...TABLE OF CONTENT Chapter I 1.1. Introduction Chapter II 2.1. Liquidity Ratio 2.1.1 Current Ratio 2.1.2 Quick or Acid Test Ratio 1. 2. 3.1. 3.2. Asset Management Ratio 2. 3.1. 3.2. 2.2.1 Inventory Turnover Ratio 2.2.2 Fixed Asset Turnover Ratio 2.2.3 Days Sales Outstanding 2.2.4 Total Asset Turnover Ratio 3.3. Debt Management Ratio 2.3.1 Debt Ratio 2.3.2 Times-Interest-Earned-Ratio 3.4. Profitability Ratio 2.4.1 Operating Margin 2.4.2 Profit Margin 2.4.3 Return on Total Asset 2.4.4 Basic Earning Power Ratio 2.4.5 Return on Common Equity Chapter III 3.1. Calculation 3.1.1 Liquidity Ratio 3.1.2 Asset Management Ratio 3.1.3 Debt Management Ratio 3.1.4 Profitability Ratio 1. 2. 3. 3. 4.5. 4.6. Trend Analysis Appendix CHAPTER I INTRODUCTION Pharmaniaga Berhad, the largest integrated local healthcare company has established the reputation of a corporation that delivers value to its clients and stakeholders through impeccable quality products and services. The Group is driven by its goal to enrich the lives of the communities it serves while being guided by its business philosophy of doing business with a conscience. Hence, this cover concept coupled with the theme...
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...Chapter 8 ASSET-LIABILITY MANAGEMENT Asset-Liability Management 1 A Look At FNMA’s Balance Sheet December 31, 1995 Billion Dollars __________________________________________________________ Assets: Liabilities and S/Hs’ Equity: Mortgage Portfolio Investments Cash & Rec. & Other Other Total 253 57 3 4 317 Short-term bonds Long-term bonds Other Debt EQUITY Total 146 153 7 11 317 Question: What happens if the Mortgage Portfolio loses its value by 11 billion dollars? In other words, if the mortgage portfolio loses its value by ___________%, then FNMA will lose all its equity! Asset-Liability Management 2 A Look at FNMA’s Income Statement For the Period December 31, 1994 - December 31, 1995 (in Billion $) Interest Income: Mortgage Portfolio Investments Total Interest Expense: Short Term Long-Term Total Net Interest Income Other Income Other Expenses Income Before Taxes (In Billion $) 18 3 21 In percent 7.85 % 6.155 7.56 4 14 18 3 1 1 3 5.855 7.0575 6.7525 0.8075 Investment Spread Asset-Liability Management 3 Funds-Gap Analysis Focus is on evaluating the impact of changes in interest-rates on net interestincome. The analysis is “maturity based.” Hence, it can be considered as the worst assetliability management tool. There is one side benefit in learning the Funds-Gap Analysis. It is a nice tool to demonstrate how changes in market yields cut through the balance-sheet and affects the income statement. Specifically, for example, it can...
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...UNIVERSITY MALAYSIADATE : 7th FEBRUARY 2015 | Assignment: 1) Calculate the key financial ratios for Company High Profits Berhad for the year 2013. (20 marks) | Category | Financial Ratio | Formula | | | | | | | Liquidity | 1) | Current Ratio | Current Assets / Current Liabilities | | | | | | | | 2) | Quick Ratio | (Current Assets – Inventory) / Current Liabilities | | | | | | | | | | | | | 3) | Net Profit Margin | (Profit After Tax / Sales) x 100 | | | | | | | Profitability | 4) | Return on Total Assets | (Profit After Tax / Total Assets) x 100 | | | | | | | | 5) | Return on Equity | (Profit After Tax / Shareholders Equity) x 100 | | | | | | | Debt | 6) | Debt Ratio | (Total Liabilities / Total Assets) x 100 | | | | | | | | 7) | Debt-Equity Ratio | (Long Term Liabilities / Shareholders Equity) x 100 | | | | | | | | | | | | | 8) | Inventory Turnover | Cost of Goods Sold / Inventory | | Asset | | | | | | 9) | Fixed Asset Turnover | Sales / Net Fixed Assets | | Management | | | | | | | | | | | 10) | Total Asset Turnover | Sales / Total Assets | | | | | | | | | | | 2) Evaluate the financial performance of Company High Profits Berhad for 2013 against the Industry Average. (20 marks) | Category | Financial Ratio | Industry Average | | | | | | | Liquidity | 1) | Current Ratio...
