UNIVERSITY OF SARAJEVO

SCHOOL OF ECONOMICS AND BUSINESS

Analyze The Mercator Groups Consolidated Balance Sheet Equity and Liabilities in

Fiscal Year 2013 as compared to the previous year.

- CASE STUDY -

Subject: English language

Master: Financial management / Line 2

Students: Professor:

Pukar Aida 3034 - 69773 Srebren Dizdar, PhD

Selimovi Nejra 3031 - 69540

epi Almir 3160 - 69637

Tabakovi Amer 3161 - 69506

Valjevac Amna 3030 - 70555

Sarajevo, april 2015.

1

Selimovi Nejra

School of Economic and Business

Trg Osloboenja 1

71 000 Sarajevo, BiH

1st April 2014

Ivica Todori

Chairman of Agrokor Group

Agrokor trgovina d.d.

Ulica grada Vukovara 269F

HR-10000 Zagreb, Hrvatska

Dear Mr. Todori,

On behalf of my team, I wish to introduce case study on "Analyse The Mercator Group's

Consolidated Balance Sheet - Equity and Liabilities and Fiscal Year 2013 as compared to the

previous year". Through this case study, you can see the analysis of your balance sheet

liability that can help in making future decisions.

Our team consists of five members with education in economics and management.

In our report we will analyse the equity and liabilities (non-current and current) by means of

horizontal and vertical analysis, and the cause and change the data of liabilities. Each item of

liabilities we have explained in detail and presented in tables and graphs.

At the end of the case studies we wrote in the conclusion that we have summarized our

research and results, which is the goal of this work.

Thank you for your consideration, and we are looking forward for your positive feedback.

Kind Regards,

Selimovi Nejra

2

1. Horizontal analysis of Total equity and liabilities

Horizontal analysis of financial statements ''allows comparison of data across multiple

computing period in order to detect tendencies and dynamics of changes of balance sheet

captions''1, while it is used ''comparative financial statements that enable consideration of

tendencies changes using basic indices''2, based on which judges the success and safety of

operations of district heating companies.

Equity and liabilities (in

thousand EUR) 2013 2012

The Amount of

increase (decrease)

%increase

(decrease)

Total equity 514,294 538,925 -24,631 -4,57%

Total liabilities 1,789,547 1,840,549 -51,002 -2,77%

Total equity and liabilities 2,303,841 2,379,474 -75,633 -3,17%

Comment: After completion of the horizontal analysis, it was found that the total equity and

liabilities in 2013 decreased by 3.17% compared to the year 2012.

Total capital in 2013 decreased by 4.57% compared to the previous year, while total

liabilities also decreased by 2.77%.

1.1 Horizontal analysis of equity

Now we are going to do and explain the horizontal analysis of capital Mercator Group for the

year 2013 compared with 2012:

1 Skupina autora: Raunovodstvo trgovakih drutava, TEB Poslovno savjetovanje, Zagreb, 2010. str 912. 2 Skupina autora: Analiza financijskih izvjetaja, Masmedia, Zagreb, 2008. str 225.

Illustration 1: Graphic representation of the change of the total equity and total liabilities in

2013 compared to 2012.

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

2013 2012

Equity and liabilities in EUR (2013 vs 2012)

Total equity and liabilities

Total equity

Total liabilities

3

Equity (in thousand EUR) 2013 2012 The Amount of

increase (decrease)

%increase

(decrease)

Share capital 157,129 157,129 0 -

Share premium 198,872 198,872 0 -

Treasury shares (3,235) (3,235) 0 -

Revenue reserves 146,656 197,045 -50,389 -25,57%

Fair value reserve 140,587 141,008 -421 -0,29%

Retained loss (63,887) (54,362) -9,525 -17,52%

Profit (loss) for the year 18,695 (18,839) 37,534 199,24%

Currency translation reserve (80,623) (78,819) -1,804 -2,29%

Non-controlling interests 100 126 -26 -20,63%

Total equity 514,294 538,925 -24.631 -4,57%

Horizontal equity analysis showed that the value of the share capital, share premium

and treasury shares is not increased nor decreased in 2013 compared to the year 2012.

Revenue Reserves, in 2013 decreased by 25.57% compared to 2012 or from the

amount of 197.045 in 2012 to 146.656 in 2013.

Fair value reserve were also decreased in 2013 compared to the previous by 0.29%,

i.e. the amount of 141.008 from 2012 to amount of 140.587 in 2013.

