FFM CH4 - Analysis of Financial Statements Chapter 4 Ratio...

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Unformatted text preview: Analysis of Financial Statements Chapter 4 Ratio Analysis DuPont System Effects of Improving Ratios Limitations of Ratio Analysis Qualitative Factors 4-1 2008 7,282 632,160 1,287,360 1,926,802 1,202,950 263,160 939,790 2,866,592 2009E 85,632 878,000 1,716,480 2,680,112 1,197,160 380,120 817,040 3,497,152 Balance Sheet: Assets Cash A/R Inventories Total CA Gross FA Less: Deprec. Net FA Total Assets 4-2 Balance Sheet: Liabilities and Equity Accts payable Notes payable Accruals Total CL Long-term debt Common stock Retained earnings Total Equity Total L & E 4-3 2008 524,160 636,808 489,600 1,650,568 723,432 460,000 32,592 492,592 2,866,592 2009E 436,800 300,000 408,000 1,144,800 400,000 1,721,176 231,176 1,952,352 3,497,152 Income Statement Sales COGS Other expenses EBITDA Deprec. & amort. EBIT Interest exp. EBT Taxes Net income 2008 6,034,000 5,528,000 519,988 (13,988) 116,960 (130,948) 136,012 (266,960) (106,784) (160,176) 2009E 7,035,600 5,875,992 550,000 609,608 116,960 492,648 70,008 422,640 169,056 253,584 4-4 Other Data No. of shares EPS DPS Stock price Lease pmts 2009E 250,000 $1.014 $0.220 $12.17 $40,000 2008 100,000-$1.602 $0.110 $2.25 $40,000 4-5 Why are ratios useful? Ratios standardize numbers and facilitate comparisons. Ratios are used to highlight weaknesses and strengths. Ratio comparisons should be made through time and with competitors. Trend analysis. Peer (or industry) analysis. 4-6 Five Major Categories of Ratios and the Questions They Answer Liquidity: Can we make required payments? Asset management: right amount of assets vs. sales? Debt management: Right mix of debt and equity? Profitability: Do sales prices exceed unit costs, and are sales high enough as reflected in the profit margin, ROE, and ROA? Market value: Do investors like what they see as reflected in P/E and market/book ratios? 4-7 D’Leon’s Forecasted Current Ratio and Quick Ratio for 2009 4-8 × = = = 2.34 145 , 1 $ 680 , 2 $ s liabilitie Current assets Current ratio Current × =- =- = 4 8 . 145 , 1 $ ) 716 , 1 $ 680 , 2 ($ s liabilitie Current ) s Inventorie assets (Current ratio Quick Comments on Liquidity Ratios 2009E 2008 2007 Ind....
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FFM CH4 - Analysis of Financial Statements Chapter 4 Ratio...

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