Section 11 Analysis of Financial Statements © 2005 Thomson/South-Western
Slide 2Financial Statements and Reports The Income Statement The Balance Sheet Statement of Cash Flows Statement of Retained Earnings
Slide 3Unilate Textiles: Comparative IS
Slide 4Unilate Textiles: Comparative BS
Slide 5Unilate Textiles: Liabilities and Equity
Slide 6Ratio Analysis of a company's proportions is by and large the initial phase in budgetary examination. Proportions are intended to show connections between money related articulation accounts inside firms and between firms.
Slide 7What is the Purpose of Ratio Analysis? Give thought of how well the organization is getting along Standardize numbers; encourage examinations Used to highlight shortcomings and qualities
Slide 8What Are the Five Major Categories of Ratios? What Questions Do They Answer? Liquidity: Can we make required installments in the present time frame? Resource mgt.: Right measure of advantages versus deals? Obligation mgt.: Right blend of obligation and value? Productivity: Do deals costs surpass unit costs, and are deals sufficiently high as reflected in PM, ROE, and ROA? Advertise values: Do speculators like what they see as reflected in P/E and M/B proportions?
Slide 9Industry Average Data
Slide 10Current Ratio = Current Assets Current Liabilities $465.0 $130.0 = 3.6 circumstances Industry normal = 4.1 circumstances What is Unilate's Current Ratio?
Slide 11Quick Ratio = Current Assets-Inventories Current Liabilities $195.0 $130.0 $465.0 - $270.0 $130.0 = 1.5 circumstances Industry normal = 2.1 circumstances What is Unilate's Quick, or Acid Test, Ratio?
Slide 12Unilate's Liquidity Position Ratios is somewhat beneath industry normal. Inventories are minimal fluid of Unilate's benefits and they are the advantages that endure misfortunes in case of a constrained deal. The snappy proportion demonstrates that, if receivables are gathered in full, Unilate can result its present liabilities without liquidating its stock.
Slide 134.6 . 6 times $1,230.0 = $270.0 Industry normal = 7.4 circumstances What is Unilate's Inventory Turnover Ratio? Contrasts ineffectively and industry May hold overabundance inventories May hold old/out of date stock.
Slide 14Industry normal = 32.1 days What is Unilate's Days Sales Outstanding Ratio?
Slide 15$1,500.0 = 3.9 circumstances $380.0 Industry Average 4.0 circumstances = What is Unilate's Fixed Assets Turnover Ratio?
Slide 16$1,500.0 = 1.8 circumstances = $845.0 Industry Average 2.1 circumstances = What is Unilate's Total Assets Turnover Ratios? TA turnover is underneath industry normal. Unilate may have overabundance inventories & receivables.
Slide 17Debt Ratio = Total obligation Total resources $430.0 $130.0 . + $300.0 . = 0.509 = 50.9% = $845.0 Industry Average = 45.0% Calculate the Debt Ratio
Slide 18TIE = EBIT Interest charges $130.0 3.3 circumstances = $40.0 Industry Average = 6.5 circumstances Calculate the Times-Interest-Earned Ratio
Slide 19Calculate the Fixed Charge Coverage Ratio Industry Average = 5.8x All three past proportions reflect utilization of obligation, yet concentrate on various perspectives.
Slide 20$54.0 $1,500 = 0.036 = 3.6% Industry Average = 4.7% Unilate's Profitability Ratios- - Profit Margin, ROA, and ROE
Slide 21= 0.064 = 6.4% $54.0 $845.0 = $54.0 $415.0 - 0 = 0.130 = 13.0% Industry Average = Industry Average = 12.6% 17.2% Unilate's ROA, and ROE
Slide 22$23.00 10.6 circumstances = $2.16 Industry Average = 13.0 circumstances Unilate's Market Value Ratios Price/Earnings Ratio
Slide 231.4 circumstances $23.00 $16.00 = Industry Average = 2.0 circumstances Unilate's Market Value Ratios Market/Book Ratio
Slide 24ROA = Net Profit Margin X Total Assets Turnover Sales Total Assets Net Income Sales X = $54.0 $1,500.0 X $1,500.0 $845.0 = 3.6% X 1.8 = 6.4% Summary of Ratio Analysis: The DuPont Equation
Slide 25DuPont Equation Provides Overview Firm's productivity (measured by ROA) Firm's cost control (measured by overall revenue) Firm's benefit usage (measured by aggregate resource turnover)
Slide 26Limitations of Ratio Analysis? Correlation with industry midpoints is troublesome if the firm works a wide range of divisions. "Normal" execution not really great. Expansion twists accounting reports. Occasional variables can twist proportions. "Window dressing" methods can improve proclamations and proportions look. Diverse working and bookkeeping rehearses twist correlations. At times hard to discern whether a proportion is "great" or "terrible" Difficult to tell whether organization is, on adjust, in solid or frail position
SPONSORS
SPONSORS
SPONSORS