...FINANCIAL ANALYTICAL TOOLS Financial analysis involves evaluating the current financial statements of an organization in order to access the current profitability and also compare same with past performance (time series analysis) and the performance of other players within the industry. In other words, analyzing the financial statements assesses the financial health of a company. The major statistical tools used in financial analysis are ; • Ratio Analysis • Cash Flow Analysis • Common Size Analysis Ratio Analysis Investopedia describes ratio analysis as , ‘A tool used by individuals to conduct a quantitative analysis of information in a company's financial statements’. Ratio Analysis can be viewed along the following lines; • Liquidity Ratios • Profitability ratios • Debt ratios • Operating performance ratios • Cash flow indicator ratios • Investment Valuation ratios In reviewing the liquidity ratios, the current ratio, also known as working capital ratio, is used to calculate the proportion of current assets that is available to cover current liabilities, the formula can be calculated as Current Ratio = Current Assets Current Liabilities Its limitation however rests in the fact that in assessing liquidity, it assumes all the company’s assets will be liquidated to cover this and no indication has been given to the amount of time required to liquidate these current considering an organization is a going concern and as such the key to liquidity...
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...Corporation Analysis Week 3 Learning Team B Reflection XXXXXXXX Accounting 561 March 12, 2016 Professor Jason Williams American Corporation Analysis (Kellogg’s) Comparative and ratio analysis are important tool for investors and top company management in order to analyze and to determine organization’s financial performance. Comparative analysis is “changes in a financial statement's items over several accounting periods presented together to detect the emerging trends in the company's operations (Kimmel, 2010-2016). The three comparative analysis parts are intracompany basis, intercompany basis, and industry averages. In addition, “ratio analysis is a quantitative analysis of information contained in a company's financial statements (Business Dictionary, 2016).” There are three types of ratio analysis: liquidity, solvency, and profitability ratios. For this assignment, we will conduct a comparative and ratio analysis to measure profitability and liquidity for Kellogg’s Company. Kellogg's Analysis Report “Solvency ratios measure the ability of the company to survive over a long period of time. Long-term creditors and stockholders are interested in a company's long-run solvency, particularly its ability to pay interest as it comes due and to repay the balance of debt at its maturity” ( Kimmel,Weygandt & Kieso 2011). There are 4 major ratios in: Solvency Ratio Formulas: Debt to total assets: Total liabilities/Total assets Cash debt coverage ratio: cash provided...
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...financial analysis of Caterpiller Inc. (CAT). The use of various analytical tools, the assignment covered major fundamental parameters relating the company and its stock. The analysis consisted of stock reporting analysis, ratio analysis, duo point analysis, weekly return analysis and the analysis of cost of equity. The stock reporting analysis part of the project analyzed the stock selected with respect to the market Index. For the purpose of analysis the prices of both stock and index were downloaded for the period beginning 15-Jan-2009 till 15-Nov-2011. Ratio analysis had been used as the primary tool for evaluating the performance of the company. The ratio analysis helps in analyzing the probable casual relationships among different items after analyzing the past results. These ratios are derived after analyzing the past results and helps management to prepare budgets, to formulate policy and to prepare future plan. Ratio analysis also helps in making inter firm comparison and also comparisons between different divisions of the company. The required rate of return of CAT is calculated with the help of CAPM model. The model explains the relationship between the systematic risk associated with a stock and its expected return. In this model a stock’s expected return is the risk free rate of return (generally return on Govt. Treasury bonds is taken as risk free rate of return) plus a risk premium based on the stock’s systematic risk. Analysis Stock Reporting Analysis The...
