Financial Statement Analysis - Reading the Numbers Correctly, 2014 CreditScape, Western Region Credit Conference Seminar Slide Deck, sponsored by Credit Management Association. More information: www.creditmanagementassociation.org
Graydon's Tips on how to improve your business credit rating. By following a few simple tips, you can improve your business credit report, give more confidence to your suppliers, achieve better credit terms, trade more and achieve better business image.
Graydon's Tips on how to improve your business credit rating. By following a few simple tips, you can improve your business credit report, give more confidence to your suppliers, achieve better credit terms, trade more and achieve better business image.
11 Benefits of Accounts Receivable Management SoftwareE2B Teknologies
Take a look at this slide deck to learn the benefits of accounts receivable management software and how automating accounts receivable can help you increase cash flow, reduce bad debt, and much more.
Small business loans you can qualify for with bad credit scoreMerchant Advisors
Business loans can be challenging to secure if you have bad credit. Here are a few financing options to get small business loans with bad credit. For more information, visit at https://www.onlinecheck.com/blog/business-loans/business-loans-for-bad-credit/
Guide to Invoice Factoring (a.k.a. Accounts Receivable Financing)Elizabeth Kraus
Top invoice factoring company DB Squared describes the invoice factoring process (how invoice factoring works) and explains how it can help a business grow and become more profitable. For more information visit dbsquaredinc.com.
Do you know how your business credit scores are calculated? Learn more here and get started toward understanding and raising your business credit scores so you can get funding for your business.
PerformaCard is the first performance based credit card. Business owners are approved based on their business performance regardless of their credit score.
Paying business bills as agreed will net a positive credit scores with D&B, Equifax, and Experian
Your personal credit can be blended into the FICO SBSS and Experian Intelliscore Plus
Having a good Bank Rating is mostly about keeping an average of $10,000 in your bank account over the last 90 days
Learn about the 3 "Cs" in credit:
Character - who are you when times get tough?
Cash Flow - the amount of cash available from all sources of income in relationship to the total amount of personal and business debt.
Collateral The amount of cash available from all sources of income in relationship to the total amount of personal and business debt.
Learn the basics of credit in this easy-to-follow, introductory course that includes:
- What credit is and the different types of credit available
- How credit reports and credit scores work and the factors that go into building them
- Common options for building credit
And more!
Click through the slideshare to start your credit-education now.
Business Credit Score: What You Need To KnowBalboa Capital
A good business credit score is vital to the success of your business. It can help you obtain business loans, increase credit lines, and get better credit terms. Learn all about business credit in this infographic that was created by Balboa Capital. It explains how business credit scores are calculated, and how you can improve yours. It also has some interesting facts about business credit that you might know about.
What is Merchant Cash Advance (MCA) and how MCA works. This document describes the players and what is involved in setting up a merchant cash advance deal.
Paying your suppliers by credit card is a smart financial move that is good for cash flow, financial management and overall expense reduction. But to access these gains, your vendors must first agree to accept your card payments.
Securing Your Transactions in Latin America and Mexico, 2014 CreditScape, Western Region Credit Conference Seminar Slide Deck, sponsored by Credit Management Association. More information: www.creditmanagementassociation.org
11 Benefits of Accounts Receivable Management SoftwareE2B Teknologies
Take a look at this slide deck to learn the benefits of accounts receivable management software and how automating accounts receivable can help you increase cash flow, reduce bad debt, and much more.
Small business loans you can qualify for with bad credit scoreMerchant Advisors
Business loans can be challenging to secure if you have bad credit. Here are a few financing options to get small business loans with bad credit. For more information, visit at https://www.onlinecheck.com/blog/business-loans/business-loans-for-bad-credit/
Guide to Invoice Factoring (a.k.a. Accounts Receivable Financing)Elizabeth Kraus
Top invoice factoring company DB Squared describes the invoice factoring process (how invoice factoring works) and explains how it can help a business grow and become more profitable. For more information visit dbsquaredinc.com.
