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Working with Financial Statements

Working with Financial Statements

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Working with Financial Statements

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  1. Working with Financial Statements • Standardized Financial Statements • Balance sheet: Table 3.2 • Liabilities: % of ??? • Income statement: Table 3.4 • Expenses: % of ??? Working with Financial Statements

  2. Working with Financial Statements • Ratio analysis: what they tell / who cares.. • Liquidity • Solvency • Asset Management • Profitability • Market Value • Other • Intracompany/Intercompany/Industry Working with Financial Statements

  3. Working with Financial Statements • Liquidity • Current ratio • Quick ratio • Solvency • Debt • Times Interest Earned: EBIT/Int Exp Working with Financial Statements

  4. Working with Financial Statements • Asset Management • Inventory Turnover = COGS / Inv • A/R Turnover = Sales / A/R • Profitability • Profit Margin • ROA • ROE Working with Financial Statements

  5. Working with Financial Statements • Market Value • EPS • Trend… • P/E • Market capitalization • PEG • Beta • Other • Dividend payout: dividends/net income • Retention ratio: • Growth rate: EPS goes from $1.00 to $3.00 Working with Financial Statements

  6. Working with Financial Statements • DuPont Identity: what we need to know • ROE increases if… • Profit margin increases/decreases • Asset turnover increases/decreases • Leverage increases/decreases Working with Financial Statements

  7. Working with Financial Statements • Internal/Sustainable Growth Rate: what we need to know • Growth rate increases if… • Profit margin increases/decreases • Asset turnover increases/decreases • Leverage increases/decreases • Dividends increase/decrease Working with Financial Statements

  8. Issues with Financial Statement Analysis • Peer companies • Accounting methods Working with Financial Statements