...and retain earnings – closely relate to forecast, these forecast also inaccurate c. Inventory – with sales under perform, the inventory forecasts are also inaccurate. With much higher inventory than anticipated, especially in January 1991, the residual between actual and forecast is 924,000, which is a very big different. These excess inventories became illiquid assets, thus increased the liabilities which have a negative effect on the company’s financial health. Nevertheless, with lack of previous years’ financial data in addition to the unpredictable recession of the economy, it is hard to say whether or not these data were exaggerating. 2. Risk assessment a. Liquidity – as of March 1991, the current and cash ratio of Dynashears are 5.99 and 0.38, which are not bad numbers. The ratios shows that Dynashears’ current assets are still well cover (almost 6 to 1 ratio) over its increasing liabilities due to illiquid assets and that it still has sufficient cash for optimum operation. b. Long-term debt ratio – as of March 1991, the debt ratio is 4.71% which is very low, indicates that Dynashears still able to borrow a lot more. Even though Dynashears’ asset turnover rate is low (estimate at 0.24) and sales performance is not great, Dynashears’ fix assets such as their land, and plant and equipment are very valuable, thus able to leverage more debt. c. Profitability – as far as gross margin (26.19%), operating...
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...simple fundamental analysis strategy based on historical accounting information can predict stock returns. The paper’s goal is to show that simple screens based on historical financial signals can shift the distribution of returns earned by an investor by separating eventual winners stocks from losers. Results show that historical accounting signals can be used to improve the entire distribution of future returns earned by an investor. In fact, despite the overall down activity of the market over the sample period chosen, results reveal that fundamental accounting signals can be used to discriminate from an overall sample generating future negative returns of -0,116 a winner portfolio that provide positive future return of 0,019 from a loser one generating a negative return of -0,229. The over-performance of the winner portfolio seems to be attributable to the ability of the fundamental signals to predict future earnings. In fact, results show that fundamental signals have a positive and significant correlation with future earnings performance and that the winner portfolio have a future earning’s realisation (0,100) that outperforms that of the loser portfolio (-0,012). Keywords: Fundamental Analysis, Market Efficiency, Stock returns. JEL Classification Codes: G11, G14 1. Introduction One object of financial accounting is to provide information that is relevant to investment decisions. Discovering value-relevant accounting attributes has been the subject of numerous...
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...2001, an forecasted growth of approximately 15 million rupees over the previous year. In spite of the large increase, there are several additional financial factors which need to be taken into account in evaluating the forecast. For instance, Total asset turnover gives an understanding of the efficiency with which the firm uses its assets to generate sales. Total Asset Turnover in this particular case is suboptimal at best. In 2000, Kota had a total asset turnover ratio of .18, with a ratio value of .17 in projected for 2001. This shows major inefficiencies in the management of assets by the company, as it only turns its assets over .18 times a year. They may want to increase this ratio number by increasing their amount of total assets. Kota Fibres as a company (as far as its financial statements are concerned) is very capable of satisfying its short-term obligations as they come due. With a current ratio of 3.24 and quick ratio of 2.38, Kota is operating within acceptable levels (acceptable values are 2.0 and 1.0, respectively). However, the forecasted ratio for 2001 shows that this ratio drops to 1.5:1, which is below the acceptable level of 2.0 set for a manufacturing firm. This means they will have some problem paying their bills on time with the projected production and sales levels. Kota Fibres, in 2000, had a quick ratio of 2.38:1; which is well above the acceptable level of 1.0. However, the calculations show a decline from 2000 and 2001 of 1; this drives home the...
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...About the Company Ratio Analysis Ratio Analysis involves methods of calculating and interpreting financial ratios to analyze and monitor the firm’s performance. The basic inputs to ratio analysis are the firm’s income statement and balance sheet. Financial ratios are designed to helps one evaluate a financial statements. (A) Liquidity Ratio: Liquidity Ratio measures a firm’s ability to satisfy its short term obligations as they come due. Bellow we have shown the liquidity ratio of the Confidence Cement. For the year 2002, 2003.2004.2005 & 2006. 1. Current Ratio: The current ratio is a widely used measure for calculating a company’s liquidity and short term debt paying ability. Generally, the higher the current ratio, the more liquid the firm is considered to be. The current ratio is sometimes referred to as the working capital ratio. The current ratio is only one measure of liquidity. Ratio Formula 2002 2003 2004 2005 2006 Current Ratio Current Asset Current Liabilities 1.45 times 1.21 times 1.09 times 1.12 times 1.17 times Interpretation Here we have calculated the current ratio of the Confidence Cement for 5 years. Here we considered current asset = Stores + book debits+ other transactions. And we considered current liabilities = creditors + proposed dividend + other accounts. Here we have seen that for Confidence Cement all the current ratios have the minimum ability to meet the short term obligations. Hopefully we see that from 2002...
