The document provides financial statement data for Computron Corporation for years 2004, 2005 estimated, and some industry averages. It includes income statements, balance sheets, ratios, common size statements, and percentage change analyses. Key points are Computron's liquidity, debt, and profitability ratios are expected to improve in 2005E and meet or exceed many industry averages, showing the company is strengthening its financial position. However, some ratios like inventory turnover still lag the industry slightly.
The document provides financial statement data and ratios for Computron Corporation for the years 2003-2005. It includes income statements, balance sheets, common size analyses, and percentage change calculations. Some of the key points summarized are:
- Computron's liquidity, inventory turnover, and receivables collection ratios are below industry averages in 2005, though improving from 2004 levels.
- Debt ratios improved significantly from 2004 to projected 2005 levels due to a recapitalization, but are still slightly below industry averages.
- Profitability as measured by ratios such as return on assets, return on equity, and profit margin are projected to be below industry averages in 2005, though improving.
- Market valuation ratios such as price-
Fm11 ch 13 analysis of financial statementsNhu Tuyet Tran
The document provides financial statement data and ratios for Computron Corporation for the years 2003-2005. It analyzes the company's performance and financial position over this period using various ratio, percentage change, and common-size analyses. Key points include: projected ratios in 2005 show improvement but many are still below industry averages, particularly liquidity and inventory turnover; the use of debt has boosted ROE while lowering ROA; and total asset growth exceeds sales growth, indicating room for better asset utilization.
Analysis of financial statements@ bec domsBabasab Patil
The document analyzes the financial statements of Computron for 2010 and 2011 using ratio analysis. Key ratios such as liquidity, asset management, debt management, and profitability are calculated and compared to industry averages. Most ratios have improved from 2010 to projected 2011 levels but are still below industry averages, indicating room for further improvement in areas such as inventory turnover, days sales outstanding, and return on assets. Debt levels have been reduced through recapitalization but lease payments still negatively impact coverage ratios.
This document discusses ratio analysis and various financial ratios that can be calculated and analyzed for a company. It includes calculations of current and quick ratios, inventory turnover, days sales outstanding, asset turnover ratios, debt ratios, profitability ratios, and market value ratios for the company's forecasted 2005 financial statements. Key ratios are then compared to industry averages to identify areas of strength and weakness for the company.
1
CHAPTER 3
Analysis of Financial Statements
2
Topics in Chapter
Ratio analysis
Du Pont system
Effects of improving ratios
Limitations of ratio analysis
Qualitative factors
3
Value = + + +
FCF1
FCF2
FCF∞
(1 + WACC)1
(1 + WACC)∞
(1 + WACC)2
Free cash flow
(FCF)
Market interest rates
Firm’s business risk
Market risk aversion
Firm’s debt/equity mix
Cost of debt
Cost of equity
Weighted average
cost of capital
(WACC)
Net operating
profit after taxes
Required investments
in operating capital
−
=
Determinants of Intrinsic Value:
Using Ratio Analysis
...
For value box in Ch 3 ratios FM13.
4
Overview
Ratios facilitate comparison of:
One company over time
One company versus other companies
Ratios are used by:
Lenders to determine creditworthiness
Stockholders to estimate future cash flows and risk
Managers to identify areas of weakness and strength
5
Income Statement20102011ESales$5,834,400 $7,035,600COGS4,980,000 5,800,000Other expenses720,000 612,960Deprec.116,960 120,000 Tot. op. costs5,816,960 6,532,960 EBIT17,440 502,640Int. expense176,000 80,000 EBT(158,560)422,640Taxes (40%)(63,424)169,056Net income($ 95,136)$ 253,584
6
Balance Sheets: Assets20102011ECash$ 7,282 $ 14,000S-T invest.20,000 71,632AR632,160 878,000Inventories1,287,360 1,716,480 Total CA1,946,802 2,680,112 Net FA939,790 836,840Total assets$2,886,592 $3,516,952
7
Balance Sheets: Liabilities & Equity20102011EAccts. payable$ 324,000 $ 359,800Notes payable720,000 300,000Accruals284,960 380,000 Total CL1,328,960 1,039,800Long-term debt1,000,000 500,000Common stock460,000 1,680,936Ret. earnings97,632 296,216 Total equity557,632 1,977,152Total L&E$2,886,592 $3,516,952
8
Other Data20102011EStock price$6.00$12.17# of shares100,000 250,000EPS-$0.95$1.01DPS$0.11$0.22Book val. per sh.$5.58$7.91Lease payments$40,000$40,000Tax rate0.40.4
9
Liquidity Ratios
Can the company meet its short-term obligations using the resources it currently has on hand?
10
Forecasted Current and Quick Ratios for 2011.
CR10 = = = 2.58.
QR10 =
= = 0.93.
CA
CL
$2,680
$1,040
$2,680 - $1,716
$1,040
CA - Inv.
CL
11
Comments on CR and QR2011E20102009Ind.CR2.581.462.32.7QR0.930.50.81.0
Expected to improve but still below the industry average.
Liquidity position is weak.
12
Asset Management Ratios
How efficiently does the firm use its assets?
How much does the firm have tied up in assets for each dollar of sales?
13
Inventory Turnover Ratio vs. Industry Average
Inv. turnover =
= = 4.10.
