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Are figured using financial data from the ratios 2003

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Unformatted text preview: turnover = 1.9x; Industry = 2.3x Profitability ratios Profit margin before taxes = 10.6%; Industry = 2.7% ROA (profit before taxes / total assets) = 19.9%; Industry = ROA 4.9% 4.9% ROE = (profit before taxes / tangible net worth) = 34.6%; ROE Industry = 23.7% Industry 28 Potential Problems There is no underlying theory, so there is no way to There know which ratios are most relevant know Benchmarking is difficult for diversified firms Globalization and international competition makes Globalization comparison more difficult because of differences in accounting regulations accounting Varying accounting procedures, i.e. FIFO vs. LIFO Different fiscal years Extraordinary events 29 Work the Web Example The Internet makes ratio analysis much easier The than it has been in the past than Click on the web surfer to go to Click www.investor.reuters.com Choose a company and enter its ticker symbol Click on Ratios and then Financial Condition and see Click what information is available what 30 Quick Quiz What is the Statement of Cash Flows and how do you What determine sources and uses of cash? determine How do you standardize balance sheets and income How statements and why is standardization useful? statements What are the major categories of ratios and how do you What compute specific ratios within each category? compute What are some of the problems associated with financial What statement analysis? statement 31 3 End of Chapter 32 32 Comprehensive Problem XYZ Corporation has the following XYZ financial information for the previous year: financial Sales: $8M, PM = 8%, CA = $2M, FA = Sales: $6M, NWC = $1M, LTD = $3M $6M, Compute the ROE using the DuPont Compute Analysis. Analysis. 33...
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