McGraw-Hill/Irwin Copyright © 2007 by The McGraw-Hill Companies, Inc.. All rights reserved McGraw-Hill/Irwin Type of Financial Ratios Leverage ratios show how heavily the company is in
Trang 1McGraw-Hill/Irwin Copyright © 2007 by The McGraw-Hill Companies, Inc All rights reserved
Financial Statement
Analysis
Trang 2Topics Covered
Financial Ratios
DuPont System
Using Financial ratios
Measuring Company Performance
The Role of Financial Ratios
Trang 3Copyright © 2007 by The McGraw-Hill Companies, Inc All rights reserved
McGraw-Hill/Irwin
Type of Financial Ratios
Leverage ratios show how heavily the company is
in debt.
Liquidity ratios measure how easily the firm can
lay its hands on cash.
Efficiency or turnover ratios measure how
productively the firm is using its assets.
Profitability ratios are used to measure the firm’s
return on its investments.
Trang 4Financial Statements
Income Statement - Financial statement that shows the
revenues, expenses, and net income of a firm over a period
of time.
Common-Size Income - Statement Income statement that
presents items as a percentage of revenues
Balance Sheet - Financial statement that shows the value
of the firm’s assets and liabilities at a particular time.
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Leverage Ratios
equity +
debt term
long
debt term
long
= ratio debt
term Long
equity
debt term
long
= ratio equity
Debt
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Liquidity Ratios
Net working capital
to total assets ratio =
Net working capital
Total assets
Current ratio = current assets
current liabilities
Trang 8Interval measure = cash + marketable securities + receivables
average daily expenditures from operations
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Efficiency Ratios
Asset turnover ratio = Sales
Average total assets
average net working capital
Trang 10Efficiency Ratios
Days' sales in inventory = average inventory
cost of goods sold / 365
Inventory turnover ratio = cost of goods sold
average inventory Average collection period = average receivables
average daily sales
Trang 11Copyright © 2007 by The McGraw-Hill Companies, Inc All rights reserved
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Profitability Ratios
assets total
average
Interest Income
Net
= assets
Net
equity average
income
net
= equity
on Return
sales
interest income
net
= margin profit
Trang 13Copyright © 2007 by The McGraw-Hill Companies, Inc All rights reserved
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Market Value Ratios
g - r
1 EPS
avg
P
= ratio PE
Forecasted
1
1 1
EPS
Div
=
PE Ratio = stock price
earnings per share
Dividend yield = dividend per share
stock price
Trang 14Market Value Ratios
Market to book ratio = stock price
book value per share
Price per share = P = Div
r - g
0
1
Tobins Q = market value of assets
estimated replcement cost
Trang 15Copyright © 2007 by The McGraw-Hill Companies, Inc All rights reserved
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The DuPont System
A breakdown of ROE and ROA into
component ratios
equity
stock common
for available
earnings
= ROE
assets
interest Income
Net
=
Trang 16The DuPont System
sales
interest Income
Net x
Operating profit margin
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The DuPont System
interest Income
Net
Income
Net x
sales
interest Income
Net x
assets
sales x
leverage ratio
asset turnover
Operating profit margin
debt burden
Trang 18Using Financial Ratios
Trang 19Copyright © 2007 by The McGraw-Hill Companies, Inc All rights reserved
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MVA & Economic Profit
Economic Profit = capital invested
multiplied by the spread between return on investment and the cost of capital.
Market Value Added = The difference
between the market value of common stock and its book value
Invested Capital
) (
EP
Trang 20Residual Income & EVA
Residual Income or EVA = Net Dollar return
after deducting the cost of capital
[ Cost of Capital Investment ]
Earned Income
-required income
Earned Income
Income Residual
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Measuring Performance
Trang 22Measuring Performance
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Financial Ratios and Default Risk
Note: EBITDA is earnings before interest, taxes, depreciation, and amortization.
Sources: Default rates from “Statement of Standard & Poor’s on Credit Rating Agencies to SEC,” Public Hearing, November
2002; all other data from Standard & Poor’s.