FSA_01 - 3-1 CHAPTER 3 Analysis of Financial Statements...

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Unformatted text preview: 3-1 CHAPTER 3 Analysis of Financial Statements Ratio Analysis Du Pont system Effects of improving ratios Limitations of ratio analysis Qualitative factors 3-2 Balance Sheet: Assets Cash A/R Inventories Total CA Gross FA Less: Dep. Net FA Total Assets 2002 7,282 632,160 1,287,360 1,926,802 1,202,950 263,160 939,790 2,866,592 2003E 85,632 878,000 1,716,480 2,680,112 1,197,160 380,120 817,040 3,497,152 3-3 Balance sheet: Liabilities and Equity Accts payable Notes payable Accruals Total CL Long-term debt Common stock Retained earnings Total Equity Total L & E 2002 524,160 636,808 489,600 1,650,568 723,432 460,000 32,592 492,592 2,866,592 2003E 436,800 300,000 408,000 1,144,800 400,000 1,721,176 231,176 1,952,352 3,497,152 3-4 Income statement Sales COGS Other expenses EBITDA Depr. & Amort. EBIT Interest Exp. EBT Taxes Net income 2002 6,034,000 5,528,000 519,988 (13,988) 116,960 (130,948) 136,012 (266,960) (106,784) (160,176) 2003E 7,035,600 5,875,992 550,000 609,608 116,960 492,648 70,008 422,640 169,056 253,584 3-5 Other data No. of shares EPS DPS Stock price Lease pmts 2003E 250,000 $1.014 $0.220 $12.17 $40,000 2002 100,000-$1.602 $0.110 $2.25 $40,000 3-6 Why are ratios useful? Ratios standardize numbers and facilitate comparisons. Ratios are used to highlight weaknesses and strengths. 3-7 What are the five major categories of ratios, and what questions do 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 PM, ROE, and ROA? Market value: Do investors like what they see as reflected in P/E and M/B ratios? 3-8 Calculate DLeons forecasted current ratio for 2003. Current ratio = Current assets / Current liabilities = $2,680 / $1,145 = 2.34x 3-9 Comments on current ratio 2003 2002 2001 Ind. Current ratio 2.34x 1.20x 2.30x 2.70x Expected to improve but still below the industry average....
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This note was uploaded on 04/25/2011 for the course FIN 421 taught by Professor Anupchowdhury during the Spring '11 term at BRAC University.

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FSA_01 - 3-1 CHAPTER 3 Analysis of Financial Statements...

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