1. Financial Statement, Ratio Analysis, and Forecasting Notes
Financial Statements, Forecasting, and Ratio Analysis
8/6/2019

2. Financial Statements The Income Statement components Sales
Variable costs
SGA
Depreciation
EBIT
Net Income
Financial Statements, Forecasting, and Ratio Analysis
8/6/2019

3. Financial Statements The Balance Sheet “Box”
Financial Statements, Forecasting, and Ratio Analysis
8/6/2019

4. Financial Statements Sources and Uses Statement ^ AR ^ Inv ^ ST debt
^ AP
^ LT debt
Net profit
Net loss
CapX
Depreciation
Financial Statements, Forecasting, and Ratio Analysis
8/6/2019

5. Financial Statements Statement of Cash Flows
CF from Operating Activities
CF from Investing Activities
CF from Financing Activities
Net Change in CF
Financial Statements, Forecasting, and Ratio Analysis
8/6/2019

6. Financial Statements Some accounting terms: Accruals Prepaids Goodwill
Depreciation
Cash flow
Operating cash flow
Net cash flow
Free cash flow
Market versus book values
Financial Statements, Forecasting, and Ratio Analysis
8/6/2019

7. Ratio Analysis Issues Knowledge of firm and industry
Knowledge of what’s behind the numbers
Book versus market
Past versus future
Ratios are relative, not absolute
Financial Statements, Forecasting, and Ratio Analysis
8/6/2019

8. Ratio Analysis Reporting frameworks By ratio category
Liquidity/working capital
Asset management/efficiency
Debt level/coverage degree
Profitability
Market based (EPS/EVA)
Financial Statements, Forecasting, and Ratio Analysis
8/6/2019

9. Ratio Analysis Reporting frameworks
Time series-historical and projected
Cross sectional (industry benchmark)
Dupont framework
ROE, ROA, Equity Multiplier
Financial Statements, Forecasting, and Ratio Analysis
8/6/2019

10. Ratio Analysis Managing Growth Internal growth rate
Sustainable growth rate
Options if actual growth is greater than sustainable growth
Financial Statements, Forecasting, and Ratio Analysis
8/6/2019

11. Forecasting Forecast statements Sales/Income Balance Sheet Cash flow
Financial Statements, Forecasting, and Ratio Analysis
8/6/2019

12. Forecasting Key connections between IS and BS
Financial Statements, Forecasting, and Ratio Analysis
8/6/2019

13. Forecasting Forecasting “Drivers” Sales Variable costs SG&A
Depreciation
Bad debt
Financial Statements, Forecasting, and Ratio Analysis
8/6/2019

14. Forecasting Forecasting “Drivers” Interest expense Taxes Dividends
Current assets
Current liabilities
Fixed assets
Financial Statements, Forecasting, and Ratio Analysis
8/6/2019

15. Sensitivity and Scenario Analysis
Financial Statements, Forecasting, and Ratio Analysis
8/6/2019