Ratio Analysis (Part I) - Supplement Materials for...

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2011/4/6 Yu-cheng Chen, NCHU Supplement Materials for Financial Statement Analysis Course Statement Analysis Course FOUNDATIONS OF RATIO AND FINANCIAL ANALYSIS Part I FOUNDATIONS OF FOUNDATIONS OF RATIO AND FINANCIAL ANALYSIS FINANCIAL ANALYSIS Part I Part I 2011/4/6 Yu-cheng Chen, NCHU INTRODUCTION INTRODUCTION • Purpose and Use of Ratio Analysis Purpose and Use of Ratio Analysis • Ratio Analysis : Cautionary Notes Ratio Analysis : Cautionary Notes Economic Assumptions Benchmarks Timing and Window Dressing Negative Numbers Accounting Methods 2011/4/6 Yu-cheng Chen, NCHU Ratio Analysis A primary advantage of ratios is that A primary advantage of ratios is that they can be used to compare the risk and return relationships of firms of and return relationships of firms of different sizes. different sizes. 2011/4/6 Yu-cheng Chen, NCHU Cautionary Notes • Negative Numbers • Example 1: Return on Equity=Income/Equity Income Equity ROE Company A $50,000 $500,000 10% Company B -50,000 -500,000 10%
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2011/4/6 Yu-cheng Chen, NCHU Cautionary Notes • Negative Numbers • Example 2: Dividend Payout Ratio=Dividend/Income Dividend Income Payout Ratio Company A $20,000 $100,000 20% Company B 20,000 80,000 25% Company C 20,000 -100,000 -20% 2011/4/6 Yu-cheng Chen, NCHU COMMON-SIZE STATEMENTS COMMON COMMON -SIZE SIZE STATEMENTS 2011/4/6 Yu-cheng Chen, NCHU Comparative Balance Sheet and Income Statements(1999 data) Comparative Balance Sheet and Income Statements(1999 data) A. Comparative Balance Sheets As Reported Common Size(%) ─────────────────────────────────────────────────────────────────── Pfizer Takeda Roche (Mil ions of $) (Mil ions of Yen) (Mil ions of CHF) Pfizer Takeda Roche ────────────────────────────────────────────────────────────────────── Cash and cash equivalents $ 739 313,798 $16,544 4 24 23 Short-term investments and loans 3,967 227,032 2,322 19 17 3 Accounts receivable 3,864 224,878 6,178 9 Inventories 1,654 107,767 6,546 8 9 Prepaid expenses and taxes 958 39,788 3,041 5 3 4 Current assets $11,191 913,263 $34,631 54% 69% 49% Long-term investments 1,721 123,822 2,271 9 3 Net property land and equipment 5,343 224,229 14,240 26 17 20 Net goodwil and other intangible assets 763 15,672 0 22 Other assets 1,556 65,685 3,617 Total assets 20,574 1,326,999 $70,431 100% 100% 100% 2011/4/6 Yu-cheng Chen, NCHU Comparative Balance Sheet and Income Statements(1999 data) (continued) A. Comparative Balance Sheets ────────────────────────────────────────────────────────────────────────────── P f i z e r T a k e d a R o c h e (Mil ions of $) (Mil ions of Yen) (Mil ions of CHF) Pfizer Takeda Roche ─────────────────────────────────────────────────────────────────── Short-term debt 5,001 11,480 5,072 1
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Ratio Analysis (Part I) - Supplement Materials for...

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