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Gah, tried to do test questions before seminar and brain nearly melted - were a lot easier after though so brain saved from immanent implosion.
This is kind of like notebook soup - the seminar was a bit overwhelming. The walk through the calculation questions helped a lot.
Types of Financial Statements
Fun things we can work out by staring at financial statements
Book versus Market Values
ROE = (Net Income / Sales ) x (Sales / Total Assets) x (Total Assets / Total Equity)
Efficiency measure: Accounts Receivable Days = Accounts Receivable / Average Daily Sales (being a measure of efficiency of debt collection. Nokia's was 80 days in 2007 up from 52 in 2006). You can also look at Accounts Payable Days (average days to pay invoices) or Inventory Days (average days inventory held before it's sold)
This is kind of like notebook soup - the seminar was a bit overwhelming. The walk through the calculation questions helped a lot.
Types of Financial Statements
- Balance Sheet
- Income Statement
- Statement of Cash Flows
- Statement of Stockholders’ Equity
Fun things we can work out by staring at financial statements
Book versus Market Values
- Market-to-Book Ratio = Market Value of Equity / Book Value of Equity (means comparison of how much people will pay for shares versus how much the company is worth on paper. IBM's was 8.8 in 2009)
- Market Value of Equity (Market Capitalisation) = Market Price per Share x Number of Shares Outstanding
- Debt-Equity Ratio = Total Debt / Total Equity - measures a firm's financial leverage - how much cash is available for use
- Book Debt-Equity Ratio = Total Debt / Total Equity (not especially useful, comes out of financial statements)
- Market Debt-Equity Ratio = Total Debt / Total Equity (more informative, comes out of market's willingness to buy shares)
- Net Working Capital (NWC) = Current Assets – Current Liabilities
- Current Ratio = Current Assets / Current Liabilities
- Quick Ratio = (Current Assets – Inventories) / Current Liabilities
- Enterprise Value = Market Value of Equity + Debt – Cash (being the cost of buying ALL the shares, paying ALL the debts and inheriting ALL the cash)
- Earnings Before Interest and Taxes (EBIT) = exactly what it sounds like
- Return on Sales
- Operating Margin = Operating Profit / Sales (being how much a firm earns from each dollar of sales before interest and taxes. Nokia's was 13% in 2007)
- Net Profit Margin = Net Income / Total Sales (being how much revenue is available to equity holders after interest and taxes. Nokia's was 14% in 2007)
- Return on Assets = Net Income / Total Assets
- Net Operating Income (NOI) or EBIT or EBITDA to book value of assets
NOI or EBIT or EBITDA to enterprise value
- Net Operating Income (NOI) or EBIT or EBITDA to book value of assets
- Return on Equity (RoE) = Net Income / Book Value of Equity
- Being a measure of return on past investments - did things they invested in generate revenue? Nokia's was 42% in 2007
Earnings Per Share (EPS) = Net Income / Shares Outstanding (distributing more shares 'dilutes' the value of the existing ones)
- Being a measure of return on past investments - did things they invested in generate revenue? Nokia's was 42% in 2007
- Price to Earnings Ratio - comparison of share price to net income
ROE = (Net Income / Sales ) x (Sales / Total Assets) x (Total Assets / Total Equity)Efficiency measure: Accounts Receivable Days = Accounts Receivable / Average Daily Sales (being a measure of efficiency of debt collection. Nokia's was 80 days in 2007 up from 52 in 2006). You can also look at Accounts Payable Days (average days to pay invoices) or Inventory Days (average days inventory held before it's sold)