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YOKU: Balance Sheet and Cash Flow Instability

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money8 July 21, 2011 (Alan Cho) The historical performance of the balance sheet of Youku.com Inc. (NYSE:YOKU) shows almost all accounts, under both assets and liabilities, have been increasing. However, while top line performance has been impressive, looking at the firm’s profitability and performance and valuation ratios show that overall the company still leaves much to be desired.

The major part of the increase in Youku’s total assets is attributed to the rise in its cash and cash equivalents accounts, with over a 600% increase from 302 million to 1.8 billion yen within the last year. As a whole, total assets have increased from 442 million to 2.19 billion yen, while total liabilities have increased from 147 million to 279 million yen. Total shareholders’ equity has increased from a deficit of 486 million to positive 1.9 billion yen.

The large increases in cash and shareholders’ equity in 2010 are a direct result of Youku.com Inc. (NYSE:YOKU) going public at the end of last year. Looking at the cash flow statement, it is clear that the majority of the company’s cash flow from 2010 came from proceeds from the IPO, raising over 1.4 billion yen. At this point, it is difficult to judge what worth is created from the massive increase in cash. What matters now is how the company decides to use its newfound accumulation of cash, and whether these decisions generate value for the firm.

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