Do you know how your business credit scores are calculated? Learn more here and get started toward understanding and raising your business credit scores so you can get funding for your business.
PerformaCard is the first performance based credit card. Business owners are approved based on their business performance regardless of their credit score.
Paying business bills as agreed will net a positive credit scores with D&B, Equifax, and Experian
Your personal credit can be blended into the FICO SBSS and Experian Intelliscore Plus
Having a good Bank Rating is mostly about keeping an average of $10,000 in your bank account over the last 90 days
Learn about the 3 "Cs" in credit:
Character - who are you when times get tough?
Cash Flow - the amount of cash available from all sources of income in relationship to the total amount of personal and business debt.
Collateral The amount of cash available from all sources of income in relationship to the total amount of personal and business debt.
Learn the basics of credit in this easy-to-follow, introductory course that includes:
- What credit is and the different types of credit available
- How credit reports and credit scores work and the factors that go into building them
- Common options for building credit
And more!
Click through the slideshare to start your credit-education now.
Business Credit Score: What You Need To KnowBalboa Capital
A good business credit score is vital to the success of your business. It can help you obtain business loans, increase credit lines, and get better credit terms. Learn all about business credit in this infographic that was created by Balboa Capital. It explains how business credit scores are calculated, and how you can improve yours. It also has some interesting facts about business credit that you might know about.
What is Merchant Cash Advance (MCA) and how MCA works. This document describes the players and what is involved in setting up a merchant cash advance deal.
Paying your suppliers by credit card is a smart financial move that is good for cash flow, financial management and overall expense reduction. But to access these gains, your vendors must first agree to accept your card payments.
Securing Your Transactions in Latin America and Mexico, 2014 CreditScape, Western Region Credit Conference Seminar Slide Deck, sponsored by Credit Management Association. More information: www.creditmanagementassociation.org
Training session for the Reliance Credit Network service on anscers.com. Originally presented by Mike Mitchell, President of CMA, at the Reliance Credit Meeting on September 11, 2014.
2014 CreditScape, Western Region Credit Conference Seminar Slide Deck, sponsored by Credit Management Association. More information: www.creditmanagementassociation.org
The anscersX multibureau business trade credit report includes the best elements from business credit reports from Dun and Bradstreet, Equifax and Experian, allowing customers to get the information they need to make a credit decision about their customers.
Documentary Credit means any arrangement that is irrevocable and thereby constitutes a definite undertaking of the issuing bank to honour a complying presentation
http://accountsknowledgehub.blogspot.com/
INTERNATIONAL TRADE DOCUMENTS used in Export and Import Procedures are Commercial Invoice, Packing List, Certificate of Origin, Irrevocable Letter of Credit, Bill of Lading and CMR Document.
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
Analyzing Liquidity Using the Cash Conversion Cycle, 2014 CreditScape, Western Region Credit Conference Seminar Slide Deck, sponsored by Credit Management Association. More information: www.creditmanagementassociation.org
FIN 534 – FINANCIAL MANAGEMENTwithDr. charity ezenwa.docxcharlottej5
FIN 534 – FINANCIAL MANAGEMENT
with
Dr. charity ezenwa
WELCOME
1
Chapter 3:
ANALYSIS OF FINANCIAL STATEMENTS
WEEK 2
2
Course Learning Outcome(s)
Analyze financial statements for key ratios, cash flow positions, and taxation effects.
3
Topics
Ratio analysis
DuPont equation
Effects of improving ratios
Limitations of ratio analysis
Qualitative factors
4
Why Financial Statement Analysis?
To facilitate comparison of:
One company over time
One company versus other companies
Uses: How can stakeholders benefit and why?
Lenders to determine creditworthiness
Stockholders to estimate future cash flows and risk
Managers to identify areas of weakness and strength
Financial statement analysis involves (1) comparing a firms; performance with that of the other firms in the same industry; and (2)Evaluating trends in the firm’s financial position over time.