Retained loss in 2013 decreased by 17.52% compared to 2012, and with the amount of

-54.362 from 2012 to the amount of -63.887 in 2013.

Profit (loss) for the year in 2013 increased by 199.24% compared to 2012, and with

the amount of -18.839 in 2012 to the amount of 18,695 in 2013.

Currency translation reserve in 2013 was reduced by 2.29% compared to 2012 or the

amount of -78.819 in 2012 to the amount of 80.623 in 2013.

Non-controlling interests in 2013 was reduced by 20.63% compared to 2012, and the

amount of 126 in 2012 to the amount of 100 in 2013.

Illustration 2: Graphic display of changes in equity in 2013 compared to 2012.

1.2 Horizontal analysis of liabilities

Now we are going to do and explain the horizontal analysis of liabilities of Mercator Group

for the year 2013 compared with 2012:

-100,000

0

100,000

200,000

300,000

2013 2012

Equity in EUR (2013 vs 2012)

Share capital

Share premium

Treasury shares

Revenue reserves

4

Liabilities (in thousand

EUR) 2013 2012

The Amount of

increase (decrease)

%increase

(decrease)

Non-current liabilities

Trade and other payables 850 2,462 -1,612 -65,48%

Financial liabilities 351,583 593,841 -242,258 -40,80%

Deferred tax liabilities 37,455 33,618 3,837 11,41%

Provisions 25,047 31,459 -6,412 -20,38%

Total 414,935 661,380 -246,445 -37,26%

Current liabilities

Trade and other payables 686,507 672,858 13,649 2,03%

Current tax liabilities 411 163 248 152,15%

Financial liabilities 686,225 500,879 185,346 37,00%

Derivate financial

instruments 1,469 5,269 -3,800 -72,12%

Total 1,374,612 1,179,169 195,443 16,57%

Total liabilities 1,789,547 1,840,549 -51,002 -2,77%

Current liabilities:

Trade and other payables are drastically reduced in 2013 for 65.48% over the previous

year or from the amount of 2.462 to the amount of 850.

Financial liabilities were reduced in 2013 for 40.80% compared to the year 2012, and

from the amount of 593.841 to the amount of 351.583.

Deferred tax liabilities were increased in 2013 for 11.41% compared to the year 2012,

and from the amount of 33.618 to the amount of 37.455.

Provisions were reduced in 2013 for 20.38% compared to the year 2012, and from the

amount of 31.459 to the amount of 25.047.

Total current liabilities were in 2013 decreased by 37.26% compared to the previous

year.

Long-term liabilities:

Trade and other payables have increased in 2013 for 2.03% compared to the year

2012, and from the amount of 672.858 to the amount of 686.507.

Current tax liabilities are drastically increased in 2013 for 152.15% compared to the

year 2012, and from the amount of 163 to the amount of 411.

Financial liabilities have increased in 2013 for 37% compared to the year 2012, and

from the amount of 500.879 to the amount of 686.225.

Derivative financial instruments were reduced in 2013 for 72.12% compared to the

year 2012, and from the amount of 5.269 to the amount of 1.469.

Total long-term liabilities, in 2013, were increased by 16.57% compared to the

previous year.

5

Illustration 3: Graphic representation of change in liabilities in 2013 compared to 2012.

2. Vertical analysis of total equity and liabilities

Unlike the horizontal analysis, vertical analysis enables ''insight into the structure of the

financial statements, and comparing financial data, ie. position in one year, and is used

structural financial statements''3. In the balance sheet, assets and liabilities are commonly

equated with the 100, which means that the individual positions in the balance sheet are

calculated as a percentage of total assets or liabilities, while in the income statement total

revenues and expenditures equate with 100.

By using both horizontal and vertical analysis will come to the same conclusions as the only

structural financial statements more useful in comparison with other companies or when

comparing the data of one company with another when there is an inflation in the economy.

As we can see in the table below, the total capital, in 2013 were decreased to 22.32%

compared to the year 2012 or by 0.33% or from the amount of 538,925,000 euros to the

amount of 514,294,000 euros. Total liabilities increased from 77.35% to 77.68%, i.e. from

1,840,549 euros to 1,865,180 euros.