Sales
Inventories
$7,036
$1,716
2011E 2010 2009 Ind.
Inv. T. 4.1 4.5 4.8 6.1
14
Comments on Inventory Turnover
Inventory turnover is below industry average.
Firm might have old inventory, or its control might be poor.
No improvement is currently forecasted.
.
The document discusses various financial ratios that can be used to analyze a company's financial statements. It provides ratio calculations and analysis for a company called D'Leon for the years 2002-2003. Key ratios like current ratio, inventory turnover, days sales outstanding, profit margin, and return on equity are presented. Limitations of ratio analysis are also discussed.
This document discusses various aspects of financial ratio analysis, including:
1) Calculating and analyzing key ratios such as the current ratio, inventory turnover, days sales outstanding, and profitability ratios for a company.
2) Using the DuPont analysis and extended DuPont equation to break down return on equity.
3) The potential limitations and qualitative factors to consider when evaluating a company's ratios and future performance.
This document discusses various aspects of financial ratio analysis, including:
1) Calculating and analyzing key ratios such as the current ratio, inventory turnover, days sales outstanding, and profitability ratios for a company.
2) Using the DuPont analysis and extended DuPont equation to break down return on equity.
3) The potential limitations and qualitative factors to consider when evaluating a company's ratios and future performance.
The document provides financial statement data and ratios for Computron Corporation for the years 2003-2005. It includes income statements, balance sheets, common size analyses, and percentage change calculations. Some of the key points summarized are:
- Computron's liquidity, inventory turnover, and receivables collection ratios are below industry averages in 2005, though improving from 2004 levels.
- Debt ratios improved significantly from 2004 to projected 2005 levels due to a recapitalization, but are still slightly below industry averages.
- Profitability as measured by ratios such as return on assets, return on equity, and profit margin are projected to be below industry averages in 2005, though improving.
- Market valuation ratios such as price-
Fm11 ch 13 analysis of financial statementsNhu Tuyet Tran
The document provides financial statement data and ratios for Computron Corporation for the years 2003-2005. It analyzes the company's performance and financial position over this period using various ratio, percentage change, and common-size analyses. Key points include: projected ratios in 2005 show improvement but many are still below industry averages, particularly liquidity and inventory turnover; the use of debt has boosted ROE while lowering ROA; and total asset growth exceeds sales growth, indicating room for better asset utilization.
Analysis of financial statements@ bec domsBabasab Patil
The document analyzes the financial statements of Computron for 2010 and 2011 using ratio analysis. Key ratios such as liquidity, asset management, debt management, and profitability are calculated and compared to industry averages. Most ratios have improved from 2010 to projected 2011 levels but are still below industry averages, indicating room for further improvement in areas such as inventory turnover, days sales outstanding, and return on assets. Debt levels have been reduced through recapitalization but lease payments still negatively impact coverage ratios.
This document discusses ratio analysis and various financial ratios that can be calculated and analyzed for a company. It includes calculations of current and quick ratios, inventory turnover, days sales outstanding, asset turnover ratios, debt ratios, profitability ratios, and market value ratios for the company's forecasted 2005 financial statements. Key ratios are then compared to industry averages to identify areas of strength and weakness for the company.
1
CHAPTER 3
Analysis of Financial Statements
2
Topics in Chapter
Ratio analysis
Du Pont system
Effects of improving ratios
Limitations of ratio analysis
Qualitative factors
3
Value = + + +
FCF1
FCF2
FCF∞
(1 + WACC)1
(1 + WACC)∞
(1 + WACC)2
Free cash flow
(FCF)
Market interest rates
Firm’s business risk
Market risk aversion
Firm’s debt/equity mix
Cost of debt
Cost of equity
Weighted average
cost of capital
(WACC)
Net operating
profit after taxes
Required investments
in operating capital
−
=
Determinants of Intrinsic Value:
Using Ratio Analysis
...
For value box in Ch 3 ratios FM13.
4
Overview
Ratios facilitate comparison of:
One company over time
One company versus other companies
Ratios are used by:
Lenders to determine creditworthiness
Stockholders to estimate future cash flows and risk
Managers to identify areas of weakness and strength
5
Income Statement20102011ESales$5,834,400 $7,035,600COGS4,980,000 5,800,000Other expenses720,000 612,960Deprec.116,960 120,000 Tot. op. costs5,816,960 6,532,960 EBIT17,440 502,640Int. expense176,000 80,000 EBT(158,560)422,640Taxes (40%)(63,424)169,056Net income($ 95,136)$ 253,584
6
Balance Sheets: Assets20102011ECash$ 7,282 $ 14,000S-T invest.20,000 71,632AR632,160 878,000Inventories1,287,360 1,716,480 Total CA1,946,802 2,680,112 Net FA939,790 836,840Total assets$2,886,592 $3,516,952
7
Balance Sheets: Liabilities & Equity20102011EAccts. payable$ 324,000 $ 359,800Notes payable720,000 300,000Accruals284,960 380,000 Total CL1,328,960 1,039,800Long-term debt1,000,000 500,000Common stock460,000 1,680,936Ret. earnings97,632 296,216 Total equity557,632 1,977,152Total L&E$2,886,592 $3,516,952
8
Other Data20102011EStock price$6.00$12.17# of shares100,000 250,000EPS-$0.95$1.01DPS$0.11$0.22Book val. per sh.$5.58$7.91Lease payments$40,000$40,000Tax rate0.40.4
9
Liquidity Ratios
Can the company meet its short-term obligations using the resources it currently has on hand?
