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Cash
One of Visa's largest assets is cash. Since Visa has no inventory, they end up having a large portion of cash instead. Their cash ratio was 1.24 for 2021, 1.45 for 2020, 1.0 for 2019, 1.17 for 2018, and 1.45 for 2017. The ratio has fluctuated over the past five years but has stayed strong. The Covid-19 pandemic decreased the 2019 ratio but still wasn't at a concerning level. Along with the cash ratio, Visa's days cash on hand is large as well. Days cash on hand measures the security of a company by determining how many days a company can pay operating and maintenance expenses before running out of cash. In 2021, their days cash on hand was 4,007, 4,343 in 2020, 2,269 in 2019, 2,384 in 2018, and 2,793 in 2017.
Figure 1: Days Cash on Hand 2021-2017
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Accounts Receivable
An efficient way to measure Visa's accounts receivable is to find the portion of AR of total assets. Looking at figure one, their portion averages around the 2 percent mark. A low accounts receivable percentage is strong and shows Visa's efficiency of being paid for their services. Their days sales outstanding ranges from 21-29 days in the past 5 years and averages at 25 days. Their small days sales outstanding correlates with their small percentage of accounts receivables. Some of their competitors in the Financial Transaction Processor sector including PayPal, Block, and Jack Henry have days sales outstanding in the same range and others not. PayPal's 5 year average is 550 days, while Block is 51, and Jack Henry falls at 75. Since Visa has the smallest days sales outstanding, it reveals another reason why they are the leading competitor in this sector.
Visa also does not have any doubtful accounts on their balance sheet, therefore indicating that any of their receivables will not turn into a bad debt in future years.
Figure 2:Visa Accounts Receivable % of Total Assets
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Figure 3: Visa vs Competitors for Days Sales Outstanding
Inventories
Since Visa is a service based company, specializing in financial transaction processes, they do not have inventory. Therefore, some of the metrics including inventory turnover, and cash collection cycle are not applicable. Some of the competitors in this sector like Block do have inventory because they sell point-of-sale hardware and software, however most of Visa's competitors just focus on services.
Accounts Payable
Visa's Accounts Payable has stayed consistent for the past five years with a five year average of 14.5 days. In 2021 it was 16.8, 12.0 in 2020, 11.8 in 2019, 14.9 in 2018, and 17.2 in 2017. This small turnover of days shows that Visa is efficient in paying back money to its suppliers. To compare it again to the sector average, Visa again falls in the lower range when comparing 5 year averages. PayPal is way higher than the rest of the sector with 1,1032 days, while Jack Henry is lower at 5 days, and Block at 132 days.
Figure 4: Visa's Accounts Payable
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Long Term Fixed Assets
As seen in Figure 2 below Visa's fixed assets account for around 3 percent of their total assets in the past 5 years. According to Visa's 10-K report, Visa has entered in only operating leases for real estate purposes. All of their leases are capital leases which end Visa with rights to the ownership of the asset at end of the term. Visa's 10K report states "During fiscal 2021 and 2020, total operating lease cost was $111 million and $114 million, respectively."(factset.com).
The PPE Turnover ratio examines how many dollars of sales are generated from each dollar invested in plant, property, and equipment. Visa's PPE Turnover ratio has stayed very consistent over the past 5 years. It was 8.9 in 2021, 8.0 in 2020, 8.5 in 2019, 8.3 in 2018, and 8.1 in 2017. Visa's ratio is very similar to many competitors in the industry again. Blocks ratio is 23.4 which is way higher than its competitors but, PayPal has a 9.4 ratio while Jack Henrys has a 5.3.
Visa's 10K report states "Property, equipment and technology are recorded at historical cost less accumulated depreciation and amortization, which are computed on a straight-line basis over the asset’s estimated useful life" (factset.com). Many different assets have a different lifespan as well. Technology, furniture fixtures, and equipment have a lifespan of 2 to 10 years while, building improvements range from 3 to 30 years, and buildings are depreciated over 40 years.
Many of the competitors in this field including PayPal, Jack Henry, and Block all depreciate their assets on a straight line basis over the estimated useful life. The estimated useful lives of PPE range for all different companies though. For example, Block states that capitalized software has a life of 18 months, computer equipment has 3 years, furniture and fixtures have 7 years and leasehold agreements have less than 10 years. With PayPal they state that computer equipment and software range from 1-4 years, furniture and fixtures has 3 years, building and building improvements is up to 30 years, and lease improvements has less than five years.
Figure 5: Visa's Fixed Assets Percentage of Total Assets
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Sources:
https://my.apps.factset.com/navigator/company-security/balance-sheet/V-US
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