Chapter 4 - Chapter4 AnalysisofFinancial Statements...

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Analysis of Financial  Statements Chapter 4 Ratio Analysis DuPont System Effects of Improving Ratios Limitations of Ratio Analysis Qualitative Factors 4-1
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      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
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Balance Sheet: Liabilities and Equity Accts payable Notes payable Accruals Total CL Long-term debt Common stock Retained earnings Total Equity 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
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Income Statement Sales COGS Other expenses EBITDA 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
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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
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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
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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 PM, ROE, and ROA? Market value: Do investors like what they see  as reflected in P/E and M/B ratios? 4-7
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Quick Ratio for 2009 4-8 × = = = 2.34 145 , 1 $ 680 , 2 $ s liabilitie Current  assets Current    ratio Current  × = - = - = 4 8 . 0 145
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Chapter 4 - Chapter4 AnalysisofFinancial Statements...

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