10
Forecasted Current and Quick Ratios for 2011.
CR10 = = = 2.58.
QR10 =
= = 0.93.
CA
CL
$2,680
$1,040
$2,680 - $1,716
$1,040
CA - Inv.
CL
11
Comments on CR and QR2011E20102009Ind.CR2.581.462.32.7QR0.930.50.81.0
Expected to improve but still below the industry average.
Liquidity position is weak.
12
Asset Management Ratios
How efficiently does the firm use its assets?
How much does the firm have tied up in assets for each dollar of sales?
13
Inventory Turnover Ratio vs. Industry Average
Inv. turnover =
= = 4.10.
Sales
Inventories
$7,036
$1,716
2011E 2010 2009 Ind.
Inv. T. 4.1 4.5 4.8 6.1
14
Comments on Inventory Turnover
Inventory turnover is below industry average.
Firm might have old inventory, or its control might be poor.
No improvement is currently forecasted.
.
The document discusses various financial ratios that can be used to analyze a company's financial statements. It provides ratio calculations and analysis for a company called D'Leon for the years 2002-2003. Key ratios like current ratio, inventory turnover, days sales outstanding, profit margin, and return on equity are presented. Limitations of ratio analysis are also discussed.
This document discusses various aspects of financial ratio analysis, including:
1) Calculating and analyzing key ratios such as the current ratio, inventory turnover, days sales outstanding, and profitability ratios for a company.
2) Using the DuPont analysis and extended DuPont equation to break down return on equity.
3) The potential limitations and qualitative factors to consider when evaluating a company's ratios and future performance.
This document discusses various aspects of financial ratio analysis, including:
1) Calculating and analyzing key ratios such as the current ratio, inventory turnover, days sales outstanding, and profitability ratios for a company.
2) Using the DuPont analysis and extended DuPont equation to break down return on equity.
3) The potential limitations and qualitative factors to consider when evaluating a company's ratios and future performance.
Analysis of Financial Statements.(Ratio analysis, Du Pont system ,Effects of ...Tanjin Tamanna urmi
Five Categories of Fin. Ratios
Liquidity: Ability to meet current obligations
Asset Mgmt: Proper & effective use of assets
Asset utilization (i.e., Total Asset Turnover Ratio:
TAT = Sales / T. Assets
Debt Mgmt: extent of debt & level of safety afforded creditors
Debt utilization (i.e., Equity Multiplier:
EM = T. Assets / T. Eqty
Profitability: reflects effects of liquidity, asset mgmt, & debt on operating results
Expense Control: Profit Margin:
PM = Net Income / Sales
Market Value: indicators of what investors think of firm’s past results & future prospects
This document contains financial statements and ratio analyses for D'Leon Corporation. It includes D'Leon's balance sheet, income statement, and key financial ratios for 2002, 2001, and 2000, as well as industry averages. The ratio analyses indicate that while some of D'Leon's liquidity, debt management, and profitability ratios improved in 2002 and exceeded prior years or industry averages, others such as inventory turnover and return on assets remained below industry averages, suggesting areas for improvement. Qualitative factors like customer and supplier dependence and the competitive environment are also important to consider in evaluating the company's prospects.
Fred Campo, chairman of Computer Industries, brought in Donna Jamison to help turn the company around after an expansion program failed to generate the expected sales and profits, resulting in large losses. Ratios analyzed from the company's financial statements showed liquidity was weak, assets were not being utilized efficiently, and profitability was below industry averages, indicating poor performance and need for improvement. Comparing to competitors provided benchmarks to identify specific areas for Computer Industries to address in order to improve operations and financial position.
SFW - FOFA implications, Sum of parts valuation, possible acquirers George Gabriel
This research note analyses potential acquirer of the SFW business, and looks at Future of Financial Advice (FOFA) reforms and values SFW on a sum of the parts basis (a relevant valuation methodology for any business with multiple business segments).
Financial services sector - implications of FOFA, possible acquires of SFW, S...George Gabriel
SFW Australia is rated positively given its scarcity value as one of two listed vertically integrated wealth managers in Australia. The stock offers upside for strategic acquirers at its current sum-of-parts valuation of 42 cents per share. Potential acquirers include regional banks, third tier lenders, trustee companies, and diversified wealth managers seeking to expand their distribution networks and mitigate key person risks. The deferral of mandatory FOFA reforms to 2013 will drive further sector consolidation as smaller players exit and larger players pursue acquisitions.
Consolidated Construction Consortium (CCCL) reported poor financial results for the second quarter of fiscal year 2011, with revenues growing only 8.5% year-over-year. Operating margins declined due to higher staff costs and a design change that increased costs. Net profit declined 21.9% due to a large increase in interest costs. The analyst is lowering earnings estimates and downgrading the stock to Neutral due to disappointing execution, rich valuations, and expectations that the company will underperform peers.