Financial statement analysis is used by managers to identify situations needing attention. Potential lenders use financial statement analysis to determine whether a company is credit worthy, and stockholders use it to help them predict future earnings, dividends, and free cash flow.
5
Ratio Analysis
Used to extract information not obvious from simply examining financial statements.
Provides standardized comparison of firms
Example: Giant owes $10 million in debt while Safeway owes $20 million in debt. Which firm has a stronger financial position?
It is very difficult to answer this question without first determining each company's debt relative to its assets, earnings, and interests. Ratio analysis allows us to standardize these debts so as to easily compare the two forms.
6
The Income Statement Example
20162017ESales$5,834,400 $7,035,600COGS except depr.4,980,000 5,800,000Other expenses720,000 612,960Deprec.116,960 120,000 Tot. op. costs5,816,960 6,532,960 EBIT17,440 502,640Int. expense176,000 80,000 EBT(158,560)422,640Taxes (40%)(63,424)169,056Net income($ 95,136)$ 253,584
7
The Balance Sheet – Assets Example
20162017ECash$ 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 $3,516,952
8
The Balance Sheet – Liabilities & Equity
20162017EAccts. payable$ 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
9
Other Data
20162017EStock 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
10
What are Liquidity Ratios?
Measures a company’s ability to meet its short-term obligations.
Current Ra.
Cross Cultural Communications, 2014 CreditScape, Western Region Credit Conference Seminar Slide Deck, sponsored by Credit Management Association. More information: www.creditmanagementassociation.org
Manage Your Customer's Payment With Speed, Accuracy, Reliability and Savings, 2014 CreditScape, Western Region Credit Conference Seminar Slide Deck, sponsored by Credit Management Association. More information: www.creditmanagementassociation.org
Efficiency Models and Methods to Improve Credit Department Performance, 2014 CreditScape, Western Region Credit Conference Seminar Slide Deck, sponsored by Credit Management Association. More information: www.creditmanagementassociation.org
Dialing for Dollars, 2014 CreditScape, Western Region Credit Conference Seminar Slide Deck, sponsored by Credit Management Association. More information: www.creditmanagementassociation.org
Saying Yes to the Sale With Limited Information, 2014 CreditScape, Western Region Credit Conference Seminar Slide Deck, sponsored by Credit Management Association. More information: www.creditmanagementassociation.org
Investigating Your Debtor, 2014 CreditScape, Western Region Credit Conference Seminar Slide Deck, sponsored by Credit Management Association. More information: www.creditmanagementassociation.org
Coloring Your Collections, 2014 CreditScape, Western Region Credit Conference Seminar Slide Deck, sponsored by Credit Management Association. More information: www.creditmanagementassociation.org
Collections Best Practices seminar. 2014 CreditScape, Western Region Credit Conference Seminar Slide Deck, sponsored by Credit Management Association. More information: www.creditmanagementassociation.org
Antitrust seminar at 2014 CreditScape, Western Region Credit Conference Seminar Slide Deck, sponsored by Credit Management Association. More information: www.creditmanagementassociation.org
The world of search engine optimization (SEO) is buzzing with discussions after Google confirmed that around 2,500 leaked internal documents related to its Search feature are indeed authentic. The revelation has sparked significant concerns within the SEO community. The leaked documents were initially reported by SEO experts Rand Fishkin and Mike King, igniting widespread analysis and discourse. For More Info:- https://news.arihantwebtech.com/search-disrupted-googles-leaked-documents-rock-the-seo-world/
Buy Verified PayPal Account | Buy Google 5 Star Reviewsusawebmarket
Buy Verified PayPal Account
Looking to buy verified PayPal accounts? Discover 7 expert tips for safely purchasing a verified PayPal account in 2024. Ensure security and reliability for your transactions.