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...Profitability ratios measure the company's use of its assets and control of its expenses to generate an acceptable rate of return Gross margin, Gross profit margin or Gross Profit Rate[7][8] [pic] OR [pic] Operating margin, Operating Income Margin, Operating profit margin or Return on sales (ROS)[8][9] [pic] Note: Operating income is the difference between operating revenues and operating expenses, but it is also sometimes used as a synonym for EBIT and operating profit.[10] This is true if the firm has no non-operating income. (Earnings before interest and taxes / Sales[11][12]) Profit margin, net margin or net profit margin[13] [pic] Return on equity (ROE)[13] [pic] Return on investment (ROI ratio or Du Pont Ratio)[6] [pic] Return on assets (ROA)[14] [pic] Return on assets Du Pont (ROA Du Pont)[15] [pic] Return on Equity Du Pont (ROE Du Pont) [pic] Return on net assets (RONA) [pic] Return on capital (ROC) [pic] Risk adjusted return on capital (RAROC) [pic] OR [pic] Return on capital employed (ROCE) [pic] Note: this is somewhat similar to (ROI), which calculates Net Income per Owner's Equity Cash flow return on investment (CFROI) [pic] Efficiency ratio [pic] Net gearing [pic] Basic Earnings Power Ratio[16] [pic] ...
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...Return on year - end capital employed Comparing the ratios of return on year end capital employed that have been calculated for Venice ltd for 30th september 2010 which is 7.1% and for 30th september 2011 which is 11.21%, it has an increase of 4.11%. This increase in the percentage indicates the efficiency and profitability of Venice ltd capital investment have increase. From the Chief Executive's report of Venice's performance for year ended 30th september 2011, gross profit margin up from 16.7% to 20% and a doubling of the profit for the period. Also from the impact of purchasing of the net assets of roma company, gross profit and profits has a obvious increase of almost double of previous year, 2010. This suggest that there is an increase in profits have been earn from the investment the shareholders have made in Venice Ltd and definitely pleases the shareholders. This also means that the shareholders has more money to invest on Venice and venice ltd need not borrow so much money for investment. Net assets Net assets is the revenue of the company being generated over the share holders fund. Comparing the ratio of net assets that have been calculated for Venice Ltd for 30th september 2010 which is 1.6 and for 30th september 2011 which is 2.19, there is an increase of 0.59. From the Chief Executive's report, there is an increase in sales revenue of 30%. The increase of the ratio of the net assets is due to the increase in revenue of $70000000 in 2011...
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...Capital + Long-term Assets NOPAT = EBIT * (1 – Tax Rate) Free Cash Flow (FCF) = NOPAT - Net investment in operating capital Return of Invested Capital (ROIC) = NOPAT / Total Net Operating Capital Economic Value Added (EVA) = NOPAT- WACC * Total Net Operating Capital Market Value Added (MVA) = Market Value of stock - Book Value of Common Equity Financial Ratios Current Ratio = Current Asset / Current Liabilities Quick Ratio = (Current Asset – Inventory) / Current Liabilities Inventory Turnover Ratio = Sales / Inventory Days Sales Outstanding (DSO) = (Account Receivable/ Sales) x 365 Fixed Asset Turnover Ratio =Sales/Fixed Assets Total asset Turnover Ratio = Sales/Total Assets Debt Ratio=Total liabilities/Total assets Time-Interest-Earned (TIE) Ratio =EBIT/Interest expense 1 EBITDA coverage ratio = (EBITDA + Lease payment) / (Interest Expense + Principle payment + Lease payment) Profit Margin = Net Income / Sales Basic Earning Power (BEP) Ratio = EBIT/Total assets Return on Assets (ROA) = Net Income / Total Assets Return on Equity (ROE) = Net Income / Total Equity PE Ratio = Price per share / Earnings per share Market-to-Book (MB) ratio = Price per share/Book value of common equity per share The Du Pont Equation Equity Multiplier = Total Assets / Total Equity ROE = ROA * Equity Multiplier ROE = Profit Margin * Equity...
