Financial analysis - Training & Templates

Financial Analysis
Training & Templates
Includes links with
Excel tables and
charts

2 www.slidebooks.com2
Objectives of this document
“ Learn how to do a comprehensive financial
analysis with a training and templates created by
former Deloitte Management Consultants ”
“ Save your time by using our fully editable
PowerPoint slides that you can reuse for your own
presentation ”

Overview - Guiding principles
Click here to download the editable PowerPoint
version at www.slidebooks.com

Table of content
The Balance Sheet
The Cash Flow Statement
2
3
The Profit and Loss Statement (P&L)1
The Key Financial Ratios4
Financial Analysis

Profit and Loss Statement (P&L) - Definition

Profit and Loss Statement (P&L) - Description
The Income Statement has three primary components:
Revenues
The money earned by the
company which includes:
• The sale of goods and
services
• The interest earned
• Certain investment activities
Expenses
The Money spent to generate
revenue which includes:
• Cost of Goods Sold (COGS):
The direct costs attributable to
the production of the goods
sold by a company
• Selling Expenses: Cash
payments (or equivalent) for
marketing services
• Administrative Expenses:
Costs to the firm to cover
items such as salaries
• Interest Expenses: Payments
made to cover costs of
financing
• Tax Expense: Payments
made to the government to
cover income taxes
• Depreciation Expense:
Amount of asset usage
(described in the next chapter)
that is applied to this year
Net Income
Net Income is referred to as
“Profit” or “Earnings,” when not
negative and “Loss” when
negative.
It is the company revenues
minus its expenses
- =

Profit and Loss Statement (P&L) – Excel template
Net Sales
Gross Profit
Net Income
Revenue
Gross sales $500,000
Sales returns and allowances -$5,000
NET SALES $495,000
Cost of sales
Beginning inventory $45,000
Goods purchased / manufactured $100,000
Ending inventory -$20,000
Total Cost of Goods Sold $125,000
Gross Profit $370,000
Selling Expenses
Salaries and wages $45,000
Advertising $10,000
Depreciation $5,000
Other -$20,000
Total Selling Expenses $40,000
General / Administrative Expenses
Salaries and wages $45,000
Employee benefits $10,000
Payroll taxes $10,000
Insurance $10,000
Rent $10,000
Utilities $10,000
Depreciation & amortization $10,000
Office supplies $10,000
Travel & entertainment $10,000
Postage $10,000
Equipment maintenance & rental $10,000
Interest $5,000
Furniture & equipment -$20,000
Total General / Administrative Expenses $130,000
Net Income Before Taxes $200,000
Tax
Income Tax Expense $45,000
Net Income $155,000 Insert your own comments
$495,000
$370,000
$155,000
Insert your own comments
Insert Your company name
Income Statement
For Period Ending XXX
Executive summary
Details
Comments
Double click to access
the Excel document
and enter your own
data
Cells with formula will
be automatically
updated

Table of content
The Balance Sheet
2
3
Financial Analysis

Balance Sheet - Definition

Balance Sheet - Description
The balance sheet must follow the formula Asset = Liabilities + Shareholders’ Equity
Asset Liabilities + Shareholders’ Equity
Where the
money is going
to
Where the
money is
coming fromFixed Assets
Current asset
Intangible Assets
Long-term Liabilities
Current liabilities
Shareholder’s Equity &
Retained Earnings

Balance Sheet - Excel template
TOTAL ASSET
TOTAL LIABILITIES
TOTAL SHAREHOLDERS'S EQUITY
CURRENT ASSETS CURRRENT LIABILITIES
Cash in Bank $45,000 Accounts Payable $50,000
Inventory $0 Taxes Payable $0
Accounts Receivables $0 Short Terms Notes Payable $0
Prepaid Expenses $10,000 Current Portion Long-term Debt $0
Other $0 Other current liabilities (specify) $0
TOTAL $55,000 TOTAL $50,000
FIXED ASSETS LONG-TERM LIABILITIES
Property, Plant and Equipement $20,000 Bank Loans Payable (greater than 12 months) $0
Furniture & Fixtures $0 Less: Short-term Portion $0
Leasehold Improvements $0 Notes Payable to Stockholders $0
Other $0 Other long-term debt (specify) $0
TOTAL $20,000 TOTAL $0
OTHER ASSETS OTHER LIABILITIES
Specify $0 Specify $0
TOTAL $0 TOTAL $0
TOTAL ASSET $75,000 TOTAL LIABILITIES $50,000
SHAREHOLDERS' EQUITY
Capital Stock $10,000
Retained Earnings $15,000
TOTAL $25,000
TOTAL SHAREHOLDERS'S EQUITY $25,000
TOTAL LIABILITIES & SHAREHOLDERS'S EQUITY $75,000
Balance Sheet
Insert Date
Executive summary
Details
ASSETS LIABILITIES & SHAREHOLDERS'S EQUITY
$75,000
$50,000
$25,000
Double click to
access the
Excel
document and
enter your own
data
Cells with formula
will be automatically
updated

Table of content
The Balance Sheet
2
3
Financial Analysis

Cash Flow Statement - Definition

Cash Flow Statement - Description
Sources of
cash
Starting cash
position
Closing Cash
Position
Uses of cash
Cash
Flow
Statement

Cash Flow Statement - Excel Template
Starting Cash Position
Change During Year
Closing Cash Position
Starting Cash Position $100,000
Incoming
Cash sales $100,000
Collections from accounts receivable $50,000
Other cash receipts $50,000
Total Incoming $200,000
Outgoing Fixed Costs
Administration $45,000
Marketing $50,000
Operation -$20,000
Total Outgoing Fixed Costs $75,000
Outgoing Variable Costs
Administration $45,000
Marketing $50,000
Operation -$20,000
Total Outgoing Variable Costs $75,000
Change During Year $50,000
Closing Cash Position $150,000 Insert your own comments
$100,000
$50,000
$150,000
Comments
Cash Flow Statement
For Period XXX
Executive summary
Details
Double click to
access the
Excel
document and
enter your own
data
Cells with
formula will be
automatically
updated

