Presentation is loading. Please wait.

Presentation is loading. Please wait.

Analyzing Financial Statements

Similar presentations


Presentation on theme: "Analyzing Financial Statements"— Presentation transcript:

1 Analyzing Financial Statements

2 General Rules 1) Restate balance sheet to work with capital.
2) Use averages (current and previous year) for balance sheet items. 3) Be consistent.

3 Traditional Method Current assets Fixed Assets Cash Receivables
Inventory Fixed Assets Net Property Plant and Equipment (NPPE) Investments Total Assets

4 Traditional Method Current Liabilities Long Term Liabilities
Notes Payable Accounts Payable Other Payables Long Term Liabilities L.T. Debt Other Liabilities Shareholder Equity Total Liabilities and Equity

5 Capital Method Current Assets Less : Operating Current Liabilities
Cash Receivables Inventory Less : Operating Current Liabilities Accounts Payable Other Payables Operating Working Capital

6 Capital Method Operating Working Capital Fixed Assets
Net Property Plant and Equipment (NPPE) Investments Total Capital

7 Capital Method Short Term Debt Long Term Liabilities
Notes Payable Long Term Liabilities L.T. Debt Other Liabilities Shareholder Equity Total Debt and Equity

8 Leverage Ratios Debt Ratio = (Int. Bearing + Leases) / (Capital + Leases) Debt-Equity Ratio = (Int. Bearing + Leases) / Equity Times Interest Earned = (EBIT + Depreciation) / Interest Leverage Ratio = Capital / Equity

9 Liquidity Ratios Current Ratio = Current Assets / Current Liabilities
Acid Test Ratio = (Curr Assets – Inv) / Curr Liabs Working Capital to Assets = Working Capital / Capital

10 Efficiency Ratios Total Asset Turnover = Sales / Capital (TATO)
Sales to W. Capital = Sales / Working Capital Fixed Asset T/O = Sales / Fixed Assets Inventory T/O = Cost of Goods Sold / Inventory

11 Efficiency Ratios Avg Collection Period = Acc Rec / (Sales / 365)
Avg Payment Period = Acc Payable / (COS / 365) Inventory Days = 365/(Inv T/O) Cash Cycle = Inv Days + ACP - APP

12 Profitability Ratios Return on Assets (ROA) = Net Pft after Tax / Capital Return on Equity (ROE) = Net Pft after Tax / Equity Operating Return on Assets = EBIT / Capital

13 Profitability Ratios Net Profit Margin (NPM) = Net Pft after Tax / Sales Gross Pft Margin (GPM) = Gross Pft / Sales Expenses to Sales = SGA / Sales

14 Investment Ratios Payout Ratio = Divs per Share / Earnings per Share
Retention Ratio = 1 – Payout Ratio Price–Earnings Ratio (P/E) = Stock Price / EPS Market to Book Ratio = Stock Price Book Value per Share

15 Approaches Time Series
Cross-section (Comparables -- i.e., Industry or Specific Competitors) Goals / Targets

16 Other Methods Common Size Index Analysis
Balance sheet (as % of capital) Income statement (as % of sales) Index Analysis as % of base year

17 DuPont Analysis ROE = Leverage x ROA ROA = NPM x TATO

18 Value Drivers Sales growth Operating profit margin Tax rate
Investment rate = [(NPPE + WCAP) / Sales ] WACC Competitive advantage period

19 Value Drivers ROIC = Net Operating Profit after Tax / Capital
= EBIT (1-T) / Capital = EBIT (1-T) / Sales x Sales / Capital = NPM x TATO

20 Reebok Example See the Reebok Excel File


Download ppt "Analyzing Financial Statements"

Similar presentations


Ads by Google