Introduction ot Mangerial Finance - Chapter 2 by: Scott Besley & Eugene BrighamKenji Silavi
This document discusses financial statement analysis. It provides an overview of key financial statements including the balance sheet, income statement, statement of cash flows, and statement of retained earnings. It then analyzes these statements for a company called Unilate Textiles, calculating various financial ratios to evaluate Unilate's liquidity, asset management, debt management, profitability, and market value. The DuPont analysis is also explained as a way to analyze return on assets and return on equity. Finally, potential problems with financial ratio analysis are discussed.
The document provides an overview of financial statement analysis and financial modeling. It discusses standardized financial statements such as common-size balance sheets and income statements which make comparisons easier. It also covers various types of financial ratios that can be used for analysis, including liquidity, leverage, coverage, inventory, receivables, asset turnover, profitability, and market value ratios. Examples of specific ratios are given such as current ratio, quick ratio, debt-to-equity ratio, times interest earned, inventory turnover, receivables turnover, return on assets, return on equity, and price-to-earnings ratio. The document emphasizes comparing ratios over time, between companies, and to industry averages to draw meaningful conclusions.
Pace Executive MBA Finance (MBA 716) final project on Ralph Lauren's Capital Structure.
Description of project:
You have been hired by Ralph Lauren Corporation (NYSE:RL) to determine the most efficient capital structure to maximize shareholder value creation. Specifically, you will:
1. Identify the optimal capital structure and the dollar benefit to shareholders of moving from RL’s actual to optimal debt ratio
2. Based on the above, recommend whether share repurchase or investment in new projects with debt is the best way to improve RL’s debt and equity mix.
- If a firm continues to earn negative free cash flow to the firm (FCFF), it means its cash from operations is insufficient to meet investing needs and it will require external financing like debt or equity issuance.
- The FCFF and free cash flow to equity (FCFE) models will only lead to the same firm value if the firm has no debt. With debt, the models are unlikely to yield the same value.
- Using market values for debt and equity avoids problems of circularity that can arise when using book values in the weighted average cost of capital (WACC) calculation under the FCFF approach. Differences between the models can also arise if the firm's debt-to-equity ratio is changing
Metka is a leading contractor of power plants in the MENA region. It has a strong backlog of €1.1 billion providing visibility until 2015. Over 90% of the backlog is located in growing markets like Algeria, Iraq, and Jordan with energy demand increasing over 50% in the past decade. The analyst maintains an Overweight rating and €13.30 price target, expecting 39% upside, citing the company's consolidation phase with stable earnings and dividends over 2013-2015. Risks are to the upside from further contract wins to fuel growth in the region.
Dover Corporation reported financial results for the third quarter of 2005, with the following key points:
1) Revenue increased 13% to $1.56 billion compared to the prior year period, and income and earnings per share from continuing operations reached their highest levels since 2000.
2) The company completed $960 million in acquisitions in the third quarter to add new companies that are expected to help achieve growth targets and enhance shareholder value.
3) Segment results were mixed, with Resources achieving a record quarter while Commercial Equipment declined due to hurricane impacts, but the company remains cautiously optimistic about performance prospects for the fourth quarter.
- CyrusOne beat analysts' estimates for Q4 revenue, adjusted EBITDAS, FFO/share, and AFFO/share.
- While new monthly recurring revenue from new customers was slightly below average, revenue from existing customers was strong.
- Lower oil prices are not expected to negatively impact CyrusOne as its largest energy customers represent a small percentage of their costs.
- Analysts raised their price target for CyrusOne to $34 per share based on a 13x multiple of 2016 estimated adjusted EBITDAS.
This document presents the 2012 results and capital market performance of CTEEP, a Brazilian electricity transmission company. It summarizes CTEEP's key operational and financial results for 2012, including a 6.8% decrease in net operating revenue, a 3% decrease in EBITDA, and a 7.8% decrease in net income compared to 2011. It also provides details on CTEEP's capital structure, debt levels, investments, and trading activity on the stock exchange in 2012.
This document presents the 2012 results and capital market performance of CTEEP, a Brazilian electricity transmission company. It summarizes CTEEP's key operating and financial results for 2012, including a 6.8% decrease in net operating revenue, a 3% decrease in EBITDA, and a 7.8% decrease in net income compared to 2011. It also provides details on CTEEP's capital structure, debt repayment schedule, investment plan for 2013, and stock performance on the Brazilian market in 2012.
Alupar reported its financial results for the first quarter of 2014, with consolidated net income growing 19.3% compared to the same period in 2013. Key highlights included adjusted net revenue increasing 15.3% to R$324.2 million and EBITDA growing 23.5% to R$280.9 million. For the transmission business, EBITDA rose 3.9% to R$240.6 million while generation EBITDA increased significantly to R$60.7 million. The company also announced it had declared interim dividends of R$156 million and recommended final dividends of R$193.7 million for fiscal 2013.
The document provides an earnings presentation for Triunfo Participações e Investimentos S.A. for 4Q12 and full year 2012. Some key highlights include:
- Traffic across segments grew 6.4% in 4Q12 and 6.6% for the full year.
- Net operating revenue increased 13.9% in 4Q12 and 20.6% for the full year.
- Adjusted EBITDA grew 2.4% in 4Q12 to R$119.8 million and increased 19.2% for 2012 to R$419.5 million.
- Capex totaled R$312.8 million in 4Q12 and R$766.9 million for the
HP is an American multinational information technology company founded by William Hewlett and David Packard. It provides hardware, software, and services to consumers, small and medium businesses, and large enterprises. The document includes HP's income statements from 2008 to 2014 which show trends in revenue, costs, expenses, profits, and other financial metrics over this period. It also compares some of HP's key financial ratios to IBM over the same time frame.