PayPal Services Features-
🟢 Email Access
🟢 Bank Added
🟢 Card Verified
🟢 Full SSN Provided
🟢 Phone Number Access
🟢 Driving License Copy
🟢 Fasted Delivery
Client Satisfaction is Our First priority. Our services is very appropriate to buy. We assume that the first-rate way to purchase our offerings is to order on the website. If you have any worry in our cooperation usually You can order us on Skype or Telegram.
24/7 Hours Reply/Please Contact
usawebmarketEmail: support@usawebmarket.com
Skype: usawebmarket
Telegram: @usawebmarket
WhatsApp: +1(218) 203-5951
USA WEB MARKET is the Best Verified PayPal, Payoneer, Cash App, Skrill, Neteller, Stripe Account and SEO, SMM Service provider.100%Satisfection granted.100% replacement Granted.
RMD24 | Debunking the non-endemic revenue myth Marvin Vacquier Droop | First ...BBPMedia1
Marvin neemt je in deze presentatie mee in de voordelen van non-endemic advertising op retail media netwerken. Hij brengt ook de uitdagingen in beeld die de markt op dit moment heeft op het gebied van retail media voor niet-leveranciers.
Retail media wordt gezien als het nieuwe advertising-medium en ook mediabureaus richten massaal retail media-afdelingen op. Merken die niet in de betreffende winkel liggen staan ook nog niet in de rij om op de retail media netwerken te adverteren. Marvin belicht de uitdagingen die er zijn om echt aansluiting te vinden op die markt van non-endemic advertising.
Putting the SPARK into Virtual Training.pptxCynthia Clay
This 60-minute webinar, sponsored by Adobe, was delivered for the Training Mag Network. It explored the five elements of SPARK: Storytelling, Purpose, Action, Relationships, and Kudos. Knowing how to tell a well-structured story is key to building long-term memory. Stating a clear purpose that doesn't take away from the discovery learning process is critical. Ensuring that people move from theory to practical application is imperative. Creating strong social learning is the key to commitment and engagement. Validating and affirming participants' comments is the way to create a positive learning environment.
Kseniya Leshchenko: Shared development support service model as the way to ma...Lviv Startup Club
Kseniya Leshchenko: Shared development support service model as the way to make small projects with small budgets profitable for the company (UA)
Kyiv PMDay 2024 Summer
Website – www.pmday.org
Youtube – https://www.youtube.com/startuplviv
FB – https://www.facebook.com/pmdayconference
Personal Brand Statement:
As an Army veteran dedicated to lifelong learning, I bring a disciplined, strategic mindset to my pursuits. I am constantly expanding my knowledge to innovate and lead effectively. My journey is driven by a commitment to excellence, and to make a meaningful impact in the world.
Improving profitability for small businessBen Wann
In this comprehensive presentation, we will explore strategies and practical tips for enhancing profitability in small businesses. Tailored to meet the unique challenges faced by small enterprises, this session covers various aspects that directly impact the bottom line. Attendees will learn how to optimize operational efficiency, manage expenses, and increase revenue through innovative marketing and customer engagement techniques.
What is the TDS Return Filing Due Date for FY 2024-25.pdfseoforlegalpillers
It is crucial for the taxpayers to understand about the TDS Return Filing Due Date, so that they can fulfill your TDS obligations efficiently. Taxpayers can avoid penalties by sticking to the deadlines and by accurate filing of TDS. Timely filing of TDS will make sure about the availability of tax credits. You can also seek the professional guidance of experts like Legal Pillers for timely filing of the TDS Return.
Memorandum Of Association Constitution of Company.pptseri bangash
www.seribangash.com
A Memorandum of Association (MOA) is a legal document that outlines the fundamental principles and objectives upon which a company operates. It serves as the company's charter or constitution and defines the scope of its activities. Here's a detailed note on the MOA:
Contents of Memorandum of Association:
Name Clause: This clause states the name of the company, which should end with words like "Limited" or "Ltd." for a public limited company and "Private Limited" or "Pvt. Ltd." for a private limited company.
https://seribangash.com/article-of-association-is-legal-doc-of-company/
Registered Office Clause: It specifies the location where the company's registered office is situated. This office is where all official communications and notices are sent.
