WORKING WITH FINANCIAL STATEMENTS
FINANCIAL STATEMENT ANALYSIS <ul><li>History lesson </li></ul><ul><li>Purpose </li></ul><ul><li>The “Financial Dimensions”...
FINANCIAL STATEMENT ANALYSIS <ul><li>Firm Financial ‘Dimensions’ </li></ul><ul><ul><li>Liquidity/Short-Term Solvency </li>...
FINANCIAL STATEMENT ANALYSIS <ul><li>Liquidity/Short-Term Solvency </li></ul><ul><li>Current ratio </li></ul><ul><li>Quick...
FINANCIAL STATEMENT ANALYSIS <ul><li>Asset Mgmt./Managerial Effectiveness </li></ul><ul><li>Inventory turnover </li></ul><...
FINANCIAL STATEMENT ANALYSIS <ul><li>Debt Management/Long-Term Solvency </li></ul><ul><li>Total debt ratio </li></ul><ul><...
FINANCIAL STATEMENT ANALYSIS <ul><li>Profitability/Expense Control </li></ul><ul><li>Profit margin  </li></ul><ul><li>ROA ...
FINANCIAL STATEMENT ANALYSIS <ul><li>Market Value/Value Creation </li></ul><ul><li>Market capitalization (“market cap”) </...
Q&D ANALYSIS EXERCISE: YAHOO! <ul><li>Yahoo.com </li></ul>What is Yahoo’s market cap? How liquid is the firm? How indebted...
Q&D ANALYSIS EXERCISE: YAHOO! What is Yahoo’s market cap?  How liquid is the firm? How indebted is the firm? How profitabl...
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WORKING WITH FINANCIAL STATEMENTS FINANCIAL STATEMENT ANALYSIS

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WORKING WITH FINANCIAL STATEMENTS FINANCIAL STATEMENT ANALYSIS

  1. 1. WORKING WITH FINANCIAL STATEMENTS
  2. 2. FINANCIAL STATEMENT ANALYSIS <ul><li>History lesson </li></ul><ul><li>Purpose </li></ul><ul><li>The “Financial Dimensions” approach </li></ul>
  3. 3. FINANCIAL STATEMENT ANALYSIS <ul><li>Firm Financial ‘Dimensions’ </li></ul><ul><ul><li>Liquidity/Short-Term Solvency </li></ul></ul><ul><ul><li>Asset Management/Mg’l Effectiveness </li></ul></ul><ul><ul><li>Debt Mgmt./Long-Term Solvency </li></ul></ul><ul><ul><li>Profitability/Expense Control </li></ul></ul><ul><ul><li>Market Value/Value Creation </li></ul></ul>
  4. 4. FINANCIAL STATEMENT ANALYSIS <ul><li>Liquidity/Short-Term Solvency </li></ul><ul><li>Current ratio </li></ul><ul><li>Quick ratio </li></ul><ul><li>Cash ratio </li></ul>
  5. 5. FINANCIAL STATEMENT ANALYSIS <ul><li>Asset Mgmt./Managerial Effectiveness </li></ul><ul><li>Inventory turnover </li></ul><ul><li>Days’ sales in inventory </li></ul><ul><li>Days’ sales in receivables </li></ul><ul><li>Fixed asset turnover </li></ul><ul><li>Total asset turnover </li></ul>
  6. 6. FINANCIAL STATEMENT ANALYSIS <ul><li>Debt Management/Long-Term Solvency </li></ul><ul><li>Total debt ratio </li></ul><ul><li>Debt-to-equity ratio </li></ul><ul><li>Times interest earned </li></ul><ul><li>Cash coverage </li></ul>
  7. 7. FINANCIAL STATEMENT ANALYSIS <ul><li>Profitability/Expense Control </li></ul><ul><li>Profit margin </li></ul><ul><li>ROA (ROI) </li></ul><ul><li>ROE </li></ul><ul><li>The DuPont identity </li></ul>
  8. 8. FINANCIAL STATEMENT ANALYSIS <ul><li>Market Value/Value Creation </li></ul><ul><li>Market capitalization (“market cap”) </li></ul><ul><li>Price/Earnings ratio (P/E) </li></ul><ul><li>Market-to-book ratio (M/B) </li></ul>
  9. 9. Q&D ANALYSIS EXERCISE: YAHOO! <ul><li>Yahoo.com </li></ul>What is Yahoo’s market cap? How liquid is the firm? How indebted is the firm? How profitable is the firm? How well has management utilized the firm’s assets? What is the market’s assessment of the firm?
  10. 10. Q&D ANALYSIS EXERCISE: YAHOO! What is Yahoo’s market cap? How liquid is the firm? How indebted is the firm? How profitable is the firm? How well has management utilized assets? What is the market’s assessment of the firm?

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