PERFORMANCE & PROFITABILITY MEASURES. Uses of Financial Numbers Firms provide goods and services using assets that funded Debt Equity Mix of Debt and.

Slides:

Advertisements

Similar presentations

Chapter 3 Working With Financial Statements

Advertisements

Financial Management Discussion 9,10 & 11. Liquidity: Assets Management Ratios: The Total Assets Turnover Ratio:

Financial Statement Analysis

Fin 4201/8001 Topic 4: Valuing Companies The early years….Ratios.

Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1999 Financial Statement Analysis © The McGraw-Hill Companies, Inc., Part One: Financial Accounting.

CF Winter Winter Corporate Finance 1.Capital Budgeting  Long-term investments which ones? 2.Capital Structure  Long-term financing.

Chapters 2 & 3 Financial Statements and Analysis.

McGraw-Hill/Irwin Copyright © 2008 by The McGraw-Hill Companies, Inc. All rights reserved CHAPTER 3 Financial Statements Analysis and Long- Term Planning.

Financial Statement Analysis Financial Statements and Cash Flows Financial Ratios.

Financial Statement Analysis

Key Concepts and Skills

Working with Financial Statements

Financial statements and ratios

Key Concepts and Skills

© 2003 The McGraw-Hill Companies, Inc. All rights reserved. Working With Financial Statements Lecture 1b Chapter 3.

3-1 McGraw-Hill/Irwin Copyright © 2011 by the McGraw-Hill Companies, Inc. All rights reserved.

Chapter 3: Evaluating Financial Performance

Steve Paulone Facilitator Things to consider concerning financial ratios:  A ratio by itself means very little – you need to compare that result with:

Chapter 17 Financial Statement Analysis. Topics Covered  Financial Ratios  DuPont System  Using Financial ratios  Measuring Company Performance 

Working with financial statements Chapter 3. Key concepts and skills Know how to standardise financial statements for comparison purposes Know how to.

Chapter 2,3 Financial Statement Analysis. Taxes Always changing Marginal vs. average tax rates –Marginal – the percentage paid on the next dollar earned.

1 FINANCIAL STATEMENT ANALYSIS CHAPTER 13. Fundamental Analysis Finance (chapter 12): Valuation techniques  Dividend discount model, P/E ratio  Need.

© 2003 The McGraw-Hill Companies, Inc. All rights reserved. Working With Financial Statements Chapter Three.

Chapter 3 Working With Financial Statements 0. Standardized Financial Statements Common-Size Balance Sheets Compute all accounts as a percent of total.

McGraw-Hill/Irwin ©2001 The McGraw-Hill Companies All Rights Reserved 3.0 Chapter 3 Working With Financial Statements.

Part Ten Financial Analysis. Learning Objectives Understand the parties interested in performing financial ratio analysis and the common types of ratio.

WORKING WITH FINANCIAL STATEMENTS CHAPTER 3. Key Concepts and Skills Understand sources and uses of cash and the Statement of Cash Flows Know how to standardize.

Financial Statements (Ch 2 & 3) The Balance Sheet The Income Statement Taxes Free Cash Flow/Cash Flow From Assets Ratio Analysis Financial Statement (Ch2&3)

Financial Statements and Cash Flows

Parts of a Financial Statement 1.Statement of Income 2.Balance Sheet 3.Statement of Cash Flow 4.Statement of Stockholders’ Equity.

Ch.4 Financial Ratios Goals: I. Define 5 Major Categories of Ratios II. Use financial ratios to assess a firm’s past performance, identify its current.

Financial Analysis of Starbucks

Corporate Finance A1 Vysoká škola finanční a správní Summer Semester 2012 Jaromír R. Stemberg

Financial Statements and Ratio Analysis CHAPTER 2.

Ch3. Analysis of Financial Statement

3-0 Ratio Analysis 3.3 Ratios also allow for better comparison through time or between companies As we look at each ratio, ask yourself what the ratio.

WORKING WITH FINANCIAL STATEMENTS Chapter 3. Key Concepts and Skills  Understand sources and uses of cash and the Statement of Cash Flows  Know how.

Ch3. Analysis of Financial Statement. 1. Why we need ratios? Specialized information Comparison Issue Predicting future performance 1)5 types of financial.

Parts of a Financial Statement 1.Statement of Income 2.Balance Sheet 3.Statement of Cash Flow 4.Statement of Stockholders’ Equity.

1 Financial Statement Analysis 1. Short-Term Solvency 2. Activity 3. Financial Leverage 4. Profitability 5. Value.

Ratio Analysis FWhy Conduct Ratio Analysis?  FRatios Are Used To Evaluate:  FClassifications of Ratios:

Financial Health of Starbucks Coffee Presented By: Author Coffee House opened in 1971 in a small town in Seattle, Washington In 1987 Starbucks expanded.

