Welcome Miami Northwestern Bulls!

1. Welcome Miami Northwestern Bulls! Florida International University State Farm Financial Literacy Lab

2. BASIC RATIOS AND METRICS • Benchmarking • Market Capitalization • ROA • ROE • ROIC • P/E • P/B • Debt to Equity

3. Benchmarking vs.

4. MARKET CAPITALIZATION “market cap” is used in determining a company's size, as opposed to sales or total asset figures* Categorization of by capitalization • Mega-cap: Over $200 billion • Large-cap: Over $5 billion • Mid-cap: $1 billion–$5 billion • Small-cap: $250 million–$1 billion • Micro-cap: Below $250 million • Nano-cap: Below $50 million *http://www.investopedia.com/terms/m/marketcapitalization.asp#axzz1m0BMp5qh

5. MARKET CAPITALIZATION 101 AT&T(T) Verizon Wireless(VZ) VS • Market Price Per Share = $29.78 • Market Cap = 176.5B $29.78 × 176.5 = $5,257.9B • Market Price Per Share = $37.65 • Market Cap = 106.6B $37.65 × 106.6 = $4,004.9B

6. RETURN ON ASSETS (ROA) ROA = It tells me It is a percentage that tells you how much profit a company is squeezing from using it 𝑃𝑙𝑎𝑛𝑡𝑠, 𝐸𝑞𝑢𝑖𝑝𝑚𝑒𝑛𝑡, 𝐹𝑎𝑐𝑡𝑜𝑟𝑖𝑒𝑠, and other assets.

7. RETURN ON ASSETS (ROA) 101 Big Tuna Restaurant Stackhouse Pancakes Restaurant VS • Profit = $1M • 𝑃𝑙𝑎𝑛𝑡𝑠, 𝐸𝑞𝑢𝑖𝑝𝑚𝑒𝑛𝑡, 𝐹𝑎𝑐𝑡𝑜𝑟𝑖𝑒𝑠 & other assets = $10M $1M ÷ $10M = 10% • Profit = $1M • 𝑃𝑙𝑎𝑛𝑡𝑠, 𝐸𝑞𝑢𝑖𝑝𝑚𝑒𝑛𝑡, 𝐹𝑎𝑐𝑡𝑜𝑟𝑖𝑒𝑠 & other assets = $5M $1M ÷ $5M = 20%

8. RETURN ON EQUITY (ROE) ROE = It tells me Is a percentage of how much profit a company generates with the money shareholders have invested.

9. RETURN ON EQUITY (ROE) 101 Big Tuna Restaurant Stackhouse Pancakes Restaurant VS • Profit = $1M • Investor’s money/equity = $10M $1M ÷ $10M = 10% • Profit = $1M • Investor’s money/equity = $5M $1M ÷ $5M = 20%

10. RETURN ON INVESTED CAPITAL (ROIC) ROIC = It tells me Is a percentage of how much profit a company generates with the money used to invest in new projects such as buildings, projects, machinery, other companies etc.

11. RETURN ON INVESTED CAPITAL (ROIC) 101 Big Tuna Restaurant Stackhouse Pancakes Restaurant VS • Purchased a new building to branch out and create “Stackhouse Pancakes 2” = $20M • Profit= $10M $10M ÷ $20M = 50% • Purchased new machinery to add deserts to the menu cost $10M • Profit = $1M $1M ÷ $10M = 10%

12. PRICE TO EARNINGS (P/E) P/E= It tells me The P/E is sometimes referred to as the "multiple", because it shows how much investors are willing to pay per dollar of earnings.* *Read more: http://www.investopedia.com/terms/p/price-earningsratio.asp#ixzz1m0p7OWZF

13. PRICE TO EARNINGS (P/E) 101 Big Tuna Restaurant Stackhouse Pancakes Restaurant VS • Trading at a market price of $20 • Earning per Share = $5 $20 ÷ $5= 4 • Trading at a market price of $15 • Earning per Share = $5 $15 ÷ $5= 3

14. PRICE TO BOOK (P/B) P/B= It tells me This ratio also gives some idea of whether you're paying too much for what would be left if the company went bankrupt immediately.* *Read more: http://www.investopedia.com/terms/p/price-to-bookratio.asp#ixzz1mHHnm6DI

15. PRICE TO BOOK (P/B) 101 Big Tuna Restaurant Stackhouse Pancakes Restaurant VS • All Assets = $20M • Intangibles(Patents and/or Book value) = $5M • Liabilities(Debt) = $3 $20 – ($5 +$3)= 12 • All Assets = $10M • Intangibles(Patents and/or Book value) = $5M • Liabilities(Debt) = $3 $10 – ($5 +$3)= 2

16. DEBT TO EQUITY Debt/Equity = It tells me Is an indicator to see if a company has been aggressive in financing its growth with debtRead more: http://www.investopedia.com/terms/d/debtequityratio.asp#ixzz1mHgJKvW9

17. DEBT TO EQUITY101 Big Tuna Restaurant Stackhouse Pancakes Restaurant VS • Debt = $20 • Stockholder’s Equity = $5 $20 ÷ $5= 4 • Debt = 15M • Stockholder’s Equity= $5 $15 ÷ $5= 3