Table of content
The Balance Sheet
2
3
Financial Analysis

There are 6 categories of financial ratios that can be used to analyse a
company’s performance
1.Efficiency
ratios
2.Solvency
ratios
3.Liquidity
ratios
4.Profitabili
ty ratios
5.Leverage
ratios
6.Return on
investment
ratios

1.Efficiency ratios are are typically used to analyze how well a company uses
its assets and liabilities internally
COGS / Average
inventory
Formula2
The length of time it takes a company to sell
inventory
Definition2
Insert your own text
ResultRatio1
Inventory
turnover ratio
Sales / Average
accounts receivable
The length of time it takes a company to
collect accounts receivable
Accounts
receivable
turnover ratio
COGS / Average
accounts payable
The length of time it takes a company to pay
its creditors
Accounts
payable
turnover ratio
Sales / Average net
assets
The efficiency of asset usage within a
company
Asset turnover
ratio
Sales / Average fixed
assets
The efficiency of fixed asset usage within a
company
Fixed asset
turnover ratio
Sales / Average
working capital
How effectively is a company using its
working capital (= current assets – current
liabilities) to generate sales
Working
capital
turnover ratio
1365 / turnover ratio gives you the days outstanding
2The average equals the value at the beginning of the year + the value at the end of the year divided by 2Click here to download the editable PowerPoint

2.Solvency ratios are used to analyze the degree of financial risk that a
business faces at a certain point in time
Total liabilities /
shareholders’ equity
Formula
The amount of equity to support creditors in
case of financial difficulties. A high
debt/equity ratio generally means that a
company has been aggressive in financing
its growth with debt
Definition
ResultRatio
Debt to equity
ratio
Total liabilities / Total
assets
case of financial difficulties
Insert your own textDebt ratio
EBIT / Interest
charges
It indicates how many times a company can
cover its interest charges on a pretax basis
Times interest
earned (TIE)
ratio
(Current assets –
Inventories –
Receivables) /
Current liabilities
The extent to which current liabilities are
covered by the current assets that can be
converted into cash and used almost
instantly
Insert your own textCash ratio
(Current assets –
Inventories) / Current
liabilities
converted into cash almost instantly
Insert your own textQuick ratio

3.Liquidity ratios are used to analyze a company’s ability to meet its credit
obligations at a certain point in time
Current assets /
Current liabilities
Formula
covered by current assets
Definition
ResultRatio
Current ratio
(Current assets –
Inventories) / Current
liabilities
converted into cash almost instantly
Insert your own textQuick ratio
(Current assets –
Inventories –
Receivables) /
Current liabilities
converted into cash and used almost
instantly
Insert your own textCash ratio

4.Profitability ratios are used to analyse a company’s ability to generate a
profit
Net income / Net
sales
Formula1
The amount of net income earned from each
unit of sales. This ratio is also called net
profit margin
Definition
ResultRatio
Return on
sales
Net income / Average
shareholder’s equity
The return stockholders are receiving on
their investment in the company
Return on
equity
(ROE)
Net operating profit
after tax (NOPAT) /
Total net assets
The amount of net income earned per unit of
asset used in the business
Return on net
assets
working capital
The return a company is realizing from its
capital employed, i.e. how efficient is the
capital used to generate revenues
Return on Capital
Employed
(ROCE)
NOPAT / Average
total capital
How well does a company generate cash
flow relative to its capital invested. A ratio >1
means that the company is creating value
Return on
invested
capital (ROIC)
NOPAT/ Average
funds employed
The net operating return the company
generates relative to all funds invested.
Funds employed = total liabilities
Return On
Funds
Employed
1The average equals the value at the beginning of the year + the value at the end of the year divided by 2

5.Leverage ratios are used to analyze whether the use of borrowed funds
generates increased earnings
Total liabilities /
shareholders’ equity
Formula
case of financial difficulties. A high
debt/equity ratio generally means that a
company has been aggressive in financing
its growth with debt
Definition
ResultRatio
Debt to equity
ratio
Total liabilities / Total
assets
case of financial difficulties
Insert your own textDebt ratio
EBIT / Interest
charges
It indicates how many times a company can
cover its interest charges on a pretax basis
Times interest
earned (TIE)
ratio

6.Return on investment ratios are used to analyze how much money
shareholders are receiving compared to the money they have invested
Dividends per share /
Current market price
share
Formula
It shows how much a company pays out in
dividends compared to its share price
Definition
ResultRatio
Dividend Yield
Net income –
Dividends on
preferred stocks /
average outstanding
shares
The portion of a company's profit allocated to
each outstanding share of common stock
Earnings per
share
(EPS)
Current market price
share / EPS
A valuation ratio of a company's current
share price compared to its earnings per-
share
Price /
Earnings
shareholder’s equity
The return stockholders are receiving on
their investment in the company
Return on
Equity
(ROE)

Finally, present your results in a graphic way
Profitability
ratios
Return on Capital
Employed (%)
Return on net
assets (%)
Return On Funds
Employed (%)
Example of graphics you can use to present effectively your results
Return on equity
(%)
Return on sales
(%)
Worst peer Best peer
Company X Company Y Company Z
5% 8% 9%
2% 4% 8%
X%
X% X%
X% X%X%
X% X%

Sources of
information
Competitive Value Management by
Hermann J. Stern
EVA by Stephen F
Value Driver tree
Sources of information
Corporate Finance by Pierre Vernimmen

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Financial analysis - Training & Templates

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