FM12 Ch 04 Tool Kit - A 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15...

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1/26/2007 Chapter 4. Tool Kit for Analysis of Financial Statements RATIO ANALYSIS (Section 4.1) Input Data: 2007 2006 Year-end common stock price $23.00 $26.00 Year-end shares outstanding (in millions) 50 50 Tax rate 40% 40% After-tax cost of capital 11.0% 10.8% Lease payments $28 $28 Required sinking fund payments $20 $20 Balance Sheets (in millions of dollars) Assets 2007 2006 Cash and equivalents $10 $15 Short-term investments $0 $65 Accounts receivable $375 $315 Inventories $615 $415 Total current assets $1,000 $810 Net plant and equipment $1,000 $870 Total assets $2,000 $1,680 Liabilities and equity Accounts payable $60 $30 Notes payable $110 $60 Accruals $140 $130 Total current liabilities $310 $220 Long-term bonds $754 $580 Total liabilities $1,064 $800 Preferred stock (400,000 shares) $40 $40 Common stock (50,000,000 shares) $130 $130 Retained earnings $766 $710 Total common equity $896 $840 Total liabilities and equity $2,000 $1,680 Income Statements (in millions of dollars) 2007 2006 Net sales $3,000.0 $2,850.0 Operating costs $2,616.2 $2,497.0 $383.8 $353.0 Depreciation $100.0 $90.0 Amortization $0.0 $0.0 Depreciation and amortization $100.0 $90.0 Earnings before interest and taxes (EBIT) $283.8 $263.0 Less interest $88.0 $60.0 Earnings before taxes (EBT) $195.8 $203.0 Taxes (40%) $78.3 $81.2 Net Income before preferred dividends $117.5 $121.8 Preferred dividends $4.0 $4.0 Net Income available to common stockholders $113.5 $117.8 Common dividends $57.5 $53.0 Addition to retained earnings $56.0 $64.8 Financial statements are analyzed by calculating certain key ratios and then comparing them with the ratios of other firms and by examining the trends in ratios over time. We can also combine ratios to make the analysis more revealing, one below are exceptionally useful for this type of analysis. A B C D E F G 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63
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Calculated Data: Operating Performance and Cash Flows 2007 2006 Net operating working capital (NOWC) $800.0 $585.0 Total operating capital $1,800.0 $1,455.0 Net Operating Profit After Taxes (NOPAT) $170.3 $157.8 Net Cash Flow (Net income + Depreciation) $213.5 $207.8 Operating Cash Flow (OCF) $270.3 $247.8 Free Cash Flow (FCF) ($174.7) N/A Calculated Data: Per-share Information 2007 2006 Earnings per share (EPS) $2.27 $2.36 Dividends per share (DPS) $1.15 $1.06 Book value per share (BVPS)
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This note was uploaded on 06/15/2011 for the course FI515 FI515 taught by Professor Fi515 during the Spring '10 term at Keller Graduate School of Management.

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FM12 Ch 04 Tool Kit - A 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15...

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