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... Apple Computer Financial Report On November 5, 2008 Apple Computer filed the company’s 10-K report with the Securities and Exchange Commission (SEC). Although the company is required to file yearly reports with the SEC financial managers and investors use this information to help make sound financial judgments when deciding to invest in Apple Computer. In the report financial ratios, including liquidity, asset management, financial leverage, profitability, and market-based, will be discussed based on the last two years of data. The report also analyses Apple’s working capital management, long-term debt, types of stock, stock selling prices, the weighted average cost of capital, and an evaluation of the data and how the company compares to industry averages. The report will conclude with a recommendation of whether an investor should buy Apple stock. Financial Ratios According to Moyer, McGuigan, and Rao (2007), “Management uses financial ratios for analysis, monitoring, and planning purposes.” Financial ratios assist management in indentifying the strengths and weaknesses of the company, aid management in the monitoring the company, which may uncover a problem in a certain area of the firm’s operations and institute remedial action, and aids in planning. Analyst must keep in mind that while financial ratios are important that one ratio alone should not be used to make financial decisions. Financial managers must remember that the ratios only represent a sample...
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...ABB India Ltd Performance Highlights (Rs in Crores) CY11 CY10 %change Revenue 7,721.23 6,638.16 16.32 Gross Profit 393.67 186.87 110.67 PAT 184.54 63.23 191.86 ABB India has bounced back with promising numbers with net profit jumping to about 191%. The Gross Profit has increased and this has been mainly due to the improvement in power system business. Performance RATING: SELL The Net sales of ABB has increased to about 10% and it has registered a EBITDA Margin of 5.6% in this quarter. It has registered a loss in the power automation segment. There is cost overrun in two of the projects. Power crisis in India has also affected the Industry as a whole. Many Orders have been received in low voltage segment of products Considering slow down in industrial capex and pricing pressure in the industry which is impacting margins, ABB can be recommended as a SELL Industry Analysis Electrical Equipment Industry is one of the vital sectors for the contribution of each and every economy. In the current scenario, frequent outages due to the widening gap between the demand and supply of power in the state have now started affecting the electrical equipment manufacturing units. So the demand has been sluggish throughout. The Indian electrical equipment industry has reported a decelerated growth to 6.6% in 2011-12 as compared to 11.3% and 13.7% in 2009-10 and 2010-11, respectively, according to data compiled by the Indian Electrical and Electronics Manufacturers’ Association...
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...Financial Analysis: 1. Operating Profit Margin Ratio: The operating profit margin ratio indicates how much profit a company makes after paying for variable costs of production such as wages, raw materials, etc. It is expressed as a percentage of sales and shows the efficiency of a company controlling the costs and expenses associated with business operations. Year | Operating Profit Margin Ratio (%) | Mar '12 | 12.22 | Mar '11 | 13.03 | Mar '10 | 12.18 | Mar '09 | 12.02 | Mar '08 | 10.98 | The company is maintaining a very good operating profit margin ratio. In 2011 company has 13.03% of operating profit margin; it’s mainly because of increase in sales. In 2012 the operating profit margin ratio is decreased to 12.22 % as increase in operating expenses is more than increase in sales. The operating expenses rose because of increase in miscellaneous expenses. 2. Gross Profit margin ratio and Net Profit margin ratio: A financial metric used to assess a firm's financial health by revealing the proportion of money left over from revenues after accounting for the cost of goods sold. Gross profit margin serves as the source for paying additional expenses and future savings. While net profit margin ratio measures the relationship between net profit and sales. Year | Gross Profit Margin (%) | Net Profit Margin (%) | Mar '08 | 4.23 | 0.59 | Mar '09 | 6.22 | -3.54 | Mar '10 | 6.9 | 1.51 | Mar '11 | 8.78 | 4.03 | Mar '12 | 8.95 | 8.64 | The Company’s...
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...Wal-Mart 2010 Case Study Dividend in perpetuity For this model we use this formula : Expected dividends (D) divided by the investor’s required rate of return (Ke) minus the perpetual dividend growth rate(g). P = D/(Ke-g) The case tell us about each of the inputs : the dividend growth, the xpected dividend, and the investor’s required rate of return. We know that one respected analyst figure out that the constant perpetual dividend growth is g=5.0%. We also know that the consensus annulal Wal-Mart dividend for fiscal year 2011 was D= $1.21 And to calculate the investor’s required rate of return (Ke) we can use the CAPM : Risk free rate : 3.68% Beta of Wal-Mart : 0.66 Market risk premium : 5.05% So the CAPM gives us : Ke= 0.0368+ 0.66*0.0505= 7.013% So we have P= 1.21/(0.07013-0.05)= $60.11 We know that February 2010 closing price was $53.48 per share so it means that Wal-Mart is slightly undervalued. So it is a good investment opportunity. Dividends and a terminal value. In this method we forecast the futur dividends (which we know assuming the constant perpetual dividend growth is g=5.0%) until the futur stock price P(n). We call this price the terminal value. The formula is : P(0)= D(1)/(Ke+1)+D(2)/(Ke+1)^2+….+D(n)/(Ke+1)^n+P(n)/(Ke+1)^n The further we go in years the bigger become the (Ke+1)^i part of the formula and the smaller become the D(i)/(Ke+1)^i. It tend to be 0. Let’s say we forecast the dividends for the next 500 years...
