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Corporate Finance Interpreting Financial Statements Dr. Markus R. Neuhaus Dr. Marc Schmidli, CFA Winter Term 2009 Markus Neuhaus I Corporate Finance I neuhauma@ethz.ch
Corporate Finance: Course overview ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Summary, repetition M. Neuhaus
Winter Term 2009 Markus Neuhaus I Corporate Finance I neuhauma@ethz.ch ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Markus R. Neuhaus PricewaterhouseCoopers AG, Zürich   Phone: +41 58 792  4000 Email: markus . neuhaus @ch.pwc.com
Winter Term 2009 Markus Neuhaus I Corporate Finance I neuhauma@ethz.ch Marc Schmidli PricewaterhouseCoopers AG, Zürich   Phone: +41 58 792  15 64 Email: marc.schmidli @ch.pwc.com ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
Contents ,[object Object],[object Object],[object Object],[object Object],[object Object],Winter Term 2009 Markus Neuhaus I Corporate Finance I neuhauma@ethz.ch
Learning targets ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Winter Term 2009 Markus Neuhaus I Corporate Finance I neuhauma@ethz.ch
Contents ,[object Object],[object Object],[object Object],[object Object],[object Object],Winter Term 2009 Markus Neuhaus I Corporate Finance I neuhauma@ethz.ch
Pre-course reading ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Winter Term 2009 Markus Neuhaus I Corporate Finance I neuhauma@ethz.ch
Contents ,[object Object],[object Object],[object Object],[object Object],[object Object],Winter Term 2009 Markus Neuhaus I Corporate Finance I neuhauma@ethz.ch
Agenda I ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Winter Term 2009 Markus Neuhaus I Corporate Finance I neuhauma@ethz.ch
Agenda II Winter Term 2009 Markus Neuhaus I Corporate Finance I neuhauma@ethz.ch ,[object Object],[object Object],[object Object]
Agenda: Introduction ,[object Object],[object Object],[object Object],Winter Term 2009 Markus Neuhaus I Corporate Finance I neuhauma@ethz.ch
Winter Term 2009 Markus Neuhaus I Corporate Finance I neuhauma@ethz.ch ,[object Object],[object Object],[object Object],[object Object],[object Object],Financial analysis Source: White, Sondhi, Fried (2003), 2ff. Environment Financial Statements Business Macroeconomic situation,  industry, market Balance sheet, income statement,  cash flow, stockholders’ equity, budget Management, products, margins,  technology, knowledge base, competition Financial  Analysis
Winter Term 2009 Markus Neuhaus I Corporate Finance I neuhauma@ethz.ch ,[object Object],[object Object],[object Object],[object Object],[object Object],Classes of users Source: White, Sondhi, Fried (2003), 4.
Winter Term 2009 Markus Neuhaus I Corporate Finance I neuhauma@ethz.ch Need for financial statement analysis ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Financial analysis has great significance and impact on a company‘s development as it influences expectations on the capital markets
Agenda: Ratio analysis ,[object Object],[object Object],[object Object],[object Object],Winter Term 2009 Markus Neuhaus I Corporate Finance I neuhauma@ethz.ch
Winter Term 2009 Markus Neuhaus I Corporate Finance I neuhauma@ethz.ch Ratio analysis  ,[object Object],[object Object],[object Object],[object Object],[object Object],The  debt burden can be evaluated  (a)  by  comparing each firm‘s debt with its assets and  (b)  by comparing the  interest the company has to pay with the income  it has available Source: Brigham, Houston (2009), 103.
Winter Term 2009 Markus Neuhaus I Corporate Finance I neuhauma@ethz.ch Significance of ratio analysis ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],„ help predict the future development of a company” 1)  Details later: see page 25ff.
Winter Term 2009 Markus Neuhaus I Corporate Finance I neuhauma@ethz.ch Principal elements of   financial statements as primary source for financial analysis ,[object Object],[object Object],[object Object],[object Object],[object Object],Collectively, these  interrelated  financial statements provide relevant and timely information about the past and are essential  for making crucial business decisions  about investment or financing activities today and in the future. Financial statements are a key component to build trust in the financial community. Source: White, Sondhi, Fried (2003), 5.
