 |0. 010 |0. 008 |0. 009 |0. 009 | |Inventory |30 |65 |72 |107 |162 |219 |295 |399 | | | | | |Acounts Receivable |2 |2 |3 |4 |6 |8 |11 |14 |0. 002 |0. 002 |0. 002 |0. 002 | |Other Current Assets |58 |50 |75 |124 |157 |212 |286 |386 |0. 049 |0. 052 |0. 056 |0. 052 | |Cash |18 |51 |116 |151 |199 |268 |362 |489 |0. 050 |0. 080 |0. 068 |0. 66 | |Total Current Assets |108 |168 |266 |386 |524 |707 |954 |1288 | | | | | |TOTAL ASSETS |188 |300 |457 |622 |870 |1162 |1557 |2090 | | | | | | | | | | | | | | | | | | | |Shareholders' Equity |39 |89 |98 |112 |206 |278 |375 |507 |0. 087 |0. 068 |0. 050 |0. 068 | |Special Provisions |0 |0 |1 |1 |1 |2 |2 |3 |0. 000 |0. 001 |0. 000 |0. 000 | |Long-term Debt |26 |25 |64 |64 |121 |237 |393 |605 | | | | | |Accounts Payable |0 |48 |61 |77 |124 |168 |226 |305 |0. 047 |0. 042 |0. 034 |0. 041 | |Trades notes (noninterest) |100 |79 |147 |244 |244 |244 |244 |244 | | | | | |Other Current Liabilities |23 |59 |86 |124 |173 |234 |316 |427 |0. 058 |0. 060 |0. 056 |0. 058 | |Total Current Liabilities |123 |186 |294 |445 |542 |646 |786 |976 | | | | | |TOTAL LIABILITIES & EQUITY |188 |300 |457 |622 |870 |1162 |1557 |2090 | | | |