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...for 2013 were $1,176,140. Harley Davidson time-interest-earned ratio was better in 2013. 2013 Tax expenses: $380,312 Net Income: $733,993 Interest expenses: $165,491 Ratio: 257% 2012 Tax expenses: $337,587 Net Income: $623,925 Interest expenses: $195,990 Ratio: 196% This was calculated by “the sum up the net income of the company, tax expense, and interest expense altogether, and then divides this sum by the interest-expense. This shows the company’s capability to meet up interest payments when due” (analysis). Free cash Flow 2013 Capital expenditures: $208,321 Cash dividends: $187,688 Cash operations: $997,093 Free Cash Flow: $601,084 2012 Capital expenditures: $189,002 Cash dividends: $141,681 Cash operations: $801,458 Free cash Flow: $470,775 This was calculated by subtracting “the capital expenditures and cash dividends from cash from operations. This is the method of determining the amount of free cash flow of the company” (analysis). “Free cash flow is a quantification of the amount of cash possessed by a company which allows for investing, debt payments, and overall liquidity” (analysis). Debt-to-total assets 2013 Total Assets: $9,405,040 Total Debt: $5,259,170 \ Debt-to-Assets Ratio: 55% 2012 Total assets: $9,170,773 Total Debt: $5,102,649 Debt-to-Assets Ratio: 55% Works Cited analysis, F. (n.d.). Solvency. Retrieved 7 13, 2014, from Ready Ratios:...
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...Financial Statement Analysis Session #1: Fundamental Analysis and Valuation March 2015 In-Mu Haw (许 仁茂) 1 Create value through acquisition to build brands (over 100) 2 Lenovo vs. HP Stock Price Lenovo created value through acquisitions Poor acquisition (overpaid: $8.8B) $18 million in 2013 3 Deloitte Report Chet Wood, Managing Partner of Deloitte LLP, Merger & Acquisition Services: • • About 70 percent of all health plan M&As fail to create meaningful shareholder value. CFOs and management can take a stronger role in M&A deal evaluation, especially on revenue growth. 4 Use of Financial Statements for Valuation “I am considering to buy a small packing company. They offered me RMB 15 million and gave me their last 2 years’ Income Statements and Balance Sheets. I think it’s overpriced. How much do you think I should pay?” How will you use I/S and B/S to assess the target firm’s fair value? 5 Warren Buffet Emphasized importance of looking at a firm’s Competitive advantage of products Long-term growth potential… for good investment 6 Sound Fundamental Analysis One does not buy a stock, one buys a business. When buying a business, know the business. Good firms can be bad buys (if overpriced). Price is what you pay, value is what you get. Value of firm = Value of Debt + Value of Equity TA = L + SE (BV) on B/S 7 TA – L = SE SE (BV) vs. Market value of equity 8 Stock Price What is intrinsic value? Is the price overvalued? P/E=41: What earnings growth...
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...assignments-readings/ For More Courses and Exams use this form ( http://hwguiders.com/contact-us/ ) Feel Free to Search your Class through Our Product Categories or From Our Search Bar (http://hwguiders.com/ ) Problem P2-12 Debt analysis Springfield Bank is evaluating Creek Enterprises, which has requested a $4,000,000 loan, to assess the firm’s financial leverage and financial risk. On the basis of the debt ratios for Creek, along with the industry averages and Creek’s recent financial statements (on the facing page), evaluate and recommend appropriate action on the loan request. Ratio Definition Calculation Creek Industry Debt 0.73 0.51 Times Interest Earned 3.00 7.30 Fixed Payment Coverage + {[(Principal + Preferred Stock Dividends)] ´ [1¸ (1 – t)]} + {[($800,000 + $100,000)] ´ [1¸ (1 – 0.4)]} 1.19 1.85 Because Creek Enterprises has a much higher degree of indebtedness and much lower ability to service debt than the average firm in the industry, the loan should be rejected Problem P2-13 Common-size statement analysis a common-size income statement for Creek Enterprises’ 2005 operations follows. Using the firm’s 2006 income statement presented in Problem 2–12, develop the 2006 common-size income statement and compare it to the 2005 statement. Which areas require further analysis and investigation? Creek Enterprises Common-Size Income Statement For the Years Ended December 31, 2005...