Winter Term 2009 Markus Neuhaus I Corporate Finance I neuhauma@ethz.ch Financial reporting systems and standards  ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Source: White, Sondhi, Fried (2003), 5ff.
Winter Term 2009 Markus Neuhaus I Corporate Finance I neuhauma@ethz.ch Balance sheet  ,[object Object],[object Object],Source: Brigham, Houston (2009), 58.
Winter Term 2009 Markus Neuhaus I Corporate Finance I neuhauma@ethz.ch Income statement  ,[object Object],[object Object],Source: Brigham, Houston (2009), 61.
Winter Term 2009 Markus Neuhaus I Corporate Finance I neuhauma@ethz.ch Statement of cash flow  ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Source: Brigham, Houston (2009), 63.
Winter Term 2009 Markus Neuhaus I Corporate Finance I neuhauma@ethz.ch Statement of retained earnings  ,[object Object],[object Object],Source: Brigham, Houston (2009), 66.
Winter Term 2009 Markus Neuhaus I Corporate Finance I neuhauma@ethz.ch Important groups of financial ratios  ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Source: Brigham, Houston (2009), 84ff.
Winter Term 2009 Markus Neuhaus I Corporate Finance I neuhauma@ethz.ch Liquidity ratios  ,[object Object],[object Object],Source: Brigham, Houston (2009), 87f.
Winter Term 2009 Markus Neuhaus I Corporate Finance I neuhauma@ethz.ch Balance sheet and income statement Source: Brigham, Houston (2009), 58. Source: Brigham, Houston (2009), 61.
Winter Term 2009 Markus Neuhaus I Corporate Finance I neuhauma@ethz.ch Liquidity ratios  ,[object Object],[object Object],Source: Brigham, Houston (2009), 87f.
Winter Term 2009 Markus Neuhaus I Corporate Finance I neuhauma@ethz.ch Balance sheet and income statement Source: Brigham, Houston (2009), 61. Source: Brigham, Houston (2009), 58.
Winter Term 2009 Markus Neuhaus I Corporate Finance I neuhauma@ethz.ch Asset management ratios  ,[object Object],[object Object],[object Object],Source: Brigham, Houston (2009), 88ff.
Winter Term 2009 Markus Neuhaus I Corporate Finance I neuhauma@ethz.ch Balance sheet and income statement Source: Brigham, Houston (2009), 61. Source: Brigham, Houston (2009), 58.
Winter Term 2009 Markus Neuhaus I Corporate Finance I neuhauma@ethz.ch Asset management ratios  ,[object Object],[object Object],[object Object],Source: Brigham, Houston (2009), 88ff.
Winter Term 2009 Markus Neuhaus I Corporate Finance I neuhauma@ethz.ch Balance sheet and income statement Source: Brigham, Houston (2009), 61. Source: Brigham, Houston (2009), 58.
Winter Term 2009 Markus Neuhaus I Corporate Finance I neuhauma@ethz.ch Asset management ratios  ,[object Object],[object Object],[object Object],Source: Brigham, Houston (2009), 88ff.
Winter Term 2009 Markus Neuhaus I Corporate Finance I neuhauma@ethz.ch Balance sheet and income statement Source: Brigham, Houston (2009), 61. Source: Brigham, Houston (2009), 58.
Winter Term 2009 Markus Neuhaus I Corporate Finance I neuhauma@ethz.ch Debt or financing ratios  ,[object Object],[object Object],Source: Brigham, Houston (2009), 91ff.
Winter Term 2009 Markus Neuhaus I Corporate Finance I neuhauma@ethz.ch Balance sheet and income statement Source: Brigham, Houston (2009), 61. Source: Brigham, Houston (2009), 58.
Winter Term 2009 Markus Neuhaus I Corporate Finance I neuhauma@ethz.ch Debt or financing ratios  ,[object Object],[object Object],Source: Brigham, Houston (2009), 91ff.
Winter Term 2009 Markus Neuhaus I Corporate Finance I neuhauma@ethz.ch Balance sheet and income statement Source: Brigham, Houston (2009), 61. Source: Brigham, Houston (2009), 58.