Objective Clause: This clause delineates the main objectives for which the company is formed. It's important to define these objectives clearly, as the company cannot undertake activities beyond those mentioned in this clause.
www.seribangash.com
Liability Clause: It outlines the extent of liability of the company's members. In the case of companies limited by shares, the liability of members is limited to the amount unpaid on their shares. For companies limited by guarantee, members' liability is limited to the amount they undertake to contribute if the company is wound up.
https://seribangash.com/promotors-is-person-conceived-formation-company/
Capital Clause: This clause specifies the authorized capital of the company, i.e., the maximum amount of share capital the company is authorized to issue. It also mentions the division of this capital into shares and their respective nominal value.
Association Clause: It simply states that the subscribers wish to form a company and agree to become members of it, in accordance with the terms of the MOA.
Importance of Memorandum of Association:
Legal Requirement: The MOA is a legal requirement for the formation of a company. It must be filed with the Registrar of Companies during the incorporation process.
Constitutional Document: It serves as the company's constitutional document, defining its scope, powers, and limitations.
Protection of Members: It protects the interests of the company's members by clearly defining the objectives and limiting their liability.
External Communication: It provides clarity to external parties, such as investors, creditors, and regulatory authorities, regarding the company's objectives and powers.
https://seribangash.com/difference-public-and-private-company-law/
Binding Authority: The company and its members are bound by the provisions of the MOA. Any action taken beyond its scope may be considered ultra vires (beyond the powers) of the company and therefore void.
Amendment of MOA:
While the MOA lays down the company's fundamental principles, it is not entirely immutable. It can be amended, but only under specific circumstances and in compliance with legal procedures. Amendments typically require shareholder
Skye Residences | Extended Stay Residences Near Toronto Airportmarketingjdass
Experience unparalleled EXTENDED STAY and comfort at Skye Residences located just minutes from Toronto Airport. Discover sophisticated accommodations tailored for discerning travelers.
Website Link :
https://skyeresidences.com/
https://skyeresidences.com/about-us/
https://skyeresidences.com/gallery/
https://skyeresidences.com/rooms/
https://skyeresidences.com/near-by-attractions/
https://skyeresidences.com/commute/
https://skyeresidences.com/contact/
https://skyeresidences.com/queen-suite-with-sofa-bed/
https://skyeresidences.com/queen-suite-with-sofa-bed-and-balcony/
https://skyeresidences.com/queen-suite-with-sofa-bed-accessible/
https://skyeresidences.com/2-bedroom-deluxe-queen-suite-with-sofa-bed/
https://skyeresidences.com/2-bedroom-deluxe-king-queen-suite-with-sofa-bed/
https://skyeresidences.com/2-bedroom-deluxe-queen-suite-with-sofa-bed-accessible/
#Skye Residences Etobicoke, #Skye Residences Near Toronto Airport, #Skye Residences Toronto, #Skye Hotel Toronto, #Skye Hotel Near Toronto Airport, #Hotel Near Toronto Airport, #Near Toronto Airport Accommodation, #Suites Near Toronto Airport, #Etobicoke Suites Near Airport, #Hotel Near Toronto Pearson International Airport, #Toronto Airport Suite Rentals, #Pearson Airport Hotel Suites
Financial Statement Analysis - Reading the Numbers Correctly
1. 1
October 15-17, 2014 - CreditScapeConference.com - #creditscape
Financial Statement Analysis:
Reading the Numbers Correctly!
2. Author/ Instructor
DAVID L. OSBURN, MBA, CCRA
David Osburn is the founder of Osburn & Associates, LLC that specializes in providing seminars, webinars, and
keynote speeches to credit managers, CPAs, bankers, and attorneys on topics such as Banking/Finance/Credit,
Negotiation Skills, Marketing, and Management.
