Upload
gervase-ryan
View
218
Download
0
Embed Size (px)
Citation preview
4-14-1
Business Finance(MGT 232)
Lecture 23
4-24-2
Financial Statement AnalysisFinancial Statement AnalysisFinancial Statement AnalysisFinancial Statement Analysis
4-3
• Financial Statements• A Possible Framework for Analysis• Ratio Analysis• Trend Analysis• Common-Size and Index Analysis
Overview of the Last Lecture
4-4
• Ratio Analysis– Liquidity Ratios– Leverage Ratios– Asset Management Ratios– Profitability Ratios– Market Value Ratios
Ratio Analysis
4-5
Market Value RatiosMarket Value Ratios
• These ratios compare the price of the company's stock with different variables including the Earning per share (EPS), Dividend per share (DPS) etc
• These ratios compare the price of the company's stock with different variables including the Earning per share (EPS), Dividend per share (DPS) etc
4-6
Market Value RatiosMarket Value Ratios
• EPS = Net Income to common share holders common stock outstanding
For Basket Wonders December 31, 2003
• EPS = Net Income to common share holders common stock outstanding
For Basket Wonders December 31, 2003
This indicates what is the earning on each share investment and what company is paying to its shareholders
Income Statement /Balance Sheet
And other indicators
Market Value Ratios
4-7
Basket Wonders’ Income Statement
Basket Wonders’ Income Statement
Net Sales Rs. 2,211 Cost of Goods Sold bb 1,599 Gross Profit Rs. 612 SG&A Expenses cc 402 EBITd Rs. 210 Interest Expensee 59 EBT ff Rs. 151 Income Taxes 60 EATg
Rs. 91 Cash Dividends 38 Increase in REIncrease in RE Rs. 53 Rs. 53
Basket Wonders Statement of Earnings (in thousands) for Year Ending Basket Wonders Statement of Earnings (in thousands) for Year Ending December 31, 2013December 31, 2013a
4-8
Market Value RatioMarket Value Ratio
Suppose company have 1000 shareholders and company paid dividend of Rs. 5000 and market price of company’s stock is Rs. 20 per share
Net Income to common shareholder is 91(1000) = 91000
Total number of outstanding shares of the company is 4500
Suppose company have 1000 shareholders and company paid dividend of Rs. 5000 and market price of company’s stock is Rs. 20 per share
Net Income to common shareholder is 91(1000) = 91000
Total number of outstanding shares of the company is 4500
4-9
BW Industry20.22 31.822.1 31.822.1 31.8
BW Industry20.22 31.822.1 31.822.1 31.8
Year201320122011
Earning per shareEarning per share
BW has a weak earning per share
Market Value RatiosMarket Value Ratios
4-10
Market Value RatiosMarket Value Ratios
• DPS = Total Dividend common stock outstanding
For Basket Wonders December 31, 2003
• DPS = Total Dividend common stock outstanding
For Basket Wonders December 31, 2003
Indicates the amount of dividend being paid out on each share
Income Statement /Balance Sheet
And other indicators
Market Value Ratios
4-11
Market Value RatiosMarket Value Ratios
• P/E= Market Price per share
EPS
For Basket Wonders December 31, 2003
• P/E= Market Price per share
EPS
For Basket Wonders December 31, 2003
Indicates how the investment community sees our company. A high P/E is considered a Good Sign.
Income Statement /Balance Sheet
And other indicators
Market Value Ratios
4-12
BW Industry0.98 2.22.1 2.25.8 1.8
BW Industry0.98 2.22.1 2.25.8 1.8
Year201320122011
Price earning ratioPrice earning ratio
BW has a weak P/E ratio.
Market Value RatiosMarket Value Ratios
4-13
Market Value RatiosMarket Value Ratios
• Dividend Payout = DPS/EPS
For Basket Wonders December 31, 2003
• Dividend Payout = DPS/EPS
For Basket Wonders December 31, 2003
This ratio indicates how much of the earnings of the company are paid out in the form of dividends.
