Liabilities and Off-Balance Sheet Debt

Liabilities

There are many ratios we can use to analyze Visa's leverage and the risk associated with it. Total debt to equity examines how much debt a company has and compares it to the amount of shareholder equity in a company. Visa's ratio over the past five years has been 56.1 for 2017, 48.49 for 2018, 48.2 for 2019, 68.0 for 2020, and 57.3 for 2021. Looking at Figure One comparing Visa to it's competitors, Visa has a higher ratio than PayPal and Jack Henry but remains below Block. Visa's higher ratio means that it carries more risk for stockholders, however given how large the company is, this higher ratio isn't concerning.

Another ratio I used to analyze Visa was total debt to capital. Total debt to capital compares how much debt is used to finance its assets. Visa's total debt to capital ratio was 35.9 in 2017, 32.8 in 2018, 32.5 in 2019, 40.5 in 2020, and 36.4 in 2021. Looking at Figure Two below, Visa again has a higher ratio than PayPal and Jack Henry, but is below Block. A higher ratio means that Visa uses a large portion of capital to finance its debt. Just like stated above, given how large the company is, this ratio isn't concerning.

Maturity of Debt & Altman Z Score

Visa only uses operating leases to finance their real estate. When analyzing their maturity of debt, Visa 10-K report states "During fiscal 2021 and 2020, total operating cost was $111 million and $114 million, respectively. At September 30, 2021 and 2020, the weighted-average remaining lease term for operating leases was approximately 6 years and the weighted-average discount rate for operating leases was 2.23% and 2.29%, respectively." (factset.com).

Along with the ratios above the Altman Z-score measures a company's risk of bankruptcy. Visa's score was 4.77 in 2017, 6.1 for 2018, 6.82 for 2019, 6.69 for 2020, and 7.56 for 2021. Their high ratio of above 3.0 means that a company is in the "safe zone" and has no risk of bankruptcy. Visa is well above that score of three showing they are in no danger of bankruptcy.

By comparing Visa's Altman score to its competitors, its clear that none of their competitors are in risk of bankruptcy. PayPal was 4.29 in 2021, Jack Henry was 10.26 in 2021, and 10.26 for Block in 2021 as well. With Visa having a 7.56 score in 2021, Jack Henry and Block have higher score than them while PayPal is lower, yet still in a safe range at 4.29.

Pre-2019 Lease Reporting Standard

Below is my excel document with the adjusted lease reporting standards. Their total adjusted operating payments was 381,000,000 dollars. This small portion did not make a huge impact of the balance sheet because Visa has only a small portion of operating leases used for real estate. The current ratio in 2017 adjusted from 1.90 to 1.89, and from 1.61 to 1.60 for 2018. Long term debt to equity was also adjusted from 0.51 to 0.52 in 2017 and 0.49 to 0.50 in 2018.

Sources:

https://my.apps.factset.com/navigator/company-security/balance-sheet/V-US

https://www.capitaliq.com/CIQDotNet/Financial/Ratios.aspx?CompanyId=38043467