An approach to financial statement analysis that uses a simple, big-picture view about the company first, focusing on its most important financial issues, before learning innumerable ratios.
How to Make a Field Mandatory in Odoo 17Celine George
In Odoo, making a field required can be done through both Python code and XML views. When you set the required attribute to True in Python code, it makes the field required across all views where it's used. Conversely, when you set the required attribute in XML views, it makes the field required only in the context of that particular view.
Analysis of Financial Statements.(Ratio analysis, Du Pont system ,Effects of ...Tanjin Tamanna urmi
Five Categories of Fin. Ratios
Liquidity: Ability to meet current obligations
Asset Mgmt: Proper & effective use of assets
Asset utilization (i.e., Total Asset Turnover Ratio:
TAT = Sales / T. Assets
Debt Mgmt: extent of debt & level of safety afforded creditors
Debt utilization (i.e., Equity Multiplier:
EM = T. Assets / T. Eqty
Profitability: reflects effects of liquidity, asset mgmt, & debt on operating results
Expense Control: Profit Margin:
PM = Net Income / Sales
Market Value: indicators of what investors think of firm’s past results & future prospects
This document contains financial statements and ratio analyses for D'Leon Corporation. It includes D'Leon's balance sheet, income statement, and key financial ratios for 2002, 2001, and 2000, as well as industry averages. The ratio analyses indicate that while some of D'Leon's liquidity, debt management, and profitability ratios improved in 2002 and exceeded prior years or industry averages, others such as inventory turnover and return on assets remained below industry averages, suggesting areas for improvement. Qualitative factors like customer and supplier dependence and the competitive environment are also important to consider in evaluating the company's prospects.
Fred Campo, chairman of Computer Industries, brought in Donna Jamison to help turn the company around after an expansion program failed to generate the expected sales and profits, resulting in large losses. Ratios analyzed from the company's financial statements showed liquidity was weak, assets were not being utilized efficiently, and profitability was below industry averages, indicating poor performance and need for improvement. Comparing to competitors provided benchmarks to identify specific areas for Computer Industries to address in order to improve operations and financial position.
SFW - FOFA implications, Sum of parts valuation, possible acquirers George Gabriel
This research note analyses potential acquirer of the SFW business, and looks at Future of Financial Advice (FOFA) reforms and values SFW on a sum of the parts basis (a relevant valuation methodology for any business with multiple business segments).
Financial services sector - implications of FOFA, possible acquires of SFW, S...George Gabriel
SFW Australia is rated positively given its scarcity value as one of two listed vertically integrated wealth managers in Australia. The stock offers upside for strategic acquirers at its current sum-of-parts valuation of 42 cents per share. Potential acquirers include regional banks, third tier lenders, trustee companies, and diversified wealth managers seeking to expand their distribution networks and mitigate key person risks. The deferral of mandatory FOFA reforms to 2013 will drive further sector consolidation as smaller players exit and larger players pursue acquisitions.
Consolidated Construction Consortium (CCCL) reported poor financial results for the second quarter of fiscal year 2011, with revenues growing only 8.5% year-over-year. Operating margins declined due to higher staff costs and a design change that increased costs. Net profit declined 21.9% due to a large increase in interest costs. The analyst is lowering earnings estimates and downgrading the stock to Neutral due to disappointing execution, rich valuations, and expectations that the company will underperform peers.
Introduction ot Mangerial Finance - Chapter 2 by: Scott Besley & Eugene BrighamKenji Silavi
This document discusses financial statement analysis. It provides an overview of key financial statements including the balance sheet, income statement, statement of cash flows, and statement of retained earnings. It then analyzes these statements for a company called Unilate Textiles, calculating various financial ratios to evaluate Unilate's liquidity, asset management, debt management, profitability, and market value. The DuPont analysis is also explained as a way to analyze return on assets and return on equity. Finally, potential problems with financial ratio analysis are discussed.
The document provides an overview of financial statement analysis and financial modeling. It discusses standardized financial statements such as common-size balance sheets and income statements which make comparisons easier. It also covers various types of financial ratios that can be used for analysis, including liquidity, leverage, coverage, inventory, receivables, asset turnover, profitability, and market value ratios. Examples of specific ratios are given such as current ratio, quick ratio, debt-to-equity ratio, times interest earned, inventory turnover, receivables turnover, return on assets, return on equity, and price-to-earnings ratio. The document emphasizes comparing ratios over time, between companies, and to industry averages to draw meaningful conclusions.
Pace Executive MBA Finance (MBA 716) final project on Ralph Lauren's Capital Structure.
Description of project:
You have been hired by Ralph Lauren Corporation (NYSE:RL) to determine the most efficient capital structure to maximize shareholder value creation. Specifically, you will:
1. Identify the optimal capital structure and the dollar benefit to shareholders of moving from RL’s actual to optimal debt ratio
2. Based on the above, recommend whether share repurchase or investment in new projects with debt is the best way to improve RL’s debt and equity mix.
- If a firm continues to earn negative free cash flow to the firm (FCFF), it means its cash from operations is insufficient to meet investing needs and it will require external financing like debt or equity issuance.