Income Statement /Balance Sheet
And other indicators
Market Value Ratios
4-14
BW Industry5.4% 6.5%4.9% 6.3%5.3% 6.3%
BW Industry5.4% 6.5%4.9% 6.3%5.3% 6.3%
Year201320122011
Dividend Payout RatioDividend Payout Ratio
BW has a weak Dividend Payout ratio.
Market Value RatiosMarket Value Ratios
4-15
Market Value RatiosMarket Value Ratios
Dividend Yield = DPS . Market Price per share;
For Basket Wonders December 31, 2003
Dividend Yield = DPS . Market Price per share;
For Basket Wonders December 31, 2003
This ratio indicates dividend return to the shareholders of the company
Income Statement /Balance Sheet
And other indicators
Market Value Ratios
4-16
BW Industry5% 6.8%4.9% 6.13%4.1% 6 %
BW Industry5% 6.8%4.9% 6.13%4.1% 6 %
Year201320122011
Dividend YieldDividend Yield
BW has a weak Dividend yield
Market Value RatiosMarket Value Ratios
4-17
Common-size AnalysisCommon-size Analysis
An analysis of percentage financial statements where all balance sheet items are divided by total assets and all income
statement items are divided by net sales or revenues.
It is also known as vertical analysis
An analysis of percentage financial statements where all balance sheet items are divided by total assets and all income
statement items are divided by net sales or revenues.
It is also known as vertical analysis
4-18
Basket Wonders’ Common Size Balance Sheets
Basket Wonders’ Common Size Balance Sheets
Regular (thousands of $) Common-Size (%)
Assets 2011 2012 2013 2011 2012 2013
Cash 148 100 90 12.10 4.89 4.15
AR 283 410 394 23.14 20.06 18.17
Inv 322 616 696 26.33 30.14 32.09
Other CA 10 14 15 0.82 0.68 0.69
Tot CA 763 1,140 1,195 62.39 55.77 55.09
Net FA 349 631 701 28.54 30.87 32.32
LT Inv 0 50 50 0.00 2.45 2.31
Other LT 111 223 223 9.08 10.91 10.28
Tot Assets 1,223 2,044 2,169 100.0 100.0 100.0
4-19
Basket Wonders’ Common Size Balance Sheets
Basket Wonders’ Common Size Balance Sheets
Regular (thousands of $) Common-Size (%)
Liab+Equity 2011 2012 2013 2011 2012 2013
Note Pay 290 295 290 23.71 14.43 13.37
Acct Pay 81 94 94 6.62 4.60 4.33
Accr Tax 13 16 16 1.06 0.78 0.74
Other Accr 15 100 100 1.23 4.89 4.61
Tot CL 399 505 500 32.62 24.71 23.05
LT Debt 150 453 530 12.26 22.16 24.44
Equity 674 1,086 1,139 55.11 53.13 52.51
Tot L+E 1,223 2,044 2,169 100.0 100.0 100.0
4-20
Basket Wonders’ Common Size Income Statements
Basket Wonders’ Common Size Income Statements
Regular (thousands of $) Common-Size (%)
2011 2012 2013 2011 2012 2013
Net Sales 1,235 2,106 2,211 100.0 100.0 100.0
COGS 849 1,501 1,599 68.7 71.3 72.3
Gross Profit 386 605 612 31.3 28.7 27.7
Adm. 180 383 402 14.6 18.2 18.2
EBIT 206 222 210 16.7 10.5 9.5
Int Exp 20 51 59 1.6 2.4 2.7
EBT 186 171 151 15.1 8.1 6.8
EAT 112 103 91 9.1 4.9 4.1
Cash Div 50 50 50 4.0 2.4 2.3
4-21
Horizontal Analysis
• It shows the trend in accounts over the years
• It is also known as Percentage change or comparative analysis
• Formula:
4-22
