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Slide+3 - RATI O ANALYSI S by Diep Duong Ratio Analysis...

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RATIO ANALYSIS by Diep Duong
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Ratio Analysis Ratios allow for better comparison through time or between companies For each ratio - What does the ratio measure ? - Why is the ratio important ? Ratios are used both internally and externally 3-2
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Categories of Financial Ratios Short-term solvency or liquidity ratios Long-term solvency or financial leverage ratios Asset management or turnover ratios Profitability ratios Market value ratios 3-3
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Input - Sample Balance Sheet 2009 2008 2009 2008 Cash 696 58 A/P 307 303 A/R 956 992 N/P 26 119 Inventory 301 361 Other CL 1,662 1,353 Other CA 303 264 Total CL 1,995 1,775 Total CA 2,256 1,675 LT Debt 843 1,091 Net FA 3,138 3,358 C/S 2,556 2,167 Total Assets 5,394 5,033 Total Liab. & Equity 5,394 5,033 Numbers in millions of dollars 3-4
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Input -Sample Income Statement Revenues 5,000 Cost of Goods Sold (2,006) Expenses (1,740) Depreciation (116) EBIT 1,138 Interest Expense (7) Taxable Income 1,131 Taxes (442) Net Income 689 EPS 3.61 Dividends per share 1.08 Numbers in millions of dollars, except EPS & DPS 3-5
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Input - Sample Statement of Cash Flows Cash, beginning of year 58 Financing Activity Operating Activity Decrease in Notes Payable -93 Net Income 689 Decrease in LT Debt -248 Plus: Depreciation 116 Decrease in C/S (minus RE) -94 Decrease in A/R 36 Dividends Paid -206 Decrease in Inventory 60 Net Cash from Financing -641 Increase in A/P 4 Increase in Other CL 309 Net Increase in Cash 638
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