- The FCFF and free cash flow to equity (FCFE) models will only lead to the same firm value if the firm has no debt. With debt, the models are unlikely to yield the same value.
- Using market values for debt and equity avoids problems of circularity that can arise when using book values in the weighted average cost of capital (WACC) calculation under the FCFF approach. Differences between the models can also arise if the firm's debt-to-equity ratio is changing
Metka is a leading contractor of power plants in the MENA region. It has a strong backlog of €1.1 billion providing visibility until 2015. Over 90% of the backlog is located in growing markets like Algeria, Iraq, and Jordan with energy demand increasing over 50% in the past decade. The analyst maintains an Overweight rating and €13.30 price target, expecting 39% upside, citing the company's consolidation phase with stable earnings and dividends over 2013-2015. Risks are to the upside from further contract wins to fuel growth in the region.
Dover Corporation reported financial results for the third quarter of 2005, with the following key points:
1) Revenue increased 13% to $1.56 billion compared to the prior year period, and income and earnings per share from continuing operations reached their highest levels since 2000.
2) The company completed $960 million in acquisitions in the third quarter to add new companies that are expected to help achieve growth targets and enhance shareholder value.
3) Segment results were mixed, with Resources achieving a record quarter while Commercial Equipment declined due to hurricane impacts, but the company remains cautiously optimistic about performance prospects for the fourth quarter.
- CyrusOne beat analysts' estimates for Q4 revenue, adjusted EBITDAS, FFO/share, and AFFO/share.
- While new monthly recurring revenue from new customers was slightly below average, revenue from existing customers was strong.
- Lower oil prices are not expected to negatively impact CyrusOne as its largest energy customers represent a small percentage of their costs.
- Analysts raised their price target for CyrusOne to $34 per share based on a 13x multiple of 2016 estimated adjusted EBITDAS.
This document presents the 2012 results and capital market performance of CTEEP, a Brazilian electricity transmission company. It summarizes CTEEP's key operational and financial results for 2012, including a 6.8% decrease in net operating revenue, a 3% decrease in EBITDA, and a 7.8% decrease in net income compared to 2011. It also provides details on CTEEP's capital structure, debt levels, investments, and trading activity on the stock exchange in 2012.
This document presents the 2012 results and capital market performance of CTEEP, a Brazilian electricity transmission company. It summarizes CTEEP's key operating and financial results for 2012, including a 6.8% decrease in net operating revenue, a 3% decrease in EBITDA, and a 7.8% decrease in net income compared to 2011. It also provides details on CTEEP's capital structure, debt repayment schedule, investment plan for 2013, and stock performance on the Brazilian market in 2012.
Alupar reported its financial results for the first quarter of 2014, with consolidated net income growing 19.3% compared to the same period in 2013. Key highlights included adjusted net revenue increasing 15.3% to R$324.2 million and EBITDA growing 23.5% to R$280.9 million. For the transmission business, EBITDA rose 3.9% to R$240.6 million while generation EBITDA increased significantly to R$60.7 million. The company also announced it had declared interim dividends of R$156 million and recommended final dividends of R$193.7 million for fiscal 2013.
The document provides an earnings presentation for Triunfo Participações e Investimentos S.A. for 4Q12 and full year 2012. Some key highlights include:
- Traffic across segments grew 6.4% in 4Q12 and 6.6% for the full year.
- Net operating revenue increased 13.9% in 4Q12 and 20.6% for the full year.
- Adjusted EBITDA grew 2.4% in 4Q12 to R$119.8 million and increased 19.2% for 2012 to R$419.5 million.
- Capex totaled R$312.8 million in 4Q12 and R$766.9 million for the
HP is an American multinational information technology company founded by William Hewlett and David Packard. It provides hardware, software, and services to consumers, small and medium businesses, and large enterprises. The document includes HP's income statements from 2008 to 2014 which show trends in revenue, costs, expenses, profits, and other financial metrics over this period. It also compares some of HP's key financial ratios to IBM over the same time frame.
An approach to financial statement analysis that uses a simple, big-picture view about the company first, focusing on its most important financial issues, before learning innumerable ratios.
How to Make a Field Mandatory in Odoo 17Celine George
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Ch13S.ppt
1. 13 - 1
Ratio analysis
Du Pont system
Effects of improving ratios
Limitations of ratio analysis
Qualitative factors
CHAPTER 13
Analysis of Financial Statements
5. 13 - 5
Other Data
2004 2005E
Stock price $6.00 $12.17
# of shares 100,000 250,000
EPS -$0.95 $1.01
DPS $0.11 $0.22
Book val. per share $5.58 $7.91
Lease payments 40,000 40,000
Tax rate 0.4 0.4
6. 13 - 6
Standardize numbers; facilitate
comparisons
Used to highlight weaknesses and
strengths
Why are ratios useful?
7. 13 - 7
Liquidity: Can we make required
payments as they fall due?
Asset management: Do we have
the right amount of assets for the
level of sales?
What are the five major categories of
ratios, and what questions do they
answer?
(More…)
8. 13 - 8
Debt management: Do we have the
right mix of debt and equity?
Profitability: Do sales prices exceed
unit costs, and are sales high
enough as reflected in PM, ROE, and
ROA?
Market value: Do investors like what
they see as reflected in P/E and M/B
ratios?
