Financial Statement Analysis

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Financial Statement Analysis

• Acct 592
• July 8, 2003

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Nike Case Continued
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Statement of Cash Flows Grid
Direction of Chg. In Acct. During Year Direction of Chg. In Acct. During Year
Increase Decrease
Type of Account Asset -
Type of Account Liability -
? Sign ( or -) indicated in grid is the
adjustment to net income for the year in the
operating section on the SCFs
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Chapter 3

• Introduction to Profitability
• and Risk Analysis

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Using ROA and its components

• Return on Assets
• ROA
• Profit Margin
• pM
• Asset Turnover
• ATO

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MultiStep Income Statement

• Net Sales
• - COGS
• Gross Profit
• - Operating Expenses (SGA)
• Operating Income
• /- Other Revenues and Expenses
• Income before Taxes
• - Provision for Taxes
• Net Income (Income from Cont. Operations)

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MultiStep IS Cont.

• ..
• - Provision for taxes
• Income from Continuing Operations
• /- Discontinued operations (net of tax)
• /- Extraordinary items (net of tax)
• /- Changes in acct. principles (net of tax)
• Net Income

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Liquidity

• Accounts receivable turnover
• Inventory turnover
• Accounts payable turnover
• Current ratio
• Quick ratio

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Solvency

• Long-term Debt Ratio
• Debt to Equity Ratio
• Liabilities to Assets Ratio
• Interest Coverage Ratio (accrual and cash flow)
• Operating Cash Flows to Liabilities

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Profitability the B/S

• ROA ?
• ROC
• ROPS
• ROCE
• Note that this is not an equality but rather an
  allocation to each source of capital

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Now, decompose ROCE

• Common Capital
• ROCE ROA x Earnings x Structure
• Leverage Leverage

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EPS, Appendix 3.1

• Basic vs. Diluted (Complex) EPS