Winter Term 2009 Markus Neuhaus I Corporate Finance I neuhauma@ethz.ch Profitability ratios  ,[object Object],[object Object],[object Object],Source: Brigham, Houston (2009), 95ff.
Winter Term 2009 Markus Neuhaus I Corporate Finance I neuhauma@ethz.ch Balance sheet and income statement Source: Brigham, Houston (2009), 61. Source: Brigham, Houston (2009), 58.
Winter Term 2009 Markus Neuhaus I Corporate Finance I neuhauma@ethz.ch Profitability ratios  ,[object Object],[object Object],[object Object],Source: Brigham, Houston (2009), 95ff.
Winter Term 2009 Markus Neuhaus I Corporate Finance I neuhauma@ethz.ch Balance sheet and income statement Source: Brigham, Houston (2009), 61. Source: Brigham, Houston (2009), 58.
Winter Term 2009 Markus Neuhaus I Corporate Finance I neuhauma@ethz.ch Profitability ratios  ,[object Object],[object Object],[object Object],Source: Brigham, Houston (2009), 95ff.
Winter Term 2009 Markus Neuhaus I Corporate Finance I neuhauma@ethz.ch Balance sheet and income statement Source: Brigham, Houston (2009), 61. Source: Brigham, Houston (2009), 58.
Winter Term 2009 Markus Neuhaus I Corporate Finance I neuhauma@ethz.ch Market value ratios  ,[object Object],[object Object],[object Object],[object Object],Numbers of shares: 50m Share price: 23 Cash flow = net income + D&A Source: Brigham, Houston (2009), 98ff.
Winter Term 2009 Markus Neuhaus I Corporate Finance I neuhauma@ethz.ch Balance sheet and income statement Source: Brigham, Houston (2009), 61. Source: Brigham, Houston (2009), 58.
Winter Term 2009 Markus Neuhaus I Corporate Finance I neuhauma@ethz.ch Market value ratios  ,[object Object],[object Object],[object Object],[object Object],Numbers of shares: 50m Share price: 23 Cash flow = net income + D&A Source: Brigham, Houston (2009), 98ff.
Winter Term 2009 Markus Neuhaus I Corporate Finance I neuhauma@ethz.ch Balance sheet and income statement Source: Brigham, Houston (2009), 61. Source: Brigham, Houston (2009), 58.
Winter Term 2009 Markus Neuhaus I Corporate Finance I neuhauma@ethz.ch Market value ratios  ,[object Object],[object Object],[object Object],[object Object],Numbers of shares: 50m Share price: 23 Cash flow = net income + D&A Source: Brigham, Houston (2009), 98ff.
Winter Term 2009 Markus Neuhaus I Corporate Finance I neuhauma@ethz.ch Balance sheet and income statement Source: Brigham, Houston (2009), 61. Source: Brigham, Houston (2009), 58.
Agenda: Case study ,[object Object],Winter Term 2009 Markus Neuhaus I Corporate Finance I neuhauma@ethz.ch
Winter Term 2009 Markus Neuhaus I Corporate Finance I neuhauma@ethz.ch Case study: Interpretation of financial statements  ,[object Object],[object Object],[object Object],[object Object],[object Object],Beans Inc. Garlic Inc. vs.
Winter Term 2009 Markus Neuhaus I Corporate Finance I neuhauma@ethz.ch Case study: Beans Incorporation I  Beans Inc.
Winter Term 2009 Markus Neuhaus I Corporate Finance I neuhauma@ethz.ch Case study: Beans Incorporation II  Beans Inc. ,[object Object],[object Object]
Winter Term 2009 Markus Neuhaus I Corporate Finance I neuhauma@ethz.ch Case study: Garlic Incorporation I Garlic Inc.
Winter Term 2009 Markus Neuhaus I Corporate Finance I neuhauma@ethz.ch Case study: Garlic Incorporation II Garlic Inc. ,[object Object],[object Object]
Winter Term 2009 Markus Neuhaus I Corporate Finance I neuhauma@ethz.ch Case study: Solution guideline  ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Value Creation Liquidity Security/Risk Profitability
Winter Term 2009 Markus Neuhaus I Corporate Finance I neuhauma@ethz.ch Case study: Solution guideline II  ,[object Object],[object Object],[object Object],[object Object],[object Object],Source: Brigham, Houston (2009), 103.