Financial Statement Analysis. Two Primary Statements Balance Sheet –Snapshot –BV vs MV Income Statement –Period of time.

Finance Chapter 3 Analysis of financial statements.

Chapter 2 Financial Ratio Analysis. 2-2 Example 2.1 Problem  Rylan Enterprises has 5 million shares outstanding.  The market price per share is $22.

The Analysis of Financial Statements

Chapter 3 Working With Financial Statements. Standardized Financial Statements Common-Size Balance Sheets –Compute all accounts as a percent of total.

Sample Balance Sheet Numbers in millions Cash A/P 307

McGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved. Financial Statements Analysis Chapter 3.

McGraw-Hill/Irwin Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights reserved. Chapter 19 Financial Statement Analysis.

FINANCIAL STATEMENTS. Financial Health of Firm Firms produce good and services by using assets Financial condition of firm’s Assets Financing of these.

Questions What are the major categories of financial ratios?

Dr Eva CipovovaCorporate Finance I1 I. Role of Financial Analysis Financial Statements & Annual report –Financial statements BS, P&L, CF, Statement of.

Financial Ratios BUS 499 CAPSTONE L. Panetta P. Tinsley © Idaho State University – College of Business.

Presented by: Lauren Rudd Tel: March 26, 2013.

+ Working With Financial Statements ch 3. + Using Financial Statement Our goal in this chapter is to expand our understanding of the uses of financial.

3-1 Unit 3 Financial Statements and ratios Key Financial Statements Balance sheet Income statements Statement of cash flows Statement of retained earnings.

Finance Citi Funded Entrepreneurship Training Program UNIVERSITY OF DUBAI Dr. Zahi Yaseen.

Working With Financial Statements Chapter 3. Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Essentials of Corporate Finance by Ross, Trayler,

Rivanna Investments: Intro to Equity Research. Rivanna Investments First step is to gather information Financial statement and reports (EDGAR)

Pre – MBA Program Accounting Ratios Nov 11, 2012.

Financial Statement Analysis

INTERNAL ASSESSMENT FINANCE/ACCOUNTING

Financial Statement Analysis

Working With Financial Statements

Analysis Example Financial Ratio

Financial Analysis of The “Voda Vrnjci” company

Ch. 3: Working with Financial Statements

Working With Financial Statements

FINANCIAL STATEMENT ANALYSIS

Presentation transcript:

PERFORMANCE & PROFITABILITY MEASURES

Uses of Financial Numbers Firms provide goods and services using assets that funded Debt Equity Mix of Debt and Equity = Capital Structure Debt/Equity Ratio Debt/(Debt + Equity) = Financial Leverage Leverage magnifies performance How efficiently is management using the assets? How profitable is the firm?

Short-Term Solvency Short-Term Solvency and Liquidity Measures Current Ratio = Current Assets/Current Liabilities Quick Ratio = (Current Assets – Inventory)/Current Liabilities Cash Ratio = Cash / Current Liabilities Net Working Capital = Current Assets – Current Liabilities Net Working Capital/Total Assets Average Daily Operating Cost = (Total Cost for Year excluding Depreciation and Interest)/365 Suppose there is a strike and cash inflows dry up, how many days can the company operate? Interval Measure = Current Assets/Average Daily Operating Cost

Long-Term Solvency Total Debt Ratio (Total Assets – Total Equity)/Total Assets = Debt/(Debt + Equity) Long-term Debt is of greater importance since short term debt constantly changes and accounts payable reflection of business Long-Term Debt Ratio = Long-Term Debt / (Long-Term Debt + Equity) Times Interest Earned Ratio = EBIT/Interest Cash Coverage Ratio = (EBIT + Depreciation)/Interest Depreciation does not impact cash

Efficiency Measures Inventory Turnover = Cost of goods sold/Inventory Day’s sales in inventory = 365/Inventory Turnover Receivable Turnover = Sales/Accounts Receivables Day’s sales in receivables = 365/Receivable Turnover Net Working Capital Turnover= Sales/NWC Fixed Assets Turnover= Sales/Fixed Assets Total Assets Turnover= Sales/Total Assets

Profitability Measures = Sales/NWC = Sales/Fixed Assets Total Assets Turnover= Sales/Total Assets Profit Margin = Net Income/Sales Return on Assets (ROA)= Net Income/Total Assets Return on Equity (ROE) = Net Income/ Total Equity ROE = ROA * (1+ Debt/Equity) EPS = Net Income / No of Shares Outstaning PE = Price per Share/Earning Per Share

DU PONT IDENTITY ROE = Net Income/Equity = (Net Income/Assets) *(Assets/Equity) ==(Net Income/Sale)*(Sales/Assets)*(Assets/Equity) =(Net Income/Sale)*(Sales/Inventory)* (Inventory/Asset)*(Assets/Equity)