Chap 2b notes-1

Chap 2b notes-1 - Chapter 2 (contd) Financial Statement...

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Financial Statement Analysis Chapter 2 (cont’d)
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1 Spring 2010 Focusing Question Blockbuster gave a forecast on both EBITDA and Net Income. Which data is more important to value the company, and why?
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2 Spring 2010 Profit vs. Cash Flow “You Can’t Deposit Net Income, Only Cash” A firm may be profitable as measured by net income but is short of cash.
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3 Spring 2010 Example: Income Statement Operating Expenses
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4 Spring 2010 Profits vs. Cash Flow ± EBITDA ² Earnings before interest, taxes, depreciation and amortization ² Reflects the cash a firm has earned from its operation net of leverage effect ² How much cash is generated from utilizing the assets ± NI cash earned ± EBITDA of Nokia in 2007 = 8,029 + 1,206 = 9,235 mil
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5 Spring 2010 Outline Financial Statements Balance Sheet Income Statement Profits vs. Cash Flow Statement of Stockholders’ Equity Income Statement Analysis Balance Sheet Analysis Statement of Cash Flows
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6 Spring 2010 Learning Objectives 1. Compute various financial ratios from Income Statement of a firm in order to analyze its financial status. 2. Perform Du Pont analysis 3. Distinguish between cash flow and accrual-based income 4. Define and interpret a Statement of Cash Flows. 5. Define Statement of Stockholders’ Equity and other financial statement information.
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7 Spring 2010 Income Statement Analysis ± Operating Margin ± Net Profit Margin Sales Total Income Operating = Profitability Ratios Sales Total Income Net = Operating Margin affected by efficiency and pricing strategy Net Profit Margin affected by leverage and efficiency
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8 Spring 2010 Income Statement Analysis ± Asset Turnover ± Fixed Asset Turnover Assets Total Sales = Asset Efficiency Assets Fixed Sales = a firm’s efficiency in generating revenues from its assets
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9 Spring 2010 Income Statement Analysis ± Account Receivables Days or Average Collection Period or Days sales outstanding ± Accounts Payable Days Inventory Turnover Sales Daily Average s Receivable
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Chap 2b notes-1 - Chapter 2 (contd) Financial Statement...

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