It is a proxy for how much debt a company uses to operate Higher not

It is a proxy for how much debt a company uses to

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owner’s equity (assets/shareholder equity). It is a proxy for how much debt a company uses to operate Higher not necessarily better (even if it raises ROE). Why? Higher ratio may indicate a riskier business that is operating with larger amounts of debt
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Business Strategy and Leadership Spring 2016 28 In-Class Exercise - Review Let’s apply these ratios to Tesla and some competitors We’ll use publicly traded competitors (why?) Tesla, GM, Ford, Fiat Chrysler Steps: Pull input data (Nasdaq.com, Annual reports, etc.) Plug into ratios formulas Graph Analyze
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Business Strategy and Leadership Spring 2016 29 Why Are We Doing This? Errors made on Monday. Why? Need to be precise and check your work Put into a spreadsheet to avoid errors Actually doing this helps you (hopefully) understand and apply the concept
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Business Strategy and Leadership Spring 2016 30 Charts 2014 2015 Tesla 59% 27% GM 1% -2% Ford -2% 4% Fiat Chrysler -3% 6% -10% 0% 10% 20% 30% 40% 50% 60% 70% ChangeinSalesYoY% %ChangeinSales 2013 2014 2015 Tesla -11% -32% -82% GM 13% 12% 24% Ford 46% 5% 26% Fiat Chrysler 23% 5% 2% -100% -80% -60% -40% -20% 0% 20% 40% 60% ROE% ReturnonEquity% 2013 2014 2015 Tesla -3% -5% -11% GM 3% 2% 5% Ford 6% 1% 3% Fiat Chrysler 2% 1% 1% -12% -10% -8% -6% -4% -2% 0% 2% 4% 6% 8% ROA% ReturnonAssets%
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Business Strategy and Leadership Spring 2016 31 Charts 2013 2014 2015 Tesla -4% -9% -22% GM 3% 3% 6% Ford 8% 1% 5% Fiat Chrysler 2% 1% 0% -25% -20% -15% -10% -5% 0% 5% 10% ProfitMargin% ProfitMargin% 2014 2015 Latest (Stock Price) Tesla 48% 8% 5% GM -14% 0% -8% Ford 0% -9% -6% Fiat Chrysler 30% 20% -16% -20% -10% 0% 10% 20% 30% 40% 50% 60% ChangeinStockPriceYoY% ChangeinStockPrice%
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Business Strategy and Leadership Spring 2016 32 Charts Discussion What does this mean? What are the implications for the industry and for Tesla? What advice do we give Tesla based on this financial ratios analysis? What additional analysis should we do? Why?
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Business Strategy and Leadership Spring 2016 33 Capsim Assignment Capsim Practice Round 3 due 4/24 at 11:00 pm On Monday, April 25: Individual team debrief Each team will have 2-3 minutes to present their top lessons learned from Capsim so far Could be process-related And/or could be findings-related No slides All team members should speak Very informal presentations
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Business Strategy and Leadership Spring 2016 34 Assignment for Today Complete Financial Ratios analysis For Facebook and Google: 2013 – 2015 Also include latest stock price for Google and Facebook Use Nasdaq.com or annual reports for data Use Ratios Worksheet (Form on GS) Provide ratios over time for both companies Compare ratios over time (Can be graphed) for the two companies and provide your commentary on trends and key differences Maximum of 1 page for ratios + your commentary We will discuss briefly next class
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Business Strategy and Leadership Spring 2016 35 Extra Credit Assignment We will review this on Monday if time Extra credit assignment (additional 2.5% points): Correctly match the 5 types of companies with their corresponding financial statements and ratios from “Assessing a Company’s Future Financial Health” (Pages 11-13, Section: The Case of the Unidentified Industries)
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Business Strategy and Leadership Spring 2016 36 Zin Obelisk Game Introduction The game Discussion
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