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Chapter_04 - CHAPTER4 AnalysisofFinancial RatioAnalysis n...

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4-1 Click to edit Master subtitle style CHAPTER 4 Analysis of Financial  n Ratio Analysis n Du Pont system n Effects of improving ratios n Limitations of ratio analysis n Qualitative factors
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4-2 Balance Sheet: Assets    Cash A/R Inventories Total CA Gross FA Less: Dep. Net FA 2005 7,282 632,160 1,287,360 1,926,802 1,202,950 263,160 939,790 2,866,592 2006E 85,632 878,000 1,716,480 2,680,112 1,197,160 380,120 817,040 3,497,152
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4-3 Balance sheet:  Liabilities and Equity Accts payable Notes payable Accruals Total CL Long-term debt Common stock Retained earnings       2005 524,160   636,808     489,600 1,650,568 723,432 460,000      32,592     492,592 2,866,592       2006E 436,800   300,000     408,000 1,144,800 400,000 1,721,176     231,176 1,952,352 3,497,152
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4-4 Income statement Sales COGS Other expenses EBITDA Depr. & Amort. EBIT Interest Exp. EBT       2005 6,034,000 5,528,000      519,988     (13,988)      116,960   (130,948)      136,012   (266,960)   (106,784)   (160,176)     2006E 7,035,600   5,875,992     550,000 609,608    116,960 492,648      70,008 422,640     169,056    253,584
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4-5 Other data No. of shares EPS DPS Stock price Lease pmts 2006E 250,000 $1.014 $0.220 $12.17 $40,000 2005 100,000 -$1.602 $0.110 $2.25 $40,000
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4-6 Why are ratios useful? n Ratios standardize numbers and  facilitate comparisons. n Ratios are used to highlight  weaknesses and strengths. n Ratio comparisons should be made  through time and with competitors n Trend analysis
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4-7 What are the five major categories of  ratios, and what questions do they  n Liquidity: Can we make required payments? n Asset management: right amount of assets  vs. sales? n Debt management: Right mix of debt and  equity? n Profitability: Do sales prices exceed unit  costs, and are sales high enough as  reflected in PM, ROE, and ROA?
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