Key Concepts and Skills
Know:
- How to s.D.dardize financial statements
Q.QJ.[taris00J2.urposes
- How to c~ute
for
and ilJierpret important
f~
- The determinants
growth
of a firm's profitability
~-
and
Understand the problems and pitfalls in
financial sta
Asset Management:
Asset Turnover Ratios
Liabilities
Current
9B
1BB
422
708
I
& Owners
Equity
Sales
Liabilities
COGS
$
$
$
$
Accounts Payable
Notes Payable
Total
Long term debt
Owners' Equity
Common Stock and paid in surplus
Fixed Assets
Net Plant & Equipm
Internal and Sustainable Growth
Payout and Retention Ratios
Dividend payout ratio ("b") = DPS/EPS
=
Cash dividends / Net income
tf;' Retention
i
L,
3l.o3
.-:. 3,3 c/o
3
ratio ("1 - b") = (EPS-DPS)/EPS
~ditiOn
to Retained Earnings) / Net income
fJso ~
Ow
Example: Work the Web
The Internet makes ratio analysis much
easier than it has been in the past
Click on the Web surfer to go to
www.businessweek.com/finance/
- Choose a company and enter its ticker symbol
- Click on "Financial Results" and "Key Ratios
rcO
Key Concepts and Skills
Be able to compute the f~f
~flows
Be able to compute the present value of
multiple cash flows
Be able to compute loan payments
Be able to find the interest rate on a loan
Understand how loans are amortized or
paid off
Und
Example Continued
How much will you have in 5 years if you
make no further deposits?
First way:
FV = $500(1.09)5 + $600(1.09)4 = $1,616.26
Second way - use value at year 2:
FV = $1,248.05(1.09)3 = $1,616.26
5-11
Calculator and Excel Solution
Future V
Multiple Uneven Cash Flows
Using the TI BAil's Cash Flow Worksheet
Clear all:
- Press0B
~fj0
- Then W
- Then ~
_
CFo is displayed as 0.00
Enter the Period 0 cash flow
- If an outflow, press'
the sign
to change
To enter the figure in the cash
flow regi
I
Quick Quiz - Part 1
\
Suppose you are looking at the following
possible cash flows:
=
- Year 1 CF $100;
_ Years 2 and 3 CFs = $200;
_ Years 4 and 5 CFs = $300.
_ The required discount rate is 7%
What is the value of the CFs at year 5?
What is the val