Live#5 financial analysis mooc

FINANCIAL ANALYSIS MOOC WITH MARC BERTONECHE
LIVE SESSION #5 WEDNESDAY APRIL 2ND 2014
DEMOGRAPHIC DATA

Max density
( >300)
Average density
(Entre 50 et 300)
Low density
(<50)
Caption
Density = 0
323
160
83
73
64
Source: Introduction quizz, 1243 participants, as of 27.03.2014

Source: Introduction quizz, 1243 participants, as of 27.03.2014
Business Sector
Finance 48%
Management 36%
Other 28%
Accounting 25%
Economy 19%
Entrepreneurship 13%
Marketing 13%
Trade 8%

39%
60%
1%
Did the MOOC met your
Expectations
Yes, I liked it
Yes, it was great.
Not at all
Yes
37%
60%
3%
Did you find the work load
acceptable?
It was fine
Yes, completely
Not really
10%
48%
42%
How would you rate the Gremlin Case?
grade 1
grade 2
grade 3
grade 4
grade 5
1%
1%
8%
50%
40%
How would you rate the weekly quizzes?
grade 1
grade 2
grade 3
grade 4
grade 5
Source: Satisfaction survey, 125 participants, as of 31.03.2014

Source: Satisfaction survey, 125 participants, as of 31.03.2014
Axis of improvement
No corrections for the weekly quizzes
16%
84%
Capitalise on your MOOC participation in your
career?
No
Yes

----------
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Finance, this certificate
validates major
knowledge in Corporate
Finance
The CFF® is recognized by
investment banks, masters
in finance and MBAs
Special discount for
MOOC participants!
190$ for student,
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More information about the
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Boston Medical Instruments (BMI) developed, manufactured and sold
scientific medical instruments, needles and catheters which allowed rapid
and less invasive access to a number of different organs and vessels.
BMI experienced extraordinary growth, fueled by heavy spending on
research and development, necessary to maintain BMI’s competitive
advantage and rapid expansion of its sales force.
BMI has reached the maximum level of debt (Short term debt) which the
banker is ready to provide. What should the company do now?
Week 5 - Boston Medical Instruments

Your essay should start by considering the level of business risk of Boston
Medical Instruments (BMI) and the ability of this company to carry or not a high
amount of financial debt.
It should analyze the growth of this company and its consequences on the
investments (in fixed capital and in net working capital) and on the financing of
BMI in the last three years and try to assess the future cash flows (cash flow
from operations and free cash flow before financing) for the two next years
(2014 and 2015).
It should comment on the level of BMI‘s margins and on its profitability (ROCE
and ROE) and compare its self-sustainable-growth to its actual growth.
It should finally give some recommendations on how to solve the issues facing
the management of the company at the beginning of 2014 by listing and
discussing the various options available to the managers of BMI.
Boston Medical Instruments - Guidelines

In thousands of Dollars 2011 2012 2013
Net sales 14 512 22 163 32 803
Cost of goods sold 6 632 10 232 15 223
Gross margin 788 11 931 1 758
Selling general and administrative
costs
433 6 621 1 006
Research and development 2 454 3 534 4 997
Operating Profit (EBIT) 1 096 1 776 2 523
Interest expense 351 617 988
Profit before tax 745 1 159 1 535
Income tax 253 394 522
Net profit 492 765 1 013
Income Statement

Cash 1 243 1 523 1 250
Accounts receivables 2 798 4 225 6 232
Inventories 4 225 6 523 9 587
Total Current Asset 8 266 12 271 17 069
Gross fixed assets 1 962 2 956 3 976
Depreciation -450 -598 -773
Net fixed assets 1 512 2 358 3 203
Total assets 9 778 14 629 20 272
Balance Sheet (Assets)

Short-term bank loan 2 987 6 674 10 769
Accounts payable 395 623 898
Accrued expenses 740 1 086 1 521
Current portion of long-term debt 175 175 175
Total current liabilities 4 297 8 558 13 363
Long-term financial debt 125 1 075 900
Total liabilities 5 547 9 633 14 263
Equity 4 231 4 996 6 009
Total liabilities and equity 9 778 14 629 20 272
Balance Sheet (Liabilities & Equity)

In thousands of Dollars 2012 2013
Net Profit 765 1013
Depreciation 148 175
± Change in Not Working Capital -3 151 -4 361
Cash Flow from Operations -2 238 -3 173
- Capital Expenditures -994 -102
Cash Flow before Financing Activities -3 232 -4 193
- Long Term Debt Repayment -175 -175
+ Increase in Short Term Bank Loan 3 687 4 095
Total Cash Flow 280 -273
Cash Flow Statement

Useful Formulas
Here is a list of formulas, ratios and financial figures
with their relative week, that could be helpful to
answer to quiz Week 5

Week 2
• NWC - NWC turnover ratio - NWC to Sales ratio [Video 1]
• Fixed Assets Turnover [Video 1]
• Capital Expenditure to Depreciation ratio [Video 1]
• DSO (Days of Sales Outstanding) [Video 3]
• DPO (Days of Payables Outstanding) [Video 3]
• DSI (Days Sales of Inventory) [Video 3]
• CCC (Cash Conversion Cycle) [Video 3]

Week 3
• IGF (Internally Generated Funds) [Video 1]
• CFO (Cash Flow from Operations) [Video 1]
• Net Financial Debt [Video 2]
• Debt to Equity ratio - Debt coverage ratio [Video 4]
• Interest Coverage ratio [Video 4]
• Current ratio - Quick ratio [Video 4]

Week 4
• Return on Capital Employed [Video 1]
• Return on Equity [Video 1]
• EVA (Economic Value Added) [Video 2]
• SSG (Self Sustainable rate of Growth) [Video 5]

Forums Review

Forum Review
Boston Medical Instruments:
1) How to calculate the COCE ? And is it the same as the WACC ?
2) for the interest rate, I used 4% as interest rate, again maybe I'm
wrong, I don't know but that’s how I interpreted it after reading
the last paragraph of the case study.
3) With reference to the formula of ROCE and ROE, which is ROE =
ROCE + (ROCE-i) x D/E , can anyone tell me if this equation holds
to all types of earnings, including EBITDA, EBIT, EBT and Net
Profit?

Forum Review
Boston Medical Instruments:
4) I am in process to consider the out year forecast and assume the
Short Term Bank Loan (which is a credit line) would only be
proportional to a percent of NWC. Does anyone have different
approach?
5) Talking about interest rate, I must say I share your concerns and
am rather confused

QUESTIONS

Forums Questions
1) How can we calculate the "capital cost", link with the Interest
internal rate (IIR) ?
2) I understand business risk refers to the volatility of a company's
earnings or operating cash flow. Is there a quantitative measure
that reflects business risk?
3) Is trade credit or early invoice payment discount the quickest
way to finance a firm in all times?

CONCLUSION

Live#5 financial analysis mooc

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