Group Property Company Balance Sheets
An analysis of whether property investment companies within a group company collectively generates on-going profits is based on the group company balance sheet. A balance sheet gives the group company's profit or loss for the current year and the accumulated profits and losses from the previous years. The balance sheets also gives:
fixed assets which is the current value of all the properties hold by the group company through its subsidary companies including property purchase price, refurbishments, any fixtures and fittings
current assets including money in the group company bank accounts, purchase deposits
current liabilities associated with the group company properties such as taxation, deposits held, any short term loans repayable
long-term liabilities such as any loans used to purchase properties by the group company
For a group company, the balance sheet is a consolidated report of all its subsidary companies and their respective properties.
To illustrate this we will consider the Alpha Property Group which according to its profit and loss statement
has three companies which are:
company X
company Y
company Z
Between the three companies there are six properties of which one is sold and another one is in the process of being bought. The balance sheet of Alpha Property Group is as follows:
Fixed Assets
Company X had the following properties in its portfolio which are:
Property 1 valued at $251,500
Property 2 which was sold and was valued at $450,000
Property 3 valued at $325,000
The total property stock is valued at $576,500 and this comprises the fixed assets of company X.
Company Y had the following properties in its portfolio which are:
Property 4 valued at $1,010,000
Property 5 which was sold and was valued at $300,800
The total property stock is valued at $1,310,800 and this comprises the fixed assets of company Y.
Company Z had the following properties in its portfolio which are:
Property 6 valued at $361,200
Property 7 is in the process of being acquired
The total property stock is valued at $361,200 and this comprises the fixed assets of company Z.
If we add all the property stock of each company we get a total property stock value of the group company at $2,248,500.
By combining Alpha Property Group's profit and loss statement and its property stock in the its balance sheet we are able to do group company property stock analysis.
Current Assets
Company X has $1,200 in its bank account and no purchase deposits. The $1,200 is for unexpected sundry administrative expense as all major items of expenditure have already been made during the year. Purchase deposits are money which the company puts down towards the acquisition of a property. However, company X has no impending property purchases for the financial period.
Company Y has $5,000 in its bank account and no purchase deposits. This is the company's only current asset.
Company Z has $750 in its bank account and a purchase deposit of $1,000. The latter is for the acquisition of property 7.
If we add the above then the total current assets for the group company is $7,950.
Current Liabilities
Company X has taxation liabilities of $16,170 including corporation tax and VAT. There is no council tax as this is paid by the property tenants. The company is helding $2,040 in deposits from its property tentants which will be returned once the tenants terminate their lease and have paid their rent in full. Company X owes $3,800 to tradesmen for minor work done to its investment properties.
Company Y has taxation liabilities of $15,925 including corporation tax and VAT. There is no council tax as this is paid by the property tenants. The company is holding $2,900 in deposits from its property tentants which will be returned once the tenants terminate their lease and have paid their rent in full. Company Y owes $270,000 in short-terms to finance the acquistion of its investment properties.
Company Z has taxation liabilities of $420 including corporation tax and VAT. There is no council tax as this is paid by the property tenants. The company is holding $630 in deposits from its property tentants which will be returned once the tenants terminate their lease and have paid their rent in full. Company Z owes $25,000 in short-terms to finance the acquistion of its investment properties.
If we add the above then the total current liabilities for the group company is $336,885.
Long-Term Liabilities
Company X has $500,000 in mortgages for its investment properties. The corresponding interest of $11,200 this attracts in reflect in the company's profit and loss statement.
Company Y has $1,050,000 in mortgages for its investment properties. The corresponding interest of $36,000 this attracts is reflected in the company's profit and loss statement.
Company Z has $340,000 in loans for its investment properties. There is no corresponding interest in the profit and loss statement as this money is an interest free inter company loan.
If we add the above then the total long-term liabilities for the group company is $1,890,000.
Balance Sheet Analysis
Company X has $55,690 in net assets. Its profit and loss account for the financial period is $43,856 of which part was generated from a one off sale of a property. Hence this figure is likely to decrease for the next year. The retained earnings for the company from its previous years was $10,834. As a whole the company is an ongoing concern.
Company Y has -$23,025 in net assets. Its profit and loss account for the financial period reflects a loss of $9,589. The retained earnings for the company from its previous years was -$14,436. This figure is the accumulated losses generated by the company for all its previous financial periods. The company is therefore less of an ongoing concern than company X.
Company Z has -$3,100 in net assets. Its profit and loss account for the financial period reflects a loss of $223. The retained earnings for the company from its previous years was -$3,877. This figure is the accumulated losses generated by the company for all its previous financial periods. The company is therefore less of an ongoing concern than company Z but is more viable than company Y.
If we add the above then the total net assets for the group company is $29,565 which includes the total issued share capital valued at $3,000. However, this should be subject to a group company property stock analysis to identity areas of improvements.
Related Topics
Property Company Profit and Loss Statements
Property Company Balance Sheets
Property Stock Analysis