David also functions as a Contract CFO and works with medical practitioners, financial institutions, CPA firms,
construction companies, and real estate developers. He is also an adjunct faculty member of both an accredited MBA
program and the accounting department of a community college with over 29 years of teaching experience.
David’s extensive professional background includes 14 years as a Business Trainer/Contract CFO and 16 years in
banking (commercial lending) including the position of Vice President/Senior Banking Officer.
David has an MBA in Finance/Marketing from Utah State University and a BS degree in Finance from Brigham Young
University. He is also a graduate of the ABA National Commercial Lending School held at the University of Oklahoma.
David also holds the professional designation of Certified Credit & Risk Analyst (CCRA) as granted by the National
Association of Credit Management (NACM).
Osburn & Associates, LLC
A Business Training & Contract CFO Firm
David L. Osburn, MBA, CCRA
Managing Member
7426 Alamo Summit Drive
Las Vegas, Nevada 89129
Direct: (702) 655-1187
E-Mail: dlosburn@cox.net
Web: dlosburn.com
2
3. 3
Financial Statement Analysis: Reading the Numbers Correctly!
Creditor: Loan officers and bond rating analysts analyze ratios to ascertain a
company’s ability to pay its debts.
Investor: Stock analysts assess the company’s efficiency, risk, and growth
prospects through ratio analysis.
Manager: Business owners and managers use ratios to analyze, control, and
improve their firm’s operations.
Guarantor: Business owners are usually required to guarantee their various
business obligations and use “related” ratio analysis to determine their personal
position.
4. Accounting Principles
Accounting Basics – Quick Review of the Four Financial Statements:
Income Statement
Revenue – Expenses = Net Income (Net Loss)
Statement of Retained Earnings
Beginning Retained Earnings + Net Income (-Net Loss) – Dividends = Ending
Retained Earnings
Balance Sheet
Assets = Liabilities + Owner’s Equity
Statement of Cash Flows
Operating, Investing & Financing Cash Flows
4
5. 5
A. Liquidity Ratios
Definition:
Working Capital = Current Assets – Current Liabilities
Current Ratio = Current Assets
Current Liabilities
Quick Ratio (Acid Test) = Current Assets-Inventory/Current Liabilities
Adjustments: Prepaid Expenses, Due From Officers, Shareholders & Employees
7. 7
Income Statement
2011 2012 2013
Sales $ 3,432,000 $ 5,834,400 $ 7,035,600
Cost of goods sold 2,864,000 4,980,000 5,800,000
Other expenses
340,000 720,000 612,960
Depreciation
18,900 116,960 120,000
Total operating costs $ 3,222,900 $ 5,816,960 $ 6,532,960
EBIT $ 209,100 $ 17,440 $ 502,640
Interest Expense
62,500 176,000 80,000
EBT $ 146,600 $ (158,560) $ 422,640
Taxes (40%)
58,640
(63,424) 169,056
Net income $ 87,960 $ (95,136) $ 253,584
Industry Comparisons
2013 Industry Average
Current 2.7X
Quick 1.0X
Inventory turnover 6.1X
Days sales outstanding 32 Days
Fixed assets turnover 7.0X
Total assets turnover 2.5X
Debt ratio 2.0X
TIE 6.2X
EBITDA coverage 8.0X
Profit margin 3.6X
8. Tasks:
1) Calculate Snider Corporation’s working capital, current ratio, and quick (acid
test) ratio.
Comment on the company’s liquidity position.
2) Snider Corporation is owned by one principal (Jim “Saw tooth” Snider) with
personal liquidity consisting of the following:
$25,000 Cash
15,000 Mutual funds
75,000 Individual unlisted stock
90,000 IRAs
$205,000
Comment on Mr. Snider’s personal liquidity.