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...Certified Internal Auditor Computer-integrated manufacturing Certified Management Accountant Certified Public Accountant Credit Debit Electronic funds transfer Earnings per share Financial Accounting Foundation Financial Accounting Standards Board Financial Executives International Federal Insurance Contributions Act tax First-in, first-out Free on board Generally accepted accounting principles Governmental Accounting Standards Board Gross National Product Institute of Management Accountants Internal Revenue Code Internal Revenue Service Just-in-time Last-in, first-out Lower of cost or market Modified Accelerated Cost Recovery System Net 30 Net, end-of-month Price-earnings ratio Point of sale Return on investment Securities and Exchange Commission Total quality control Core_Endsheets_Rear.qxd 5/17/08 12:51 PM Page F Classification of Accounts Account Title Accounts Payable Accounts Receivable Accumulated Depreciation Accumulated Depletion Advertising Expense Allowance for Doubtful Accounts Amortization Expense Bonds Payable Building Capital Capital Stock Cash Cash Dividends Cash Dividends Payable Common Stock Cost of Merchandise (Goods) Sold Deferred Income Tax Payable Delivery Expense Depletion Expense Discount on Bonds Payable Dividend Revenue Dividends Drawing Employees Federal Income Tax Payable Equipment Exchange Gain Exchange Loss Factory Overhead (Overapplied) Factory Overhead (Underapplied) Federal Income Tax Payable Federal Unemployment Tax Payable Finished Goods...
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...[pic] Al-Azhar University - Gaza Faculty of Economics and Administrative Sciences Business Administration Department Financial Analysis For : [pic] Prepared by: Ahmed Al-Saqqa Ibrahem Al-Shanti Under the supervision of: Mr.. Nizar Naim 2010-2011 Introduction Microsoft Corporation is one of the largest companies in the field of software and information technology, noted in recent years, the performance drop valuable company, which used to occupy pride of place in this sector, probably due to the enormous development in this area as well as the emergence of new competitors. Microsoft Corporation is a public multinational corporation headquartered in Redmond, Washington, USA that develops, manufactures, licenses, and supports a wide range of products and services predominantly related to computing through its various product divisions. Established on April 4, 1975 to develop and sell BASIC interpreters for the Altair 8800, Microsoft rose to dominate the home computer operating system (OS) market with MS-DOS in the mid-1980s, followed by the Microsoft Windows line of OSs. Microsoft would also come to dominate the office suite market with Microsoft Office. The company has diversified in recent years into the video game industry with the Xbox and its successor, the Xbox 360 as well as into the consumer electronics market with Zune and the Windows Phone OS. The ensuing rise of stock in...
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...Most of the companies’ assets were current assets. The company A has more total current assets of 51.2 % than company B, who has only 32.1 %. The current assets in here, includes Cash and Short Term Investments, Receivables, Inventories, and other current assets, as shown below. Figure 1.1: ASSETS | A | B | Cash & Short Term Investments | 24.2 | 16.1 | Receivables | 12.8 | 8.1 | Inventories | 7.0 | 5.4 | Other Current Assets | 7.2 | 2.5 | Total Current Assets | 51.2 | 32.1 | However, both company A and B, have obtain 100% of Total Assets, comprising the Total Current Assets, Net Fixed Assets, Other Assets, Intangible, Investments& Advances. (shown on Fig. 2). Figure 1.2: ASSETS | A | B | Cash and Short Term Investments | 24.2 | 16.1 | Receivables | 12.8 | 8.1 | Inventories | 7.0 | 5.4 | Current Assets – Other | 7.2 | 2.5 | Current Assets - Total | 51.2 | 32.1 | Net Fixed Assets | 19.6 | 14.9 | Other Assets | 6.9 | 3.8 | Intangibles | 22.2 | 46.1 | Investments and Advances | 0.1 | 3.1 | Total Assets | 100.0 | 100.0 | When it comes to Liablties and Equity, as we observed, Company A, has more amount of Liabilities compared to company B, and most of these liabilities are curent liabilities. Company A has a total current liabilities of 26.1 % while, Company B, has only 21.4%. (shown on Fig. 3) Figure 1.3: | A | B | Accounts Payable | 9.8 | 2.2 | Debt in Current Liablities | 0.5 | 9.1 | Income Taxes Payable | 2.8 | 1...
