fsafsa A nalyzing F inancial P erformance

fsafsa Presented by Khuram Shahzad

fsafsa a nalyzing f inancial p erformance Financial ratios s tandardized financial s tatements Applications of financial analysis Problems in using FSA GOING BEYOND THE NUMBERS

fsafsa a nalyzing f inancial p erformance Financial ratios Ratio is an arithmetic relationship between two figures FRA is a study of ratios between various items in fin statements

fsafsa is drawing conclusions to serve as basis for decisions and actions Interpretation

fsafsa a nalyzing f inancial p erformance financial ratios- classification Liquidity Turnover Profitability Valuation

fsafsa Liquidity Ratios

fsafsa Current Ratio = Current Assets Current Liabilities Quick Ratio = Current Assets-inventory Current Liabilities Work ing Capital = Current asset – Current Liabilities 440.3/356.4 = 1.2 times /356.4 = 0.38 times = 83.8 mil

fsafsa Leverage Ratios (Refers to use of debt finance)

fsafsa Leverage Ratios Debt Equity Ratio = Debt Equity Debt Asset Ratio = Debt Assets Interest Coverage Ratio = Profit before Int and Taxes Interest 122.3/22.1 = 5.54 Financial Leverage Refers to Use of Debt Finance 356.4/336 =0.90 =90% 356.4/755.3 = 0.47 = 47%

fsafsa Turnover Ratios (Measure how efficiently assets are employed)

fsafsa Turnover Ratios Activity ratios how assets are employed Inventory Turnover Cost of Goods Sold Average Inventory Debtors’ Turnover Net Credit Sales Average Sundry Debtors Average Collection Period Average Sundry Debtors Av. Daily Credit Sales 1294/( )/2 = /( )/2 =5.63 ( )/2 (1586/365) =64.89 days 365 Debtors’ Turnover =64.83 days

fsafsa Turnover Ratios activity ratios how assets are employed Fixed Assets Turnover Total Assets Turnover Net Sales Average Total Assets 1586/( )/2 = /( )/2 =2.41 Net Sales Av. Net fixed assets

fsafsa Profitability Ratios Profit Margin Ratios Rate of Return Ratios It is a measure of profitabili ty of a firm

fsafsa  Gross Profit Margin Ratio  Net Profit Margin Ratio  Return on Assets  Earning Power  Return on Equity

fsafsa Profitability Margin Ratios GP Margin Ratio Gross Profit Net Sales NP Margin Ratio Net Profit Net Sales 292/1586 =18.4% 87.5/1586 =5.5%

fsafsa Profitability Return Ratios Equity Earnings Av. Equity Return on Equity 87.5/339.9 =25.7% Earning Power PBIT Av. total Assets /755.3 =16.18% Profit after Tax Av. Total Assets Return on Assets 87.5/755.3 =11.58%

fsafsa Profitability Ratios-points to ponder Historical Value of Assets Bias in inflationary periods Numerator represents current values Denominator represents historical values

fsafsa Valuation Ratios (How Equity Stock is assessed in Capital Market)

fsafsa Valuation Ratios Market Price Per Share Earning per Share Price Earning Ratio Market Value to Book Value Ratio Market Price Per Share Book Value per Share 167.8/14.8 = /114.8 =1.46

fsafsa a nalyzing f inancial p erformance Applications of financial analysis Assessing Corporate Excellence Judging Creditworthiness 4c’s-character,capital,capacity,collatral Forecasting Bankruptcy Valuing Equity Shares Estimating Market Risk

fsafsa a nalyzing f inancial p erformance Using financial statement analysis Problems Lack of Underlying Theory Conglomerate Firms Price Level Changes Variations in Accounting Policies Window Dressing Interpretation of Results Correlation among Results

fsafsa Comparative analysis of current fiscal year with the previous fiscal year  Atlas Battery’s net sales and other operating revenues for the fiscal year ended March 31, 2008 grew from Rs mil in 2007 to Rs mil.  Net income rose from 41.3 mil in 2007 to 87.5 mil in 2008 which is % from the previous year, more than double.  Cash and cash equivalents for the year ended March 31, 2008 increased by 7.19 mil from March 31, 2007, when they were Rs. (2.29). They have increased from 2007 when their amounts were negative.  The basic earning per share for Atlas battery has increased from 6.80 per share in 2007 to per share in  The overall performance of Atlas Battery in 2008 has been far better than in 2007.

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