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...Integrated Financial Analysis Urban Outfitters URBN Stephanie Stowers Table of Contents Executive summary 3 Company Overview 7 HISTORICAL FINANCIAL STATEMENT ANALYSIS 14 RATIO ANALYSIS 16 THREE-YEAR PRO-FORMA 18 SUMMARY OF VALUATION 20 MD&A AND TRANSPARENCY 22 CORPORATE GOVERENCE 22 CONCLUSION 24 REFERENCES 25 Executive Summary Urban Outfitters, Inc. is a lifestyle retail company that operates retail-clothing stores. It operates through two reportable business segments: Retail and Wholesale. The Retail segment consists of Urban Outfitters, Anthropologie, Free People, Terrain, Leifsdottir and BHLDN brands, whose merchandise is sold directly through stores, catalogs, call centers and web sites. The Wholesale segment consists of two divisions: Free People and Leifsdottir. The Free People division designs, develops and markets young women's contemporary casual apparel. The Leifsdottir division designs, develops and markets sophisticated women's contemporary apparel, including dresses, tops, bottoms, as well as shoes and accessories. The company was founded by Richard A. Hayne and Scott A. Belair in 1970 and is headquartered at 5000 South Broad Street, Philadelphia, Pennsylvania 19112-1495, Phone: 1- 215-454-5500. Urban Outfitters is an Apparel Retailer in the consumer services sector with a projected Revenue of $2,441,876.80, Net Income of $265,353.48 and an estimated...
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...Executive summary 2 1. Analysis of macroeconomic and industry conditions affecting Virgin and Qantas in airline company industry. 2 2. Using Capital Asset Pricing Model to analysis two companies. 3 2.1 Risk-free interest rate 3 2.2 Market expected return 3 2.3 Beta 3 2.4 Expected return for two companies’ stocks using CAPM model 3 3. Comparative Equity Valuation – Qantas versus Virgin 4 4. Key financial ratios 5 4.1 Profitability Analysis 5 4.1.1Return on Asset (ROA) 5 4.2 Market price 5 4.2.1 Price-to-Earnings Ratio 5 4.3 Liquidity Analysis 6 4.3.1Current Ratio 6 4.4Debt and Long-term Solvency 6 4.4.1 Interest Coverage 6 4.4.2Leverage 6 4.5 overall analyses 6 5. An evaluation of firms’ strategic choices with the goal of creating shareholder value 7 6. Recommendation 7 Reference 8 Appendix 9 Executive summary Virgin and Qantas airline are two really important airlines in the aviation sector in Australia that listed on the Australian Securities Exchange. During our report, firstly, we analysis the Global and Australian macroeconomic environment, also including industry conditions affecting Virgin and Qantas in airline company industry. Secondly, a capital asset pricing model analysis is given for two companies’ stocks. Next part is the comparison of the Virgin and Qantas airline by the equity valuation. Then, there are some key financial ratios analysis of this two airline from the profitability analysis,market price,liquidity analysis and debt and long-term...
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...Table of Contents Written Report Executive Summary…….............................................................................. 2 Company Profile………………………………………………………..…..3 Industry Analysis…………………………………………………………...4 SWOT Analysis………………………………………………………….....8 Valuation…………………………………………………………………..12 Conclusion……………………………………………………………..…..13 Historical Ratio Analysis Valuation ratios………………………………………………………........17 Dividends………………………………………………………………….17 Growth rates……………………………………………………………….18 Financial strength………………………………………………………….18 Profitability ratios………………………………………………………….19 Management effectiveness…………………………………………….......19 Efficiency………………………………………………………………….19 Valuation Tables Pro Forma Income Statement……………………………………………..21 Pro Forma Balance Sheet…………………………………………………23 Free Cash Flow……………………………………………….…………...25 Free cash flow valuation summary……………………………..……...….26 WACC calculation………………………………………………………...27 Sensitivity analysis………………………………………………………...27 Graphs/ Plots Net income (loss) by year……………………………………………….…28 Free cash flow by year……………………………………………………..28 Written Report Executive Summary Executive Summary Introduction of the Firm Under Armour (UA) was incorporated on July 1, 1996; producing and distributing performance apparel and footwear for athletes of all ages. The brand engineered a fabric that enhances performance and comfort through its “moisture wicking” fabrications that helps athlete’s performance no matter the weather...
