Analyzing Open-Source Intelligence is essential to check a company’s financial stability, and financial statements are the primary information source for a company’s background check. This article will show how to conduct financial analysis, specifically on the balance sheet.
Understand The Company Features in The Same Category
We offer quizzes to help you discover which sections of a balance sheet require focus when differentiating between companies in the same category.
BOOK OFF or Mercari?
Both OOK OFF and Mercari facilitate the buying and selling of used goods.
| A | B | |
| Current assets | 63% | 89% |
| Fixed assets | 14% | 1% |
| Intangible assets | 4% | 0.2% |
| Investments and other assets | 20% | 9% |
| Total assets | 100% | 100% |
| Current liabilities | 36% | 66% |
| Fixed liabilities | 27% | 23% |
| Net assets | 37% | 11% |
| Total liabilities and net assets | 100% | 100% |
BOOK OFF
In Japan, there are over 700 physical shops that sell a variety of items, such as second-hand books and electronics. What sets their used book selection apart is that customers can try them on before purchasing. Mercari, a Japanese free market app similar to Poshmark or eBay, allows users to convert their trades with electronic money.
While BOOK OFF and Mercari provide used goods, they differ in their business models. BOOK OFF is a retailer with physical shops and warehouses, while Mercari operates solely as a web platform without physical stores.
As a result, Mercari has significantly fewer fixed assets than BOOK OFF, making it a B business. In addition to Mercari, the company also operates Merpay, which allows users to use electronic money for transactions, thereby increasing their deposits and current liabilities.
MITSUKOSHI ISETAN or MARUI?
Both MITSUKOSHI ISETAN and MARUI are renowned department stores in Japan.
| A | B | |
| Current assets | 70％ | 21％ |
| Fixed assets | 18％ | 61％ |
| Intangible assets | 1％ | 3％ |
| Investments and other assets | 10％ | 15％ |
| Total assets | 100％ | 100％ |
| Current liabilities | 29％ | 30％ |
| Fixed liabilities | 43％ | 25％ |
| Net assets | 28％ | 45％ |
| Total liabilities and net assets | 100％ | 100％ |
MITSUKOSHI ISETAN
This department store has been around since 1673 and offers high-end fashion products from well-known brands such as Burberry, Gucci, and Hermes.
MARUI
The shopping mall offers a lower grade of fashion items than MITSUKOSHI ISETAN and does not include food options like department stores. However, it differentiates itself from department stores by selling anime goods. Regarding fixed assets, MITSUKOSHI ISETAN owns land in prime locations such as Nihonbashi, Ginza, Shinjuku, Kyoto, and Nagoya, giving it a higher proportion of fixed assets.
On the other hand, MARUI has fewer fixed assets as it relies on leasing properties for its retail stores. Although MARUI is a retailer, its primary source of sales comes from its credit card, EPOS CARD. The company needs cash to meet installment payments and obtains it from the banks. As such, MARUI functions not only as a retailer but also as a financial institution.
Financial License Registration with FSA
To operate a financial business, including an e-money or installment plan business, you need to have a financial license with FSA (Financial Service Agency).
Mercari holds a registration number from a financial institution for handling e-money operations, while MARUI has a registration number for installment trading.
Merpay:
資金移動業者 / 関東財務局長第00057号 2018年3月22日
Funds Transfer Service Provider / Kanto Local Finance Bureau No. 00057, 2018 / 03/ 22
EPOS Card:
金融商品仲介業者 / 関東財務局長第855号 2018年10月2日
Financial instruments intermediary / Kanto Local Finance Bureau No. 00057, 2018 / 10/ 2
Some fraudulent investment management agencies operate without a financial license. It would be best if you didn’t deal with unlicensed financial agencies. Unfortunately, many foreign clients are more vulnerable to unregistered fraudsters, as they may struggle to verify legitimacy. In case of suspected investment fraud, always confirm the financial institution’s registration to safeguard your interests.
Finance-related businesses are required to obtain a license from the Financial Services Agency (FSA) to operate. Financial statements can be analyzed through credit reporting agencies to ensure due diligence, and the license can be checked on the FSA website.
Summary
Open-Source intelligence analysis is crucial for assessing a company’s financial stability, with financial statements as the primary source. This article focuses on conducting economic research, particularly on the balance sheet, and provides examples comparing companies within the same category, such as BOOK OFF and Mercari and MITSUKOSHI ISETAN and MARUI. It also emphasizes the importance of verifying financial license registration with the Financial Services Agency (FSA) to avoid dealing with unlicensed financial agencies.
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