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...AN INTERNSHIP REPORT ON [pic] HABIB BANK LIMITED SUBMITTED TO Mr.nazik hussain SUBMITTED BY Beenish Ameer Roll #07 BBA(HONS) Morning SESSION 2009-2013 DEPARTMENT MANAGEMENT SCIENCES [pic] Islamia University Bahawalpur IN THE NAME OF ALLAH WHO IS THE MOST BENEFICENT THE MOST MERCIFUL PREFACE Internship is the one of the part of BBA programmed and this provide the practical knowledge of what students read about business in their books. The field of banking has always been a source of inspiration for me during my entire academic career. To work in a bank, to acquaint with its working mechanism was always a point of interest for me and God gave me a golden opportunity to complete my internship at HBL, one of the leading bank in Pakistan and well known in world due to its appearance in the international markets. I had a general idea about the banking, but once I practically started the internship in banking field I observed much about banking. To adjust myself in such a large commercial organization was not an easy task, but by the grace of Almighty Allah aids my internship in a befitting manner and I learned a lot about...
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...perspective of such a term paper is to make us familiar with the key factors of security market that affect the users in decision making. For this purpose we have used the annual reports of Bangladesh lamps ltd, and try to analyze and understand the overall capital market components according to our best effort. 1.2 OBJECTIVES OF TERM PAPER This term paper is based on “financial analysis & stock valuation of Bangladesh lamps ltd”. The objective of this term paper is to provide present situation of the Bangladesh lamps ltd, corporate structure, industry performance, stock valuation, SWOT analysis, ratio and risk analysis and financial statement analysis of the company. More precisely we can identify the objective of this report as follows: * To provide the overall industry performance within our selected industry * To acquire experience of a real organization to supplement theoretical knowledge. * To know about how the academic issues taught in our educational institutions come to practical ground in an organization. * To get familiar with the organizational structure and financial aspect of our selected company 1.3 METHODOLOGY For achieving the specific objective of this study, data were gathered from only secondary sources. Secondary Sources: * Company’s published annual reports * securities & exchange commission’s (SEC) Published annual report * Bangladesh lamps ltd Web site * Engineering industry related published articles...
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...Provide a detailed overview of a U.S. publicly traded company. This should be one to two (1-2) pages. Overview Pepsico is the leading global food, snack and beverage company. The brand include Quaker Oats, Tropicana, Gatorade, Lay's and Pepsi . Pepsico is a global company, it includes strong regional brands such as Walkers, Gamesa and Sabritas. Either independently or through contract manufacturers .Pepsico market and sell a variety of convenient, enjoyable and wholesome foods and beverages in over 200 countries. Its portofolio includes oat, rice and grain-based foods, as well as carbonated and non-carbonated beverages. Pepsico largest operations are in North America (United States and Canada), Mexico, Russia and the United Kingdom. All the brand are united by its unique commitment to Performance with Purpose, which means delivering sustainable growth by investing in a healthier future for people and the planet .Pepsico’s goal is to continue to build a balanced portfolio of enjoyable and wholesome foods and beverages, find innovative ways to reduce the use of energy, water and packaging and provide a great workplace for our associates. Additionally, Pepsico is committed to respecting, supporting and investing in the local communities where it operates by hiring local people, creating products designed for local tastes and partnering with local farmers, governments and community groups. Pepsico make this commitment because it is a responsible . In recognition of its...
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...many financial analysts fail to beat the S&P 500, I realized that my chances of beating the market were slim. If “professionals” have difficulty choosing the right stocks, then chances are I will to. In short, I decided that taking a gamble and investing in risky stocks to win the game was probably a futile strategy. The technical reason for why I, or any other person for that matter, cannot beat the markets is that markets are mostly efficient. Much of what I know about a company is probably public information so it is already reflected in that company’s stock price. For example, many people view Apple as a company with much potential for growth. As a result, the demand for its stock is already very great; so great that some say the demand for the company can’t go any higher. If I were to buy Apple, I must find a reason for why the public is undervaluing it; simply saying the iPhone is selling off the charts won’t work since everyone already knows that. With this in mind, I focused on buying stocks that I was familiar with and could at least make a reasonable case as to why they were undervalued. I decided to settle on buying a group of stocks and keeping them until the end of the game. In fact, since I was investing for the long term, I pushed myself to rarely look at my holdings in order to limit the chance that I would buy or sell a stock based on its short-term price movements. At first, I limited my search to value stocks with low Price to Earnings (PE) ratios and...
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