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...Financial Analysis Week 6 Assignment 1. Elizabeth Bermudez Dr. Chee Piong ACC 556: Financial Accounting for Managers. 8-14-2015 Financial Analysis Week 6 Assignment 1. Introduction In this paper, we will be interpreting and analyzing a company’s health from an investor’s point of view using financial statements. For the purpose of decision making, two retailer companies featured in Fortune is the focus of this analysis. Fortune 100 best companies to work for ranks at 58 Recreational Equipment, INC., (REI) at (Fortune, 2015 Fortune 100 Best Companies to Work For®, 2015). Fortune 500 ranks 393 Dick’s Sporting Goods, INC. (Dick’s), (Fortune, Fortune 500, 2015) Decision making from an investor or leadership role explores reliable sources such as Fortune. Investment decision based on business practice influenced by business regulations are the investor's goal. Financial tools of ratios analysis used to determine profitability, liquidity, and solvency are used to evaluate performance. Ratio tools assist in the decision-making reasons for choosing to invest or not to do so. Annual Report Financial Statement The annual report introduces financial statement reports formatted for investor’s analysis. The main forms of interpretation include; Balance Sheet, Cash Flow, Income, Stockholders Equity or Member’s Equity. The Balance Sheet reports critical information of assets and liabilities to determine profitability, liquidity, and solvency. Specific tools used to analyze financial...
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...Chapter 2 Mini Case: “Financial Statement and Cash Flow Analysis” Jennifer L. Hatch Professor Edward Strafaci Advanced Financial Management January 28, 2015 Chapter 2 Mini Case: “Financial Statement and Cash Flow Analysis” Introduction According to the mini case, Jaeden Industries has provided their account balances as of December 31, 2010. In order to determine the company’s free cash flow, liquidity, debt and profitability ratios, and market ratios, the following are required: dividend payout ratio of 25%, tax rate of 34%, stock price on December 31, 2009 was $42.39 and the stock price on December 31, 2010 was $56.82. Below are the calculations required in order to obtain a cash flow analysis on Jaeden Industries. Jaeden’s Free Cash Flow Free cash flow involves the following acronyms that are to be applied to the first party of the formula: net operating profits after taxes (NOPAT), earning before interest and taxes (EBIT), T = corporate tax rate, and operating cash flow (OCF). In order to calculate the free cash flow (FCF), two steps are required. The first step is to calculate the OCF, and then the free cash flow can be determined. Operating Cash Flow OCF = [EBIT x (1 – T)] + Depreciation OCF = [$13,119,000 x (1 - .34) + $700,000 OCF = [$13,119,000 x .66] + $700,000 OCF = $8,658,540 + $700,000 OCF = $9,358,540 Free Cash Flow In order to determine the second part of the calculation, the following information is required: change in gross fixed...
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...Valued at 1 April, 2007 Matthew Lewis: matthew.lewis@ttu.edu Tyler Page: tyler.page@ttu.edu Alex Segreti: alexander.l.segreti@ttu.edu Andrea Spencer: andrea.spencer@ttu.edu Stephen Wiggins: stephen.wiggins@ttu.edu Table of Contents Executive Summary Business & Industry Analysis. Five Forces Model Rivalry Among Existing Firms Threat of New Entrants Threat of Substitute Products Bargaining Power of Buyers Bargaining Power of Suppliers Competitive Advantage Analysis Key Success Factors Accounting Analysis Key Accounting Policies Accounting Flexibility Accounting Strategy Quality of Disclosure Revenue Manipulation Diagnostics Expense Manipulation Diagnostics Potential “Red Flags” Undo Accounting Distortions Ratio Analysis Forecast Financials Liquidity Analysis Profitability Analysis Capital Structure Analysis Extended Ratio Analysis SGR and IGR Analysis Forecasting Valuation Analysis Cost of Equity Cost of Debt WACC Method of Comparables Intrinsic Valuation Models Altman Z-Score Analyst Recommendation Appendix Works Cited 3 7 8 9 10 11 12 13 14 14 16 16 18 20 21 23 26 29 30 31 31 37 44 46 47 47 61 61 66 67 68 72 78 79 80 84 1 2 Executive Summary Investment Recommendation: Overvalued, Sell BBBY – NASDAQ $40.40 52 week range $30.92 - $43.32 Revenue (2006) $5,809,562,000 Market Capitalization $11.75 Billion Shares Outstanding 283,380,000 3-month Avg. Daily Trading Volume 2,332,640 Institutional Ownership 83.40% Insider Ownership 3.70% Book Value Per Share (mrq) $9...