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...Chapter 3. Solution to 3-15 Joshua & White Technologies: December 31 Balance Sheets (Thousands of Dollars) Assets 2010 2009 Cash and cash equivalents $21,000 $20,000 Short-term investments 3,759 3,240 Accounts Receivable 52,500 48,000 Inventories 84,000 56,000 Total current assets $161,259 $127,240 Net fixed assets 218,400 200,000 Total assets $379,659 $327,240 Liabilities and equity Accounts payable $33,600 $32,000 Accruals 12,600 12,000 Notes payable 19,929 6,480 Total current liabilities $66,129 $50,480 Long-term debt 67,662 58,320 Total liabilities $133,791 $108,800 Common stock 183,793 178,440 Retained Earnings 62,075 40,000 Total common equity $245,868 $218,440 Total liabilities and equity $379,659 $327,240 Joshua & White Technologies December 31 Income Statements (Thousands of Dollars) 2010 2009 Sales $420,000 $400,000 Expenses excluding depr. and amort. 327,600 320,000 EBITDA $92,400 $80,000 Depreciation and Amortization 19,660 18,000 EBIT $72,740 $62,000 Interest Expense 5,740 4,460 EBT $67,000 $57,540 Taxes (40%) 26,800 23,016 Net Income $40,200 $34,524 Common dividends $18,125 $17,262 Addition to retained earnings $22,075 $17,262 Other Data 2010 2009 Year-end Stock Price $90.00 $96...
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...Non-current assets should be financed by equity Equity – Non-current assets = … 2. Non-current assets should be financed bay equity + long-term liabilities Equity + long-term liabilities – non-current assets = … 3. Current assets should be financed by current liabilities Current liabilities – Current assets = … INVESTMENT RATIOS Earning per ordinary share 1. EPOS= Net income – dividends for privileged shares/number of ordinary shares Dividends per ordinary share 2. DPOS= dividends for ordinary shares / number of ordinary shares Price to earnings, x times –how much shareholders are ready to pay for 1 unit of company’s net profit; how fast shareholders can have return on their shares 3. P/E = Stock price / EPOS … LIQUIDITY RATIOS (times) 1. Current Ratio = Current assets/ current liabilities 2. Quick Ratio = (Current assets – Inventory)/ current liabilities 3. Absolute Ratio = (current assets – Inventory – accounts receivable)/ current liabilities ACTIVITY RATIOS, OPERATION CYCLE EVALUATION 1. Inventory turnover, X times, 365 days a year = COGS/ Average Inventory Average days’ inventory on hand = 365/ Inventory Turnover 2. Average Collection Period ACP = Account receivable/ average daily sales Average daily sales = Sales/ 365 3. Total assets turnover, X times = Sales/ Total assets 1-2 – low ratio for stable enterprise TAT = Sales/ total assets 4. Current...
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...Chapter 3 Analyzing Financial Statement Five major areas to analyze. (1) (2) (3) (4) (5) (1) a) Liquidity Position Management of Assets Management of Debt Company's Profitability Market's View of Company Liquidity Ratios - use to investigate the relationship between a firm's current (shortterm) assets and current (short-term) liabilities. Current Ratio = Current Assets Current Liabilities Current Assets - Inventory Current Liabilities Cash + Marketable Securities Current Liabilities b) Quick Ratio (Acid-test) Cash Ratio = c) = (2) Asset Management Ratios - Use to evaluate how efficiently management employs assets. Inventory Management a) b) Inventory Turnover Days’ Sales in Inventory = = Cost of Goods Sold (or Sales) Inventory Inventory Average Sales/day Accounts Receivable Management a) Average Collection = Period (ACP) Accounts Receivable Turnover = Accounts Receivable Average Sales/day Sales Accounts Receivable b) Accounts Payable Management a) Average Payment = Period (APP) Accounts Payable Turnover = Accounts Payable Cost of Goods Sold / day Cost of Goods Sold Accounts Payable b) Fixed Asset and Working Capital Management a) b) Fixed Asset Turnover Sales to Working Capital = Sales Net Fixed Assets Sales Net Working Capital = Total Asset Management a) b) Total Asset Turnover Capital Intensity = = Sales Total Assets Total Assets Sales (3) Debt Ratios - use to evaluate riskiness of company (remember higher risk equates to higher required...
