| Week3: Financial Statement Analysis Exercise | Name: _________________________ |
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| PS: Guidance at bottom of this document. |
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| Instructions | |||||||
| 1) Calculate the value or the ratio of items in the |
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| 2) Show your work by specifiying the formula you used for each of these calculations. |
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| 3) For $ values, no need to display any decimals, e.g Gross Profit = $34,000. |
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| 4) For unitless ratios and percentages, display 1 decimal place, e.g. TIE = 2.8; ROA = 4.7%. |
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| (1) | (2) | ||||||
| Suggestion: Calculate the subtotals (e.g. the current assets) before going on to answer the individual questions. |
Commonsize | ||||||
| Balance Sheet & | |||||||
| Income Statement | |||||||
| Big Apple Enterprises | 2013 | 2014 | 2013 | 2014 | |||
| Total Assets | 62,000 | 72,000 | 100.0% | 100.0% | |||
| Inventories | 7,500 | 8,200 | |||||
| Receivables | 21,000 | 21,000 | |||||
| Cash | 4,500 | 6,000 | |||||
| Current Assets | |||||||
| Other Non-current Assets | 10,500 | 11,300 | |||||
| Net Fixed Assets | 18,500 | 25,500 | |||||
| Current Liabilities | 19,000 | 14,000 | |||||
| Debt | 23,000 | 28,000 | |||||
| Equity | 20,000 | 30,000 | |||||
| Total Liabilities & Equity | |||||||
| Revenues | 125,000 | 142,000 | 100.0% | 100.0% | |||
| Cost of Goods Sold (COGS) | 89,000 | 108,000 | |||||
| Gross Profit | |||||||
| SG&A | 21,000 | 25,000 | |||||
| Operating Profit (EBIT) | |||||||
| Interest Expense | 2,800 | 3,500 | |||||
| Earnings Before Taxes (EBT) | |||||||
| Taxes | |||||||
| Net Income After Tax (NIAT) | |||||||
| Other Information | |||||||
| Tax Rate | 35% | 35% | |||||
| Number of Shares Outstanding | 10,000 | 13,000 | |||||
| Common Dividends Paid | 3,000 | 3,900 | |||||
| Share Price | $8.00 | $7.50 | |||||
| 2014 Summer2 | |||||||
| For each of the calculations or ratios below, indicate the formula that you are using to compute the quantum as well as the numeric answer. |
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| Year: | 2014 | ||||||
| 3) | What is the company’s Gross Profit in 2014? | ||||||
| e.g. | Gross Profit = Rev – COGS | 34,000 | |||||
| 4) | What is the company’s Gross Margin in 2014? |
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| Gross Margin = … specify your formula used |
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| 5) | What is the company’s Operating Profit (EBIT) in 2014? |
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| EBIT = … specify your formula used | |||||||
| 6) | What was the company’s Pretax Income in 2014? (EBT) |
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| EBT = … specify your formula used | |||||||
| 7) | How much Income Tax did they pay in 2014? |
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| Income Tax = … specify your formula used |
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| 8) | What was the company’s Net Income After Tax in 2014? |
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| NIAT = … specify your formula used | |||||||
| 9) | What was the company’s NOPAT in 2014? |
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| NOPAT = … specify your formula used |
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| 10) | What was the company’s Times Interest Earned in 2014? |
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| TIE = … specify your formula used | |||||||
| 11) | What was the company’s Profit Margin in 2014? |
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| Profit Margin = … specify your formula used |
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| 12) | What was the Company’s Return on Assets in 2014 ? |
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| ROA = … specify your formula used | |||||||
| 13) | What was the company’s Return on Equity in 2014? |
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| ROE = … specify your formula used | |||||||
| 14) | What is the company’s Current Ratio in 2014? |
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| Current Ratio = … specify your formula used |
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| 15) | What is the company’s Quick Ratio in 2014? |
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| Quick Ratio = … specify your formula used |
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| 16) | What is the company’s Total Asset Turnover Ratio in 2014? |
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| Total Asset Turnover = … specify your formula used |
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| 17) | What is the company’s Inventory Turnover Ratio in 2014? |
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| Inventory Turnover = … specify your formula used |
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| 18) | What is the company’s Day’s Sales Outstanding (DSO) in 2014 assuming 365 days per year? |
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| DSO = … specify your formula used | |||||||
| 19) | What is the rate of the the company’s asset growth between 2013 and 2014? |
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| Asset Growth = … specify your formula used |
