MGMT 340 Chapter 8 ppt0

MGMT 340 Chapter 8 ppt0 - CHAPTER8...

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1 CHAPTER 8 Analysis of Financial Statements
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2 Topics in Chapter Ratio analysis Du Pont system Effects of improving ratios Limitations of ratio analysis Qualitative factors
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3 Income Statement 2009 2010E Sales $5,834,400  $7,035,600 COGS 4,980,000  5,800,000 Other expenses 720,000  612,960 Deprec. 116,960  120,000    Tot. op. costs 5,816,960  6,532,960    EBIT 17,440  502,640 Int. expense 176,000  80,000    EBT (158,560) 422,640 Taxes (40%) (63,424) 169,056 Net income ($  95,136) $ 253,584
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4 Balance Sheets: Assets 2009 2010E Cash $      7,282  $     14,000 S-T invest. 20,000  71,632 AR 632,160  878,000 Inventories 1,287,360  1,716,480    Total CA 1,946,802  2,680,112    Net FA 939,790  836,840 Total assets $2,886,592   $3,516,952
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5 Equity 2009 2010E Accts. payable $    324,000  $    359,800 Notes payable 720,000  300,000 Accruals 284,960  380,000    Total CL 1,328,960  1,039,800 Long-term debt 1,000,000  500,000 Common stock 460,000  1,680,936 Ret. earnings 97,632  296,216    Total equity 557,632  1,977,152 $2,886,592   $3,516,952
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6 Other Data 2009 2010E Stock price $6.00 $12.17 # of shares 100,000  250,000 EPS -$0.95 $1.01 DPS $0.11 $0.22 Book val. per sh. $5.58 $7.91 Lease payments $40,000 $40,000 Tax rate 0.4 0.4
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7 Why are ratios useful? Standardize numbers; facilitate  comparisons Used to highlight weaknesses and  strengths
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8 Five Major Categories of  Ratios Liquidity:  Can we make required  payments as they fall due? Asset management:  Do we have the  right amount of assets for the level of  sales? (More…)
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9 Ratio Categories (Continued) Debt management:  Do we have the  right mix of debt and equity? Profitability:  Do sales prices exceed  unit costs, and are sales high enough  as reflected in PM, ROE, and ROA? Market value:  Do investors like what  they see as reflected in P/E and M/B  ratios?
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Forecasted Current and Quick  Ratios for 2010. CR 10  =           =               = 2.58. QR 10  = =                             = 0.93. CA
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MGMT 340 Chapter 8 ppt0 - CHAPTER8...

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