9. 13 - 9
Calculate the firm’s forecasted current
and quick ratios for 2005.
CR05 = = = 2.58x.
QR05 =
= = 0.93x.
CA
CL
$2,680
$1,040
$2,680 - $1,716
$1,040
CA - Inv.
CL
10. 13 - 10
Expected to improve but still below
the industry average.
Liquidity position is weak.
Comments on CR and QR
2005E 2004 2003 Ind.
CR 2.58x 1.46x 2.3x 2.7x
QR 0.93x 0.5x 0.8x 1.0x
11. 13 - 11
What is the inventory turnover ratio as
compared to the industry average?
Inv. turnover =
= = 4.10x.
Sales
Inventories
$7,036
$1,716
2005E 2004 2003 Ind.
Inv. T. 4.1x 4.5x 4.8x 6.1x
12. 13 - 12
Inventory turnover is below
industry average.
Firm might have old inventory, or
its control might be poor.
No improvement is currently
forecasted.
Comments on Inventory Turnover
13. 13 - 13
Receivables
Average sales per day
DSO is the average number of days
after making a sale before receiving
cash.
DSO =
= =
= 45.5 days.
Receivables
Sales/365
$878
$7,036/365
14. 13 - 14
Appraisal of DSO
Firm collects too slowly, and
situation is getting worse.
Poor credit policy.
2005 2004 2003 Ind.
DSO 45.5 39.5 37.4 32.0
15. 13 - 15
Fixed Assets and Total Assets
Turnover Ratios
Fixed assets
turnover
Sales
Net fixed assets
=
= = 8.41x.
$7,036
$837
Total assets
turnover
Sales
Total assets
=
= = 2.00x.
$7,036
$3,517 (More…)
16. 13 - 16
FA turnover is expected to exceed
industry average. Good.
TA turnover not up to industry
average. Caused by excessive
current assets (A/R and inventory).
2005E 2004 2003 Ind.
FA TO 8.4x 6.2x 10.0x 7.0x
TA TO 2.0x 2.0x 2.3x 2.5x
17. 13 - 17
Total liabilities
Total assets
Debt ratio =
= = 43.8%.
$1,040 + $500
$3,517
EBIT
Int. expense
TIE =
= = 6.3x.
$502.6
$80
Calculate the debt, TIE, and EBITDA
coverage ratios.
(More…)
18. 13 - 18
All three ratios reflect use of debt, but
focus on different aspects.
EBITDA
coverage
= EC
= = 5.5x.
EBIT + Depr. & Amort. + Lease payments
Interest Lease
expense pmt.
+ + Loan pmt.
$502.6 + $120 + $40
$80 + $40 + $0
19. 13 - 19
Recapitalization improved situation,
but lease payments drag down EC.
How do the debt management ratios
compare with industry averages?
2005E 2004 2003 Ind.
D/A 43.8% 80.7% 54.8% 50.0%
TIE 6.3x 0.1x 3.3x 6.2x
EC 5.5x 0.8x 2.6x 8.0x
20. 13 - 20
Very bad in 2004, but projected to
meet industry average in 2005.
Looking good.
Profit Margin (PM)
2005E 2004 2003 Ind.
PM 3.6% -1.6% 2.6% 3.6%
PM = = = 3.6%.
NI
Sales
$253.6
$7,036
21. 13 - 21
BEP =
= = 14.3%.
Basic Earning Power (BEP)
EBIT
Total assets
$502.6
$3,517
(More…)
22. 13 - 22
BEP removes effect of taxes and
financial leverage. Useful for
comparison.
Projected to be below average.
Room for improvement.
2005E 2004 2003 Ind.
BEP 14.3% 0.6% 14.2% 17.8%
23. 13 - 23
Return on Assets (ROA)
and Return on Equity (ROE)
ROA =
= = 7.2%.
Net income
Total assets
$253.6
$3,517
(More…)
24. 13 - 24
ROE =
= = 12.8%.
Net income
Common equity
$253.6
$1,977
2005E 2004 2003 Ind.
ROA 7.2% -3.3% 6.0% 9.0%
ROE 12.8% -17.1% 13.3% 18.0%
Both below average but improving.
25. 13 - 25
ROA is lowered by debt--interest
expense lowers net income, which
also lowers ROA.
However, the use of debt lowers
equity, and if equity is lowered
more than net income, ROE would
increase.
Effects of Debt on ROA and ROE
26. 13 - 26
Calculate and appraise the
P/E, P/CF, and M/B ratios.
Price = $12.17.
EPS = = = $1.01.
P/E = = = 12x.
NI
Shares out.
$253.6
250
Price per share
EPS
$12.17
$1.01
27. 13 - 27
Industry P/E Ratios
Industry Ticker* P/E
Banking STI 17.6
Software MSFT 33.0
Drug PFE 31.7
Electric Utilities DUK 13.7
Semiconductors INTC 57.5
Steel NUE 28.1
Tobacco MO 12.3
Water Utilities CFT 21.8
S&P 500 30.4
*Ticker is for typical firm in industry, but P/E ratio is for the
industry, not the individual firm.
28. 13 - 28
NI + Depr.
Shares out.
CF per share =
= = $1.49.
$253.6 + $120.0
250
Price per share
Cash flow per share
P/CF =
= = 8.2x.