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...Valued at 1 April, 2007 Matthew Lewis: matthew.lewis@ttu.edu Tyler Page: tyler.page@ttu.edu Alex Segreti: alexander.l.segreti@ttu.edu Andrea Spencer: andrea.spencer@ttu.edu Stephen Wiggins: stephen.wiggins@ttu.edu Table of Contents Executive Summary Business & Industry Analysis. Five Forces Model Rivalry Among Existing Firms Threat of New Entrants Threat of Substitute Products Bargaining Power of Buyers Bargaining Power of Suppliers Competitive Advantage Analysis Key Success Factors Accounting Analysis Key Accounting Policies Accounting Flexibility Accounting Strategy Quality of Disclosure Revenue Manipulation Diagnostics Expense Manipulation Diagnostics Potential “Red Flags” Undo Accounting Distortions Ratio Analysis Forecast Financials Liquidity Analysis Profitability Analysis Capital Structure Analysis Extended Ratio Analysis SGR and IGR Analysis Forecasting Valuation Analysis Cost of Equity Cost of Debt WACC Method of Comparables Intrinsic Valuation Models Altman Z-Score Analyst Recommendation Appendix Works Cited 1 3 7 8 9 10 11 12 13 14 14 16 16 18 20 21 23 26 29 30 31 31 37 44 46 47 47 61 61 66 67 68 72 78 79 80 84 2 Executive Summary Investment Recommendation: Overvalued, Sell BBBY – NASDAQ $40.40 52 week range $30.92 - $43.32 Revenue (2006) $5,809,562,000 Market Capitalization $11.75 Billion Shares Outstanding 283,380,000 3-month Avg. Daily Trading Volume 2,332,640 ...
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...Report on | Financial Statement Analysis & Valuation of Monno Jute Stafllers | A report on “Financial Statement Analysis & Valuation of Monno Jute Stafllers ” Course Title: FINANCIAL STATEMENT ANALYSIS & VALUATION Course Code: F-401 Submitted To: Dr. Mahmood Osman Imam Professor Department of Finance, University of Dhaka Hussain Ahmed Enamul Huda Lecturer Department of Finance, University of Dhaka Submitted By: Sayma Khair 17-115 BBA 17th batch 4th year 1st semester Department of Finance, University of Dhaka Date of Submission: July22, 2014. Letter of Transmittal July 22, 2014 Mahmood Osman Imam Professor Department of Finance University of Dhaka Subject: Submission of term paper on Financial Statement Analysis & Valuation of Monno Jute Stafllers Dear sir, I am extremely gratified & enthusiastic to present a report on Financial Statement Analysis & Valuation Of Monno Jute Stafllers as per as a part of requirement of our BBA Program of Course “FINANCIAL STATEMENT ANALYSIS & VALUATION”, Course no: F-401 . This report was assigned to us with a view to scrutinizing our skill and flamboyance when it comes to financial statement analysis know-how. Moreover, the purpose of this term paper was to extract our inner ability & enhance our financial statement analysis & valuation related potentials. We acknowledge the...
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...Lecture Handouts for Chapter 5 Chapter 5 is covered in lectures 31 and 32. Risk and Return The return from an investment is the change in market price, plus any cash payments received due to ownership, divided by the beginning price. The risk of a security can be viewed as the variability of returns from those that are expected. Measurement of Risk The expected return is simply a weighted average of the possible returns, with the weights being the probabilities of occurrence. The conventional measure of dispersion, or variability, around an expected value is the standard deviation σ. The square of the standard deviation σ2 is known as the variance (σ2). The standard deviation can sometimes be misleading in comparing the risk, or uncertainty, surrounding alternative investments if they differ in size. To adjust for the size, or scale, problem, the standard deviation can be divided by the expected return to compute the coefficient of variation (CV) – a measure of “risk per unit of expected return.” Investor’s Attitude towards Risk Investors have different attitudes while deciding between the risk and return in an investment. Investors are, by and large, risk averse. This implies that they demand a higher expected return, the higher the risk. The expected return from a portfolio The expected return from a portfolio (or group) of investments is simply a weighted average of the expected returns of the securities comprising that portfolio. The weights are equal to the proportion...
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