Equity and liabilities (in

thousand EUR)

2013 2012

Amount Percentage Amount Percentage

Equity 514,294 22,32% 538,925 22,65%

Liabilities 1,789,547 77,68% 1,840,549 77,35%

Total equity and liabilities

(in thousand EUR) 2,303,841 100% 2,379,474 100%

3 Skupina autora: Raunovodstvo trgovakih drutava, TEB Poslovno savjetovanje, Zagreb, 2010. str 916.

0

200,000

400,000

600,000

800,000

2013 2012

Liabilities in EUR (2013 vs 2012)

Trade and other payables

Financial liabilities

Deferred tax liabilities

Provisions

Trade and other payables2

Current tax liabilities

6

Illustration 4: Graphic representation of equity and liabilities in 2013 compared to 2012.

2.1 Vertical analysis of equity

Now we are going to do and explain the vertical analysis of capital of Mercator Group for the

year 2013 compared with 2012:

Total equity (in thousand

EUR)

2013 2012

Amount Percentage Amount Percentage

Share capital 157,129 30,55% 157,129 29,17%

Share premium 198,872 38,67% 198,872 36,91%

Treasury shares (3,235) -0,63% (3,235) -0,60%

Revenue reserves 146,656 28,52% 197,045 36,56%

Fair value reserve 140,587 27,33% 141,008 26,16%

Retained loss (63,887) -12,41% (54,362) -10,09%

Profit (loss) for the year 18,695 3,63% (18,839) -3,50%

Currency translation reserve (80,623) -15,68% (78,819) -14,63%

Non-controlling interests 100 0,02% 126 0,02%

Total equity 514,294 100% 538,925 100%

Share capital, in 2013, in the amount has not changed compared to the previous year,

but the percentage has increased to 30.55% compared to the previous year where it

was 29.17% of 100% of total capital.

Share premium amount is also unchanged, but compared to the 100% total capital, in

2013 it increased to 38.67% compared to 2012, which amounted to 36.91%.

Treasury shares in 2013 were reduced by 0.03% compared to the previous year.

Revenue reserves fell to 28.52% in 2013 compared to 2012, where they amounted to

36.56% of total capital.

Fair value reserve in 2013 increased to 27.33% compared to the previous year, which

amounted to 26.16%.

Retained loss in 2013 decreased by 2.33% compared to the previous year, which

amounted to 10.09% of total capital.

0%

50%

100%

2013 2012

Equity and liabilities in EUR (2013 vs 2012)

LiabilitiesEquity

7

Profit (loss) has increased dramatically in 2013, when it amounted to 3.63%, or 18.965

euros compared to the previous year which experienced a loss of 3.50% of the total

capital, or 18.839 euros.

Currency translation reserve in 2013, there was a decrease of 1.05% compared to the

previous year.

Non-controlling interests in 2013, in the percentage remained unchanged.

Illustration 5: Graphic representation of equity in 2013 compared to 2012.

2.2 Vertical analysis of liabilities

Now we are going to do and explain the vertical analysis of the total liabilities of the Mercator

Group for the year 2013 compared with 2012:

Liabilities (in thousand

EUR)

2013 2012

Amount Percentage Amount Percentage

Non-current liabilities 414,935 23,19% 661,380 35,93%

Current liabilities 1,374,612 76,81% 1,179,169 64,07%

Total liabilities 1,789,547 100% 1,840,549 100%

Short-term liabilities in 2013 were reduced to 23.19% compared to 2012 when they

amounted to 35.93% of total liabilities.

Long-term liabilities increased to 76.81% compared to the previous year when they

amounted to 64.07% of total liabilities.

-20%

0%

20%

40%

60%

80%

100%

2013 2012

Equity in EUR (20113 vs 2012)

Non-controlling interests

Currency translation reserve

Profit (loss) for the year

Retained loss

Fair value reserve

Revenue reserves

8

Illustration 6: Graphic representation of liabilities in 2013 compared to 2012.

2.2.1 Vertical analysis of non-current liabilities

Non-current liabilities (in

thousand EUR)

2013 2012

Amount Percentage Amount Percentage

Trade and other payables 850 0,21% 2,462 0,37%

Financial liabilities 351,583 84,73% 593,841 89,79%

Deferred tax liabilities 37,455 9,03% 33,618 5,08%

Provisions 25,047 6,03% 31,459 4,76%

Total non-current liabilities 414,935 100% 661,380 100%

Trade and other payables in 2013 were reduced to 0.21% compared to 2012, when

they amounted to 0.37% of total capital.

Financial liabilities in 2013 were reduced by 5.06% compared to the previous year.

Deferred tax liabilities in 2013 increased by 9.03% compared to the previous year

when they amounted to 5.08% of the total short-term liabilities.

Provisions were increased to 6.03%, while in the previous year amounted to 4.76%.

