Professional Documents
Culture Documents
Cynthia J. Brown
Marilyn M. Dutton
Thomas A. Rietz
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Stock Price
Expected
Cashflows
Timing of
Cashflows
Market
Conditions
NPV
MVA
EVA
Stock Price
Risk of
Cashflows
3
Financial Analysis
Financial Statements
Balance Sheet
Income Statement
Cashflow Statement
Statement of Retained Earnings
Sources of Data
Annual reports
Via mail, SEC or company websites
http://moneycentral.msn.com/investor
http://www.marketguide.com
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Assets
Current assets:
Cash & securities
Receivables
Inventories
Fixed assets:
Tangible assets
Intangible assets
Long-term
liabilities
Shareholders'
equity
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An Example: Dell
Abbreviated Balance Sheet
Assets:
Current Assets:
Non-Current Assets:
Total Assets:
$7,681.00
$3,790.00
$11,471.00
Liabilities:
Current Liabilities:
LT Debt & Other LT Liab.:
Equity:
Total Liab. and Equity:
$5,192.00
$971.00
$5,308.00
$11,471.00
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An Example: Dell
Abbreviated Income Statement
Sales
Costs of Goods Sold
Gross Profit
Cash operating expense
EBITDA
Depreciation & Amortization
Other Income (Net)
EBIT
Interest
EBT
Income Taxes
Special Income/Charges
Net Income (EAT)
$25,265.00
-$19,891.00
$5,374.00
-$2,761.00
2,613.00
-$156.00
-$6.00
$2,451.00
-$0.00
$2,451.00
-$785.00
-$194.00
$1,666.00
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Ratios
Measure relationships between resources and financial
flows
Show ways in which firms situation deviates from
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Types of Ratios
Financial Ratios:
Liquidity Ratios
Leverage Ratios
Operational Ratios:
Activity (Turnover) Ratios
Profitability Ratios
Valuation Ratios:
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Current Ratio:
15
2.5
2
1.5
1
0.5
0
Dell
Industry
Jan-96
Jan-97
Jan-98
Jan-99
Jan-00
2.08
1.80
1.66
1.80
1.45
1.90
1.72
1.60
1.48
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Debt Ratio:
17
Debt Ratio
0.6
0.5
0.4
0.3
0.2
0.1
0
Dell
Industry
Jan-96
Jan-97
Jan-98
Jan-99
Jan-00
54.70%
62.96%
73.07%
60.00%
69.70%
52.38%
66.25%
62.96%
53.73%
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19
Retention Ratio
20
ROE
60%
50%
40%
30%
20%
10%
0%
Dell
Industry
Jan-96
Jan-97
Jan-98
Jan-99
Jan-00
28.13%
22.30%
64.27%
30.60%
73.01%
25.50%
62.90%
18.00%
31.39%
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ROA
20%
15%
10%
5%
0%
Dell
Industry
Jan-96
Jan-97
Jan-98
Jan-99
Jan-00
12.66%
6.80%
17.31%
10.90%
22.12%
7.20%
21.23%
5.70%
14.52%
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Profit Margin
8%
7%
6%
5%
4%
3%
2%
1%
0%
Dell
Industry
Jan-96
Jan-97
Jan-98
Jan-99
Jan-00
5.14%
3.40%
6.68%
4.74%
7.66%
3.79%
8.00%
2.85%
6.59%
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24
Asset Turnover
300%
250%
200%
150%
100%
50%
0%
Dell
Industry
Jan-96
Jan-97
Jan-98
Jan-99
Jan-00
2.47
2.00
2.59
2.30
2.89
1.90
2.65
2.00
2.20
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T o ta l A s s e t T u rn o v e r
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T o ta l A s s e t T u rn o v e r
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T o ta l A s s e t T u rn o v e r
Sales
Total Assets
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T o ta l A s s e t T u rn o v e r
Sales
Total Assets Common Equity
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Sales
Total Assets Common Equity
Profit Margin Total Asset Turnover Equity Multiplier
ROA Equity Multiplier
ROE
Example: Predicted
Sustainable Growth for Dell
Based on 5 year
averages:
ROE = 51.94% &
= 100%
g = 0.5194 x 1 =
51.94%
r = 0.3139 + 0/P =
51.94%
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Benchmark with
Past for the company
Industry
36
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