$12.17
$1.49
29. 13 - 29
Com. equity
Shares out.
BVPS =
= = $7.91.
$1,977
250
Mkt. price per share
Book value per share
M/B =
= = 1.54x.
$12.17
$7.91
30. 13 - 30
P/E: How much investors will pay
for $1 of earnings. High is good.
M/B: How much paid for $1 of book
value. Higher is good.
P/E and M/B are high if ROE is high,
risk is low.
2005E 2004 2003 Ind.
P/E 12.0x -6.3x 9.7x 14.2x
P/CF 8.2x 27.5x 8.0x 7.6x
M/B 1.5x 1.1x 1.3x 2.9x
31. 13 - 31
Common Size Balance Sheets:
Divide all items by Total Assets
Assets 2003 2004 2005E Ind.
Cash 0.6% 0.3% 0.4% 0.3%
ST Invest. 3.3% 0.7% 2.0% 0.3%
AR 23.9% 21.9% 25.0% 22.4%
Invent. 48.7% 44.6% 48.8% 41.2%
Total CA 76.5% 67.4% 76.2% 64.1%
Net FA 23.5% 32.6% 23.8% 35.9%
TA 100.0% 100.0% 100.0% 100.0%
32. 13 - 32
Divide all items by
Total Liabilities & Equity
2003 2004 2005E Ind.
AP 9.9% 11.2% 10.2% 11.9%
Notes pay. 13.6% 24.9% 8.5% 2.4%
Accruals 9.3% 9.9% 10.8% 9.5%
Total CL 32.8% 46.0% 29.6% 23.7%
LT Debt 22.0% 34.6% 14.2% 26.3%
Total eq. 45.2% 19.3% 56.2% 50.0%
Total L&E 100.0% 100.0% 100.0% 100.0%
33. 13 - 33
Analysis of Common Size Balance
Sheets
Computron has higher proportion of
inventory and current assets than
Industry.
Computron now has more equity
(which means LESS debt) than
Industry.
Computron has more short-term debt
than industry, but less long-term debt
than industry.
35. 13 - 35
Analysis of Common Size Income
Statements
Computron has lower COGS (86.7)
than industry (84.5), but higher other
expenses. Result is that Computron
has similar EBIT (7.1) as industry.
36. 13 - 36
Percentage Change Analysis: Find
Percentage Change from First Year (2003)
Income St. 2003 2004 2005E
Sales 0.0% 70.0% 105.0%
COGS 0.0% 73.9% 102.5%
Other exp. 0.0% 111.8% 80.3%
Depr. 0.0% 518.8% 534.9%
EBIT 0.0% -91.7% 140.4%
Int. Exp. 0.0% 181.6% 28.0%
EBT 0.0% -208.2% 188.3%
Taxes 0.0% -208.2% 188.3%
NI 0.0% -208.2% 188.3%
37. 13 - 37
Analysis of Percent Change Income
Statement
We see that 2005 sales grew 105%
from 2003, and that NI grew 188%
from 2003.
So Computron has become more
profitable.
38. 13 - 38
Percentage Change Balance Sheets
Assets 2003 2004 2005E
Cash 0.0% -19.1% 55.6%
ST Invest. 0.0% -58.8% 47.4%
AR 0.0% 80.0% 150.0%
Invent. 0.0% 80.0% 140.0%
Total CA 0.0% 73.2% 138.4%
Net FA 0.0% 172.6% 142.7%
TA 0.0% 96.5% 139.4%
40. 13 - 40
Analysis of Percent Change Balance
Sheets
We see that total assets grew at a
rate of 139%, while sales grew at a
rate of only 105%. So asset
utilization remains a problem.
41. 13 - 41
Explain the Du Pont System
The Du Pont system focuses on:
Expense control (PM)
Asset utilization (TATO)
Debt utilization (EM)
It shows how these factors combine
to determine the ROE.
42. 13 - 42
( )( )( )= ROE
Profit
margin
TA
turnover
Equity
multiplier
NI
Sales
Sales
TA
TA
CE
2003 2.6% x 2.3 x 2.2 = 13.2%
2004 -1.6% x 2.0 x 5.2 = -16.6%
2005 3.6% x 2.0 x 1.8 = 13.0%
Ind. 3.6% x 2.5 x 2.0 = 18.0%
The Du Pont System
x x = ROE.
43. 13 - 43
What are some potential problems and
limitations of financial ratio analysis?
Comparison with industry averages
is difficult if the firm operates many
different divisions.
“Average” performance is not
necessarily good.
Seasonal factors can distort ratios.
(More…)
44. 13 - 44
Window dressing techniques can make
statements and ratios look better.
Different accounting and operating
practices can distort comparisons.
Sometimes it is difficult to tell if a ratio
value is “good” or “bad.”
Often, different ratios give different
signals, so it is difficult to tell, on
balance, whether a company is in a
strong or weak financial condition.
45. 13 - 45
What are some qualitative factors
analysts should consider when
evaluating a company’s likely future
financial performance?
Are the company’s revenues tied to a
single customer?
To what extent are the company’s
revenues tied to a single product?
To what extent does the company
rely on a single supplier? (More…)
46. 13 - 46
What percentage of the company’s
business is generated overseas?
What is the competitive situation?
What does the future have in store?
What is the company’s legal and
regulatory environment?