Contents ,[object Object],[object Object],[object Object],[object Object],[object Object],Winter Term 2009 Markus Neuhaus I Corporate Finance I neuhauma@ethz.ch
Solutions to Case Study ,[object Object],Winter Term 2009 Markus Neuhaus I Corporate Finance I neuhauma@ethz.ch

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Cf ii interpreting_fs_2009_pre_lecture

  • 1. Corporate Finance Interpreting Financial Statements Dr. Markus R. Neuhaus Dr. Marc Schmidli, CFA Winter Term 2009 Markus Neuhaus I Corporate Finance I neuhauma@ethz.ch
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  • 27. Winter Term 2009 Markus Neuhaus I Corporate Finance I neuhauma@ethz.ch Balance sheet and income statement Source: Brigham, Houston (2009), 58. Source: Brigham, Houston (2009), 61.
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  • 29. Winter Term 2009 Markus Neuhaus I Corporate Finance I neuhauma@ethz.ch Balance sheet and income statement Source: Brigham, Houston (2009), 61. Source: Brigham, Houston (2009), 58.
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  • 31. Winter Term 2009 Markus Neuhaus I Corporate Finance I neuhauma@ethz.ch Balance sheet and income statement Source: Brigham, Houston (2009), 61. Source: Brigham, Houston (2009), 58.
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  • 33. Winter Term 2009 Markus Neuhaus I Corporate Finance I neuhauma@ethz.ch Balance sheet and income statement Source: Brigham, Houston (2009), 61. Source: Brigham, Houston (2009), 58.
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  • 35. Winter Term 2009 Markus Neuhaus I Corporate Finance I neuhauma@ethz.ch Balance sheet and income statement Source: Brigham, Houston (2009), 61. Source: Brigham, Houston (2009), 58.
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  • 37. Winter Term 2009 Markus Neuhaus I Corporate Finance I neuhauma@ethz.ch Balance sheet and income statement Source: Brigham, Houston (2009), 61. Source: Brigham, Houston (2009), 58.
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  • 39. Winter Term 2009 Markus Neuhaus I Corporate Finance I neuhauma@ethz.ch Balance sheet and income statement Source: Brigham, Houston (2009), 61. Source: Brigham, Houston (2009), 58.
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  • 41. Winter Term 2009 Markus Neuhaus I Corporate Finance I neuhauma@ethz.ch Balance sheet and income statement Source: Brigham, Houston (2009), 61. Source: Brigham, Houston (2009), 58.
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  • 43. Winter Term 2009 Markus Neuhaus I Corporate Finance I neuhauma@ethz.ch Balance sheet and income statement Source: Brigham, Houston (2009), 61. Source: Brigham, Houston (2009), 58.
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  • 45. Winter Term 2009 Markus Neuhaus I Corporate Finance I neuhauma@ethz.ch Balance sheet and income statement Source: Brigham, Houston (2009), 61. Source: Brigham, Houston (2009), 58.
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  • 47. Winter Term 2009 Markus Neuhaus I Corporate Finance I neuhauma@ethz.ch Balance sheet and income statement Source: Brigham, Houston (2009), 61. Source: Brigham, Houston (2009), 58.
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  • 49. Winter Term 2009 Markus Neuhaus I Corporate Finance I neuhauma@ethz.ch Balance sheet and income statement Source: Brigham, Houston (2009), 61. Source: Brigham, Houston (2009), 58.
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  • 51. Winter Term 2009 Markus Neuhaus I Corporate Finance I neuhauma@ethz.ch Balance sheet and income statement Source: Brigham, Houston (2009), 61. Source: Brigham, Houston (2009), 58.
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  • 54. Winter Term 2009 Markus Neuhaus I Corporate Finance I neuhauma@ethz.ch Case study: Beans Incorporation I Beans Inc.
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  • 56. Winter Term 2009 Markus Neuhaus I Corporate Finance I neuhauma@ethz.ch Case study: Garlic Incorporation I Garlic Inc.
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