Illustration 7: Graphic display of short-term liabilities in 2013 compared to 2012.

0%

50%

100%

2013 2012

Liabilities in EUR (2013 vs 2012)

Current liabilities

Non-current liabilities

0%

20%

40%

60%

80%

100%

2013 2012

Non-current liabilities in EUR (2013 vs 2012)

Provisions

Deferred tax liabilities

Financial liabilities

Trade and other payables

9

2.2.2 Vertical analysis of current liabilities

Current liabilities (in

thousand EUR)

2013 2012

Amount Percentage Amount Percentage

Trade and other payables 686,507 49,94% 672,858 57,06%

Current tax liabilities 411 0,03% 163 0,01%

Financial liabilities 686,225 49,92% 500,879 42,48%

Derivate financial instruments 1,469 0,11% 5,269 0,45%

Total current liabilities 1,374,612 100% 1,179,169 100%

Trade and other payables in 2013 were reduced to 49.94% compared to the previous

year when they amounted to 57.06% of the total long-term liabilities.

Current tax liabilities increased by 0.02% compared to the previous year.

Financial liabilities were also increased in 2013 by 7.44%.

Derivatives financial instruments decreased to 0.11% in 2013, compared to the

previous year when they amounted to 0.45% of the total long-term liabilities.

Illustration 8: Graphic display of long-term liabilities in 2013 compared to 2012.

3. CONCLUSION

In this case study, there was an analysis of balance sheet liabilities of the Mercator Group for

the year 2013 and it was carried out its comparison with the same items in 2012. Our focus

was on the horizontal and vertical analysis. We have found that loans and other financial

liabilities of the Mercator Group at day 31.12.2013 amount to 1.037.808 euros, as compared

to year 2012, there is a decrease of 56.912 euros. Decrease in loans and other financial

obligations is the result of effective action towards reducing the debt of the Group. In addition

to the unfavorable economic environment that has a negative impact on consumption and

changes in consumer habits, they are faced with additional business challenges, such as the

amount of debts, low profitability of past investment and low efficiency of the company.

0%

20%

40%

60%

80%

100%

2013 2012

Current liabilities in EUR (2013 vs 2012)

Derivate financial instruments

Financial liabilities

Current tax liabilities

Trade and other payables

10

Mercator Group improves key performance indicators, although the pace of change is not

satisfactory. The implementation of the restructuring strategy focuses on increasing traffic,

improving operations and profitability, ensuring long-term sustainable and stable financial

structure that will have a positive impact on profitability and the achievement of positive

results of subsidiaries, after successfully stopping the downward trend in their business with

rehabilitation measures implemented in the first part of year 2013.

4. EXECUTIVE SUMMARY

With horizontal analysis are comparing the individual items of assets or liabilities in relation

to previous periods. It allows the detection of trends and the dynamics of change of balance

sheet items, in addition to changes in absolute values are compared and the relative

(percentage) changes. Vertical analysis implies insight into the structure of assets and

liabilities. The assets and liabilities are equals with 100, and other positions are considered in

relation to total assets or liabilities. The structure of the balance sheet is important to analyze

in the temporal context (previous period) in relation to the characteristics of the activities in

which the company operates (e.g. in the structure of assets of capital-intensive businesses we

expect higher proportion of long-term assets than for entities operating in the labor intensive

sectors).

For this company, we have done both analyzes, and our main objective was to determine the

actual state of the company and compare it with the transitional period. Mercator Group in

2012 and 2013 was actively focused on the optimization of working capital in all companies

within the Group, which has improved liquidity. They have successfully implemented the

withdrawal from the market of Bulgaria and Albania in this period. Mercator Group operates

in an extremely difficult situation, and through this analysis we saw in what it reflects.

11

5. Bibliography

Mercator Annual Report 2013 (Prof. dr. Srebren Dizdar, 2015).

Skupina autora: Raunovodstvo trgovakih drutava, TEB Poslovno savjetovanje,

Zagreb, 2010.

Skupina autora: Analiza financijskih izvjetaja, Masmedia, Zagreb, 2008.

http://mbh.mercator.ba/

1. Horizontal analysis of Total equity and liabilities1.1 Horizontal analysis of equity1.2 Horizontal analysis of liabilities

2. Vertical analysis of total equity and liabilities2.1 Vertical analysis of equity2.2 Vertical analysis of liabilities2.2.1 Vertical analysis of non-current liabilities2.2.2 Vertical analysis of current liabilities

3. CONCLUSION4. EXECUTIVE SUMMARY5. Bibliography