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...Financial Management Financial Management June 4, 2012 Brenda A. Pitts Professor: Dr. Andrea Banto Abstract The following research is a look at Google, a leader in internet information searching, and its comparison to another big name in Internet technology, Microsoft, which launched Bing. The contents will provide a comparison and contrast of each company’s business model and financial management including an explanation of their financial ratio analysis, which will include a comparison and identification of both company’s most recent annual report with six specific financial ratios and of three (3) primary financial-based guidelines that should be used when selecting one of these two companies to invest in. This report will, also, give an explanation of what the profitability ratios can tell about Google and Microsoft’s performance and how that information would influence investing decisions. Financial Management What are the calculation / identification of Google and Microsoft’s most recent annual report for the six (6) financial ratios listed below? Liquidity Measurement Ratio (Current Ratio) Starting with the liquidity measurement ratio, which is also know as the current ratio, shows how each company is able to take its short-term assets and pay off its short-term liabilities. Short-term assets are classified as cash, marketable securities, accounts receivable, and inventory. Short-term debts consist of...
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...financial planning How to read a financial statement The application of the cost-volume-profit analysis concept After Studying This Chapter, You’ll Be Able To ▲ ▲ ▲ ▲ ▲ ▲ Distinguish the three categories of ratio analysis Compare and contrast financial statements from different companies Examine the link between asset investment and sales growth Apply the major components of Du Pont analysis Analyze the quality of financial reports Use analysis methods to evaluate profit levels Goals and Outcomes ▲ ▲ ▲ ▲ ▲ ▲ Analyze and interpret financial statements Explain the categories of ratio analysis Perform the basic types of financial ratios Manage the application of ratios to evaluate business performance Prepare the requirements for external financing Evaluate the financial viability of particular business alternatives 2059T_c05_150-188.QXD 06/29/2006 06:16 PM Page 151 FIRST PAGES 5.1 FINANCIAL STATEMENT ANALYSIS INTRODUCTION Now that you have studied the structure of business organizations and learned about financial data and how it is presented, it is time to move on to the next step in financial management. Analyzing financial statements is a skill shared by bankers, investors,...
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...end of the chapter (problem 15) is designed to drive the interpretation ideas home. We suggest that you lecture on the material and assign the problem to be gone over in class after students have wrestled with it themselves. The numbers are straightforward, but you can get a lot of mileage out of having the students role play the analyst and propose possible reasons for the numerical results. The solution in this manual will give you a lot to work with. The problem and solution are drawn from the author's experience in doing just this kind of analysis in business. TEACHING OBJECTIVES Students should gain a thorough understanding of cash flow principles and the mechanics of constructing cash flows from the balance sheet and income...
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...end of the chapter (problem 15) is designed to drive the interpretation ideas home. We suggest that you lecture on the material and assign the problem to be gone over in class after students have wrestled with it themselves. The numbers are straightforward, but you can get a lot of mileage out of having the students role play the analyst and propose possible reasons for the numerical results. The solution in this manual will give you a lot to work with. The problem and solution are drawn from the author's experience in doing just this kind of analysis in business. TEACHING OBJECTIVES Students should gain a thorough understanding of cash flow principles and the mechanics of constructing cash flows from the balance sheet and income...
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...future. When plans are being made, pro forma (forecasted) financial statements are prepared and analyzed, so that managers can gain insights regarding the impact of alternative strategies on the business’s financial and operating condition. 17.3 The inventory turnover ratio indicates how well a business is utilizing its inventories. It tells managers how many dollars of sales (revenues) are generated by each dollar of inventories. Inventories are a primary input into the medical device production process, whereas inventories (although important) are not as critical to the inpatient healthcare business. Thus, the inventory turnover ratio is a more important financial performance measure for a medical device company than for a hospital management company. 17.4 a....
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...(price/earnings ratio) II. Types of Ratios and Their Purposes • Profitability ratios indicate how well a company allocates its resources in relation to income generated. • Liquidity ratios measure whether a company is able to pay its bills. • Leverage ratios show how a company’s operations are financed. • Activity ratios measure a company’s productivity and efficiency. • Price/earnings (P/E) ratio reflects investors’ estimations of how well the company will be able to cope with unforeseen changes. III. Absolute Standards for Business Performance In many organizations, minimum financial ratios are used to serve as absolute standards for their performance as follows: • Profitability: net profit no less than 3% • Liquidity: current ratio greater than one • Leverage: long-term debt to total equity less than one • Activity: average collection period less than 60 days IV. Trend Analysis of Selected Income Items During Last Five Years To analyze a company’s performance trend, choose the company’s 200x financial statement as a base year and then express subsequent items as percentages of their value in the base year. For example, consider the cost of goods sold item in successive income statements of ABC Company and use 1991 as a base year...
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