Session 1 - er of suppliers e per supplier t of Substitutes...

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STEP 3 Estimate Value Cost of Capital Valuation Models Residual Income Model Free Cash Flows Model Valuation Ratios STEP 2 Forecast the Future Structured Forecasting Income Statement Forecasts Balance Sheet Forecasts Cash Flow Forecasts STEP 1 Understand the past Collect Information Understand the Business Financial Ratio Analysis Cash Flow Analysis ber of suppliers me per supplier at of Substitutes ive price and ormance r willingness to ch at of Entrants economies mover advantage bution access ionships barriers ry economies ss capacity barriers try growth entration rentiation r Power hing costs rtance of duct for costs quality ber of buyers me per buyer Spring 2011 NBAE 5060 Session 1 – Introduction & Macroeconomic, Industry, and Strategy Analysis 1. Course Overview 2. Ratio Detective Exercise 3. Information Collection 4. Economic, Industry, and Strategy Analysis 5. Application to UA Session 1 Page 1 of 13
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1. Course Description and Introduction This course introduces the tools for effective financial analysis. The objective of financial analysis is to unearth the underlying economics of the firm. Financial statements are probably the most complete source of information about the firm, and the premiere source of externally verified firm information. The analysis of financial statements is of interest to just about anyone involved in a business. We will analyze financial statements in the context of equity valuation for the purpose of making well-informed investment decisions. ** We will apply the tools of the course twice, first together as a class to Under Armour, and then in your group projects due January 17. Session 1 Page 2 of 13
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~~ Ratio Detective Exercise ~~ Listed below are selected financial ratios for nine publicly traded companies for fiscal 2007.  The figures presented are common-sized and, hence, are a percentage  of sales.  Using your knowledge about the operating and financial structure of these companies, identify the nine companies.  The companies are as follows:  Best  Buy Co., Inc. (BBY); Wells Fargo & Co. (WFC); Brinker International, Inc. (EAT) – operator of restaurants such as Chili’s and Macaroni Grill; Nike, Inc. (NKE);  Bidz.com, Inc. (BIDZ) – an online jewelry retailer; Plum Creek Timber Co., Inc. (PCL) – a producer of lumber products; Google, Inc. (GOOG); Bristol-Myers  Squibb Co. (BMY); and Molson Coors Brewing Co. (TAP). 1 2 3 4 5 6 7 8 9 COMP ANY: Cash & Mkt Securiti es 85.7% 11.5% 71.5% 3.8% 1.9% 17.4% 14.3% 2.6% 6.1% Account s Receiva ble 13.9% 21.9% 35.2% 1.4% 1.1% 15.3% 2.7% 2.8% 14.1% Inventori es (Total): 0.0% 11.2% 0.0% 11.8% 0.7% 13.0% 5.2% 30.3% 6.5% R M 0.0% 2.2% 0.0% 0.0% 0.0% 0.0% 2.0% 0.0% 2.7% W IP 0.0% 4.3% 0.0% 0.0% 0.0% 0.0% 0.3% 0.0% 0.7% F G 0.0% 4.7% 0.0% 0.0% 0.0% 0.0% 2.9% 0.0% 3.1% Property , Plant & Equip: At Cost 33.3% 52.8% 37.3% 14.0% 52.9% 22.2% 259.6% 1.1% 87.4% A ccum.
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