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4BUSI408 - Financial Statements & Analysis2

4BUSI408 - Financial Statements & Analysis2 - BUSI...

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Chip Snively [email protected] Class 4 BUSI 408 Corporate Finance Fall 2011
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2 More on Financial Statement Analysis For Class 6 (Jan 26) RWJ 4 – Time Value of Money We’ll spend 2-3 classes on TVM Next Class
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3 Market Update Financial Statement Analysis Common-Sized Statements Ratio Analysis HW/Next Class Agenda
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4 Questions for Today How do we standardize financial statements for comparison purposes? How do we compute and interpret important financial ratios?
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5 Financial Statements Analysis Common-Size Statements B/S: Compute all accounts as a % of Total Assets I/S: Compute all line items as a % of Sales Standardized statements make it easier to compare financial information, particularly as the company grows Look at over time (time series), not a point in time They are also useful for comparing companies of different sizes, specifically within the same industry.
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6 FY2010 Intel (INTC) Cree (CREE) Hanesbrands (HBI) Location Santa Clara, CA Durham, NC Winston Salem, NC Business Semiconductors Semiconductors Apparel Essentials Revenue $43.6B $0.9B $4.3B Net Income $11.5B $0.2B $0.2B Assets $63.2B $2.4B $3.8B LT Obligations $4.4B $0.06B $2.4B Let’s Look at 3 Companies….
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7 Similar companies; size difference Intel vs Cree – Balance Sheets 2010 2009 2008 2010 2009 2008 Balance Sheet Assets Cash 34.6% 26.2% 23.5% 48.5% 29.7% 23.8% Accounts Receivables 4.5% 4.3% 3.4% 5.3% 7.4% 9.2% Other ST Assets 10.9% 9.3% 12.5% 7.8% 7.6% 7.6% Total Current Assets 50.0% 39.8% 39.4% 61.6% 44.8% 40.6% Net PP&E 28.3% 32.4% 34.8% 19.1% 22.8% 26.5% Other LT Assets 21.6% 27.7% 25.8% 19.3% 32.4% 32.9% Total LT Assets 50.0% 60.2% 60.6% 38.4% 55.2% 59.4% Total Assets 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% Liabilities & Equity Current Liabilities 14.8% 14.3% 15.5% 5.5% 9.2% 9.5% Long Term Liabiliities 7.0% 7.2% 6.2% 2.3% 3.6% 3.3% Stockholders Equity 78.2% 78.5% 78.4% 92.2% 87.2% 87.2% Total Liabilities & Equity 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% INTEL CREE
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8 Similar companies; size difference Intel vs Cree – Income Statements 2010 2009 2008 2010 2009 2008 Income Statement Revenue 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% CGS 34.7% 44.3% 44.5% 62.6% 66.4% 66.0% Gross Profit 65.3% 55.7% 55.5% 37.4% 33.6% 34.0% SG&A 14.5% 14.9% 14.5% 15.3% 15.5% 13.5% R&D 15.1% 16.1% 15.2% 12.6% 11.9% 14.7% Other 0.0% 0.1% 0.0% 2.9% 3.5% 1.1% EBIT 35.7% 24.6% 25.7% 6.6% 2.7% 4.8% Interest Expense 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Interest Income 0.3% 0.5% 1.6% 1.6% 2.9% 3.8% Other non-operating 0.8% 8.8% 6.8% 1.1% 2.7% 4.4% EBT 36.8% 16.2% 20.4% 7.0% 8.3% 13.0% Taxes 10.5% 3.8% 6.4% 1.6% 1.9% 0.2% Net Income 26.3% 12.4% 14.1% 5.4% 6.4% 12.7% CREE INTEL
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9 Different industries Cree vs Hanesbrands – B/S 2010 2009 2008 2010 2009 2008 Balance Sheet Assets Cash 48.5% 29.7% 23.8% 1.2% 1.2% 1.9% Accounts Receivables 5.3% 7.4% 9.2% 13.8% 14.1% 12.0% Other ST Assets 7.8% 7.6% 7.6% 41.8% 39.5% 45.8% Total Current Assets 61.6% 44.8% 40.6% 56.7% 54.8% 59.7% Net PP&E 19.1% 22.8% 26.5% 16.7% 18.1% 16.6% Other LT Assets 19.3% 32.4% 32.9% 26.7% 27.1% 23.6% Total LT Assets 38.4% 55.2% 59.4% 43.3% 45.2% 40.3% Total Assets 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% Liabilities & Equity Current Liabilities 5.5% 9.2% 9.5% 21.9% 26.4% 21.2% Long Term Liabiliities 2.3% 3.6% 3.3% 63.3% 63.5% 73.6% Stockholders Equity 92.2% 87.2% 87.2% 14.8% 10.1% 5.2% Total Liabilities & Equity 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% CREE HANESBRANDS
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10 Different industries Cree vs Hanesbrands – I/S 2010 2009 2008 2010 2009 2008 Income Statement Revenue 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% CGS 62.6% 66.4% 66.0% 67.3% 67.2% 66.6% Gross Profit 37.4% 33.6% 34.0% 32.7% 32.8% 33.4% SG&A 15.3% 15.5% 13.5% 22.3% 22.9% 22.7% R&D 12.6% 11.9% 14.7% 1.1% 1.2% 1.1% Other 2.9% 3.5% 1.1% 0.0% 0.0% 0.0% EBIT 6.6% 2.7% 4.8% 9.3% 8.8% 9.7% Interest Expense 0.0% 0.0% 0.0% 3.5% 4.2% 3.7% Interest Income 1.6% 2.9% 3.8% 0.0% 0.0% 0.0% Other non-operating 1.1% 2.7% 4.4% 0.5% 3.1% 2.2% EBT 7.0% 8.3% 13.0% 5.4% 1.5% 3.8% Taxes 1.6% 1.9% 0.2% 0.5% 0.2% 0.8% Net Income 5.4% 6.4% 12.7% 4.9% 1.3% 3.0% CREE HANESBRANDS
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11 Ratio Analysis Ratios also allow for better comparison through
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