Note: The principal’s personal liquidity becomes a major strength of the
principal’s guarantee (tertiary source of repayment). 8
9. B. Activity (Turn Factors)
Definition:
Account Receivable Turnover
(A/R / Sales X Days in Period)
Accounts Payable Turnover
(A/P / COGS X Days in Period)
Inventory Turnover
(Inventory/COGS X Days in Period)
Task:
Calculate Snider Corporation’s A/R turnover, A/P turnover, and Inventory
turnover.
Comment on the company’s activity. 9
10. C. Leverage
Definition:
Debt Ratio = Debt/Net Worth (Equity)
Adjustment: Subordinated Debt
Tasks:
Calculate the debt to worth ratio for Snider Corporation.
Comment on the company’s leverage position.
10
11. D. Operating Performance
Definition:
Common-Size Analysis Vertical - Income Statement (Percent of Sales)
Net sales $5,000,000 (100%)
COGS 4,400,000 ( 88%)
Gross Profit $600,000 ( 12%)
G & A Expense 350,000 ( 7%)
Net Profit $250,000 ( 5%)
Note:
Common-size analysis vertical – Expresses comparison in percentage of the
proportional expression of each item in a given period to a base figure selected
from the same period.
Common-size analysis horizontal – Expresses comparison in percentage of the
proportionate change over a period of time.
11
12. E. Cash Flow Models - Traditional versus Cash Basis:
Definition:
Traditional Cash Flow Analysis
EBITDA $1,200M
Less: Debt Ser. (P&I) 500M
Margin $700M
DCR 2.4X
(EBITDA = Net Profit + Interest Expense + Taxes + Depreciation + Amortization)
Note: Most lenders require a minimum DCR of 1.25X.
12
13. C. Personal Cash Flow (Business Owner/Guarantor)
Salary + Business Income+ $500M
Rental Income, etc. = Total Income
Less: Federal Taxes 150M
Cash Flow Available $350M
For Debt Service
Less: Debt Service (P&I) $200M
Margin $150M
DCR 1.75X
Note: Most lenders want to see a minimum guarantor DCR of 1.50X
13
14. 14
D. Global Cash Flow
Business Cash Flow + Personal Cash Flow (Business
Owner/Guarantor)
Business Cash Flow:
EBITDA $1,200M
Less: Debt Ser (P&I) 500M
Margin $700M
Personal Cash Flow:
Cash Flow Available $350M
For Debt Service
Less: Debt Service (P&I) 200M
Margin $150M
Combined Margin $850M
Combined DCR 2.21X
16. 16
The Z-score (Bankruptcy Predictor):
The following is the Z-Score formula (for manufacturing firms), which is built out of the five weighted
financial ratios:
Z-Score = 1.2A + 1.4B + 3.3C + 0.6D + 1.0E
Where:
A = Working Capital/Total Assets
B = Retained Earnings/Total Assets
C = Earnings Before Interest & Tax/Total Assets
D = Market Value of Equity/Total Liabilities
E = Sales/Total Assets
FYE FYE FYE Interim
12/31/08 12/31/09 12/31/10 1/31/11
Scale
Z-Score 2.92 (.93) 8.06 7.93
Bankruptcy
Characteristics: 0-1.80
Gray Zone: 1.81-3.00
Non-Bankruptcy Over 3.00
Characteristics:
17. 17
Sustainable Growth Model:
The sustainable growth rate, according to Robert C. Higgins, is the maximum growth rate a company
can achieve consistent with the firm’s established financial policy. Basically, it is calculated as:
SGR = (pm*(1-d)*(1+L)) / (T-(pm*(1-d)*(1+L)))
•pm is the existing and target profit margin
•d is the target dividend payout ratio
•L is the target total debt to equity ratio
•T is the ratio of total assets to sales
In order to grow faster, the company would have to invest more equity capital, increase its financial
leverage or increase the target profit margin.
Example:
FYE FYE FYE Interim
12/31/08 12/31/09 12/31/10 1/31/11
107.39 62.95 (10.57) (36.71)