Chap 3

Download as docx, pdf, or txt
Download as docx, pdf, or txt
You are on page 1of 8

CHAPTER 3: FINANCIAL STATEMENTS ANALYSIS

& FINANCIAL MODELS

Financial Statements Analysis


A standardized statement make it easier to compare information
with those of other companies.

Common-size Balance Sheet

We construct common-size balance sheets by expressing each


item as a percentage of total assets.

Common-size Income
Statements
A useful way of standardizing the income statement is to express
each item as a percentage of total sales.

Ratio analysis
Computing Liquidity Ratios

CA Cash+ Account Receivable + Inventories


 Current Ratio = CL = CL

o If Current Ratio > 1 => CA > CL => NWC > 0


o If Current Ratio < 1 => CA < CL => NWC < 0
CA−Inventory
 Quick Ratio = CL
Cash
 Cash Ratio = CL

Computing Leverage Ratios (Long-term Solvency


Measures)
TA−TE
 Total debt ratio = TA
(1 đồng được tài trợ bởi [TBR] và phần

còn lại là Equity)


TD
 Debt/Equity = TE

TA D
 Equity Multiplier = TE = 1 + E

Computing Coverage Ratios

EBIT
 Times Interest Earned = Interest

EBIT + Depreciation+ Amortization


 Cash Coverage = Interest

Both ratios show the firm’s ability to pay back interest but
TIE is viewed as the accounting perspective while CC is
viewed as a finance perspective.

Interest bearing debt / EBITDA = LTDebt + Notes


Payable

Computing Inventory Ratios (how fast a firm can sell products)

COGS
 Inventory Turnover = ( Average ) Inventory

365
 Days’ Sales in Inventory = Inventory Turnover

Computing Receivable Ratios (how fast a firm collect on sales)

Sales
 Receivables Turnover = Accounts Receivable

365
 Days’ Sales in Receivables = Receivables Turnover

Computing Total Asset Turnover


Sales
 Total Asset Turnover = TA (1 đồng tài sản tạo ra n doanh thu)

Assets
 Capacity Intension Ratio = Sales ≠ TAT (càng lớn thì số tài sản
mua về không tạo ra nhiều lợi nhuận)
COGS
 Payable Turnover = ( Average ) Accounts Payable
365
 Accounts Payables Period = Payable Turnover

Computing Profitability Measures

Net Income
 Profit Margin (PM) = Sales
Net Income
 Return on Assets (ROA) = ( Average ) TA (profit per dollar of assets)
Net Income Sales
= TA x Sales

= PM x TAT
Net Income
 Return on Equity (ROE) = ( Average ) TE (how stockholders fared in

the year)
Net Income Sales TA
= TA
x Sales
x TA
Net Income Sales TA
= Sales
x TA
x TE
= PM x TAT x Equity Multiplier
D
= ROA x (1 + E ¿

EBITDA
 EBITDA Margin = Sales

Computing Market Value Measures

Net Income−Preferred Dividends


 Earnings per Share (EPS)= Total Common Shares Outstanding
Market Price per Share
 Price Earnings Ratio (PER) = EPS
Market Value per Share
 Market-to-book ratio = Book Value per Share

 Market Capitalization (giá trị thị trường của vốn chủ sở hữu)
= Price per Share x Shares Outstanding
 Enterprise Value (EV) = Market capitalization + Market value
of interest-bearing debt – Cash
 EV Multiple = EV / EBITDA

Financial Model
Rosengarten has projected a 25% increase in sales for the coming
year, so we are anticipating sales of $1,000 x 1.25 = $1,250. To
generate a pro forma income statement, we assume that total
costs will continue to run at $800/1,000 = 80% of sales. With this
assumption, Rosengarten’s pro forma income statement is

created.
On our balance sheet, we assume that some items vary directly
with sales and others do not. For those items that vary with sales,
we express each as a percentage of sales for the year just

completed.
Rather than create pro forma statements, if we were so inclined,
we could calculate EFN directly as follows:

In this calculation,
Assets notice that
Sponthere
Liab are three parts. The first part
EFN = Sales x  Sales - Sales x  Sales – (PM x Projected
is the projected increase in assets, which is calculated using the
Sales) x (1-d)
capital intensity ratio. The second is the spontaneous increase in
liabilities. The third part is the product of profit margin and
projected sales, which is projected net income, multiplied by the
retention ratio. Thus, the third part is the projected addition to
retained earnings.

EFN and Growth


 At low growth levels, internal financing (retained earnings)
may exceed the required investment in assets.
 As the growth rate increases, the internal financing will not
be enough, and the firm will have to go to the capital
markets for financing.
 Examining the relationship between growth and external
financing required is a useful tool in financial planning

Internal Growth Rate: how much the firm can grow assets
using retained earnings as the only source of financing.

ROA x b
Internal Growth Rate: 1−ROA x b with b = 1 – d

Sustainable Growth Rate: how much the firm can grow by


using internally generated funds and issuing debt to maintain a
constant debt ratio.
RO E x b
Sustainable Growth Rate = 1−RO E x b with b = 1 – d

You might also like