Standardized Financial Statements

1
Working with Financial Statements

• Standardized Financial Statements
• Balance sheet Table 3.2
• Liabilities of ???
• Income statement Table 3.4
• Expenses of ???

2
Working with Financial Statements

• Ratio analysis what they tell / who cares..
• Liquidity
• Solvency
• Asset Management
• Profitability
• Market Value
• Other
• Intracompany/Intercompany/Industry

3
Working with Financial Statements

• Liquidity
• Current ratio
• Quick ratio
• Solvency
• Debt
• Times Interest Earned EBIT/Int Exp

4
Working with Financial Statements

• Asset Management
• Inventory Turnover COGS / Inv
• A/R Turnover Sales / A/R
• Profitability
• Profit Margin
• ROA
• ROE

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

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

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

8
Issues with Financial Statement Analysis

• Peer companies
• Accounting methods