09+Finance+I+Ratios+I

09+Finance+I+Ratios+I - Financial Statement Analysis Basic...

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Financial Statement Analysis Basic Ratio Analysis Professor Roberts
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Agenda Financial Statement Analysis Common size Ratios Commonly used financial ratios How to use/interpret ratios Issues with ratios Cheesecake Factory
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Financial Statement Analysis Employed by both internal (financial managers) and external (investors) stakeholders to make rational, objective decisions. Financial ratios are a key TOOL in financial statement analysis, not the ANSWER .
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Our Example Company Cheesecake Factory, Inc. CAKE
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Common-Size Balance Sheet All balance sheet items presented as a percentage of “Total Assets” Allows easy comparison of balance sheets of different sizes Easy Analysis of changes over time Let’s look at CAKE
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Common-Size Income Statement Each item on Income Statement stated as percentage of “Total Revenue” Allows easy comparison of firms of different sizes Easy analysis of changes in cost structure over time Let’s look at CAKE
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CAGR (Compound Annual Growth Rate) Annualized growth rate which relates the beginning value to the ending value, after “n” periods. (TVM) Beginning Balance * (1+ CAGR) n = Ending Balance
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Financial Ratio Analysis Tool to compare companies of different size Which company is more profitable? Net Income FY2009 MiniMart $ 219 million MongoMart $ 15,550 million Net Profit Margin MiniMart 10.54% MongoMart 6.25%
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Profitability Ratios Leverage and Solvency Ratios Liquidity Ratios Working Capital Activity (Asset Management) Ratios Market Value Measures Is the company  controlling costs and  expenses? Is the company  managing its assets  efficiently? Does the company have the  ability to meet it’s daily  obligations? Does the company have too  much financial risk, or not  enough? How does the company’s 
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This note was uploaded on 01/09/2011 for the course SMG 121 taught by Professor Arnold during the Spring '08 term at BU.

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09+Finance+I+Ratios+I - Financial Statement Analysis Basic...

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