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| 20) | What is the rate of the company’s sales’ growth between 2013 and 2014? |
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| Sales Growth = … specify your formula used |
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| 21) | What were the company’s Net Operating Working Capital in 2014? |
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| NOWC = … specify your formula used |
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| 22) | What was the company’s Operating Capital in 2014? |
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| Operating Capital = … specify your formula used |
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| 23) | What was the company’s Debt to Equity Ratio in 2014? |
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| Debt-to-Equity Ratio = … specify your formula used |
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| 24) | What was the company’s Equity Multiplier in 2014? |
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| Equity Multiplier = … specify your formula used |
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| 25) | What was the company’s Return on Invested Capital (ROIC) in 2014? |
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| ROIC = … specify your formula used | |||||||
| 26) | What was the company’s Earnings Per Share in 2014? |
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| EPS = … specify your formula used | |||||||
| 27) | What was the company’s Price/Earnings Ratio in 2014? |
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| PE Ratio = … specify your formula used |
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| 28) | What was the company’s Dividend Payout Ratio in 2014? |
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| Dividend Payout Ratio = … specify your formula used |
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| 29) | What were the Dividends Per Share paid in 2014? |
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| Dividend Per Share = … specify your formula used |
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| 30) | What was the Dividend Yield in 2014? |
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| Dividend Yield = … specify your formula used |
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| Guidance | |||||||
| Items highlighted in yellow are intermediate calculations that could help you in calculating some of the ratios. |
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| (0) | Before you start Googling for any of the required financial ratios to calculate the above, |
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| please be aware that some financial ratios havemore than one variation. For example, |
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| use of current accounting period’s Total Assets vs. the Average of Total Assets of the |
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| Beginning and the Ending Total Asset of the accounting period. These variations have |
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| valid rationale behind its use … | |||||||
| (1) | … but for consistency in grading this Exercises as well as the Exam, we will adopt the |
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| officieal ratios as is summarized in Vol 1, pg 521 [2014-edition]; pg 591 [2013-edition]. |
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| (2) | For ratios that are not listed on above summary page, please check the textbook’s |
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| Indexes at the back of Vol 2 pg 1089 & 1114 [2014-edition]; Vol 1 pg 736 [2013-edition]. |
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| (3) | If you still have questions regarding specific ratios, make an effort to attend the Live |
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| Classroom. It is bound to be asked by one of the students. | |||||||
| If you are unable to attend, the session will be recorded for subsequent playback. |
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| Revenue is also known as Sales. | |||||||
| Net Income in (8) is really Net Income After Tax; also called Earnings. |
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| Q&A | |||||||
| Preferred Dividends info are normally shown “above the NIAT line” in the Income Statement. If it can’t be derived from available info, assume it to be 0; we can’t make up numbers. |
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| In any of the financial ratios which involves using “averages”, for example Average Inventory, you can take its average if financial data for two consecutive years are given and that these two “columns” of data refer to “year-ending numbers”. |
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| Can dividends payout exceed NIAT? In practice, it is not illegal and it has been done before but it generally does not make sense to do so other than under “extrordinary” circumstances. It tends to send out a “what’s going on?” big red flag; sort of like “using dividends to buy investors’ hearts and similar to the comment made after the recent presidential election? BUT, if the company has Retained Earnings, it could technically do so and we have no further info from this Exercise what the Board & the CFO is thinking. Work with the numbers given in the Exercise; it is a good idea to clarify with the instructor too … |
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