Basket Wonders’ Common Size Balance Sheets
Basket Wonders’ Common Size Balance Sheets
Horizontal Analysis
Assets 2012 2013 2013
Cash 100 90
AR 410 394
Inv 616 696
Other CA 14 15
Tot CA 1,140 1,195
Net FA 631 701
LT Inv 50 50
Other LT 223 223
Tot Assets 2,044 2,169
4-23
Basket Wonders’ Common Size Balance Sheets
Basket Wonders’ Common Size Balance Sheets
Horizontal Analysis
Liab+Equity 2002 2003 2013
Note Pay 295 290
Acct Pay 94 94
Accr Tax 16 16
Other Accr 100 100
Tot CL 505 500
LT Debt 453 530
Equity 1,086 1,139
Tot L+E 2,044 2,169
4-24
Basket Wonders’ Common Size Income Statements
Basket Wonders’ Common Size Income Statements
Horizontal Analysis
2002 2003 2013
Net Sales 2,106 2,211
COGS 1,501 1,599
Gross Profit 605 612
Adm. 383 402
EBIT 222 210
Int Exp 51 59
EBT 171 151
EAT 103 91
Cash Div 50 50
4-25
Index AnalysisIndex Analysis
An analysis of percentage financial statements where all balance sheet or income statement figures for a base year equal 100.0 (percent)
and subsequent financial statement items are expressed as percentages of their values in the
base year.
An analysis of percentage financial statements where all balance sheet or income statement figures for a base year equal 100.0 (percent)
and subsequent financial statement items are expressed as percentages of their values in the
base year.
4-26
Basket Wonders’ Indexed Balance Sheets
Basket Wonders’ Indexed Balance Sheets
Regular (thousands of $) Indexed (%)
Assets 2011 2012 2013 2011 2012 2013
Cash 148 100 90 100.0 67.6 60.8
AR 283 410 394 100.0 144.9 139.2
Inv 322 616 696 100.0 191.3 216.1
Other CA 10 14 15 100.0 140.0 150.0
Tot CA 763 1,140 1,195 100.0 149.4 156.6
Net FA 349 631 701 100.0 180.8 200.9
LT Inv 0 50 50 100.0 inf. inf.
Other LT 111 223 223 100.0 200.9 200.9
Tot Assets 1,223 2,044 2,169 100.0 167.1 177.4
4-27
Basket Wonders’ Indexed Balance Sheets
Basket Wonders’ Indexed Balance Sheets
Regular (thousands of $) Indexed (%)
Liab+Equity 2001 2002 2003 2001 2002 2003
Note Pay 290 295 290 100.0 101.7 100.0
Acct Pay 81 94 94 100.0 116.0 116.0
Accr Tax 13 16 16 100.0 123.1 123.1
Other Accr 15 100 100 100.0 666.7 666.7
Tot CL 399 505 500 100.0 126.6 125.3
LT Debt 150 453 530 100.0 302.0 353.3
Equity 674 1,086 1,139 100.0 161.1 169.0
Tot L+E 1,223 2,044 2,169 100.0 167.1 177.4
4-28
Basket Wonders’ Indexed Income Statements
Basket Wonders’ Indexed Income Statements
Regular (thousands of $) Indexed (%)
2011 2012 2013 2011 2012 2013
Net Sales 1,235 2,106 2,211 100.0 170.5 179.0
COGS 849 1,501 1,599 100.0 176.8 188.3
Gross Profit 386 605 612 100.0 156.7 158.5
Adm. 180 383 402 100.0 212.8 223.3
EBIT 206 222 210 100.0 107.8 101.9
Int Exp 20 51 59 100.0 255.0 295.0
EBT 186 171 151 100.0 91.9 81.2
EAT 112 103 91 100.0 92.0 81.3
Cash Div 50 50 50 100.0 100.0 100.0
4-29
Summary
• Market Value Ratios– EPS– DPS– DPO– P/E
• Common Size / Vertical Analysis• Horizontal Analysis• Trend/index analysis