Practice sheet - Sammendrag Financial Statement Analysis PDF

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Practice sheet, Financial Statement Analysis Adjusting Entries at end of bookkeeping: Cost of goods sold: Start inv. Bought inv. Closing inv. Cost of goods sold Inventory goes to Credit Cost of goods sold goes to Debit From earnings to Cash Flow based earnings: Accrual based earnings Diff. in invent...

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Practice sheet, Financial Statement Analysis Adjusting Entries at end of bookkeeping: - Cost of goods sold: Start inv. + Bought inv. – Closing inv. = Cost of goods sold - Inventory goes to Credit - Cost of goods sold goes to Debit

From accrual-based earnings to Cash Flow based earnings: è Accrual based earnings - Diff. in inventory P and/or PCR with no S - Diff. in accounts receivable S with no PCU + Diff. in accounts payable P with no PCR = Cash Flow based Earnings . • Difference is this period minus last period

Normal Income Statement à Analytical Income Statement • Same procedure until EBIT - Find tax rate to remove from EBIT • You then find NOPAT - Net financial expenses, + tax shield • = Net Earnings

Normal Balance Sheet à Analytical Balance Sheet • Need to classify items as either Operating of Financing - Equity (right side) is neither - Thumbs rule: - Financing if it requires a return or has interest - Operating if it’s part of core business • Analytical Balance Sheet lets us find ‘Invested Capital’ Invested Capital = Operating Assets – Operating Liabilities Invested Capital = (Equity + Financing Liabilities) – Financing Assets

EVA = (ROIC-WACC) * Invested Capital !"#$%&'()(*+$&,#"' $#&-

ROE = .//0$1&23"$/,$"43)#5

or

ROE = ROIC * (ROIC-NBC) *

!6.7

.1% !"#$,)(&(8)&2$"-9"(+"+ $&,#"'$#&NBC = !6.7

ROIC, and ROIC breakdown ROIC =

!:;"+#"?$@&9)#&2 !:;"(3"

Turnover rate of Invested Capital =

!"#$A">"(3"

6(>"+#"?$@&9)#&2

• For ‘days-on-hand’ number, put result under 365: BCD = 𝐷𝑎𝑦𝑠$𝑜𝑛$ℎ𝑎𝑛𝑑 '"+32#

Sustainable growth rate g = ROE * (1-PO) -PO= Payout Ratio or

g = N𝑅𝑂𝐼𝐶 + (𝑅𝑂𝐼𝐶 − 𝑁𝐵𝐶 ) ∗ Basically, the same...

FCFF & FCFE è Net Earnings (E) - Current Assets - Investments + D&A . = FCFF . - Interest * (1-tax) + Net financing cost = FCFE .

!6.7 .1%

Z ∗ (1 − 𝑃𝑂)

Valuation & WACC • In valuation, we measure either Enterprise Value (EV), or Market value of shareholders’ equity (EV minus NIBD) -WACC is central in many of the methods

WACC =

!6.7

!6.7]%

∗ 𝑟? ∗ (1 − 𝑡) +

%

𝑟 !6.7]% "

The dividend discount model (DDM) 7)>

𝑃` = ∑ (#ec c]'b + d

7)>fgh 'di*

∗

c

(c]'d)f

• ‘P0‘ Gives price of shareholders’ equity, add NIBD for Enterprise Value The discounted cash flow model (DCF)

𝐸𝑉` = ∑ (#ec (

l@llb

c]m...