1 Financial Analysis Different Perspectives Different Perspectives Creditors Creditors Investors Investors Government Government Labor Labor Competitors.

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Presentation transcript:

1 Financial Analysis Different Perspectives Different Perspectives Creditors Creditors Investors Investors Government Government Labor Labor Competitors Competitors Customers Customers

2 Fundamental Analysis Industry Industry Structure Structure Conduct Conduct Performance Performance Recent Events Recent Events Company Company Vision Mission Goals Strategy Investments Financial Condition Management Board of Directors Key Success Factors Balance and Consistency

3 Sources of Financial Information RMA Statement Studies RMA Statement Studies D&B Key Industry Ratios D&B Key Industry Ratios S&P’s Industry Surveys S&P’s Industry Surveys Value Line Investment Survey Value Line Investment Survey Hoovers. com Hoovers. com Zacks.com Zacks.com Yahoo.finance Yahoo.finance Company website Company website

4 Methods of Analysis Ratios (Trends & Cross Section) Ratios (Trends & Cross Section) Dupont Equation Dupont Equation Statement of Cash Flows Statement of Cash Flows Common Size Statements Common Size Statements 5 C’s (Character, etc.) 5 C’s (Character, etc.) Economic Value Added Economic Value Added Z Score Z Score

5 Economic Value Added EBIT(1-T) EBIT(1-T) - $ Cost of Capital - $ Cost of Capital = EVA = EVA

6 Altman’s Z Score Z =.012x x x x x 5 X 1 = Net Working Capital/Total Assets X 2 = Retained Earnings/Total Assets X 3 = EBIT/Total Assets X 4 = Market Value of Stock/Book Value of Debt X 5 = Sales/Total Assets (NOTE: The First 4 Variables are Expressed as Percentages, Not Decimals) “Zone Of Ignorance” (50-50) FailedSuccessful

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