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ANALYSIS, USING AND UNDERSTANDING FINANCIAL STATEMENTS OF THE FIRM [AUFSF2009]
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ANALYSIS, USING AND UNDERSTANDING FINANCIAL STATEMENTS OF THE FIRM E-mail: [email protected]
www: HTTP://MICHALSKIG.UE.WROC.PL/
Mobile: +48503452860
5 lectures + 1 exam (individual homework sent via email + test)
Next lecture: 27th November.
Michalski G., Prediction cooperator future condition using financial statements (In Polish: Ocena kontrahenta na podstawie sprawozdań finansowych), ODDK, Gdańsk, 2008.
D.R.Harrington, B.D. Wilson, Corporate Financial Analysis, Irwin.
ANALYSIS, USING AND UNDERSTANDING FINANCIAL STATEMENTS OF THE FIRM [AUFSF2009]
ANALYSIS, USING AND UNDERSTANDING FINANCIAL STATEMENTS OF THE FIRM [AUFSF2009]ANALYSIS, USING AND UNDERSTANDING FINANCIAL STATEMENTS OF THE FIRM [AUFSF2009]
The return on assets (ROA) The return on assets (ROA) percentage shows how profitable a company's assets are in generating
revenue.
ROA can be computed as:
This number tells you what the firm can do with what it has, i.e. how many dollars of earnings they derive from each dollar of assets they control. Its a useful number for comparing competing companies in the same industry. The number will vary widely across different industries.
It is better when ROA > kd
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AssetsTotal
ExpenseInterestIncomeNetROA
ANALYSIS, USING AND UNDERSTANDING FINANCIAL STATEMENTS OF THE FIRM [AUFSF2009]
ANALYSIS, USING AND UNDERSTANDING FINANCIAL STATEMENTS OF THE FIRM [AUFSF2009]ANALYSIS, USING AND UNDERSTANDING FINANCIAL STATEMENTS OF THE FIRM [AUFSF2009]
Ex. ROA: Calculate ROA if you know that in the firm SARKA in 200(X-1) & 200(X), NI200(X-1)= 1318, NI200X= 5556, INT200(X-1)= 5053, INT200X= 6225, TA200(X-
1)=103528, TA200X=119057, kd,200(X-1)= 7%, kd,200X= 8%.
Typical results for firms from SARKA branch are on fig.:
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ANALYSIS, USING AND UNDERSTANDING FINANCIAL STATEMENTS OF THE FIRM [AUFSF2009]
ANALYSIS, USING AND UNDERSTANDING FINANCIAL STATEMENTS OF THE FIRM [AUFSF2009]ANALYSIS, USING AND UNDERSTANDING FINANCIAL STATEMENTS OF THE FIRM [AUFSF2009]
The return on equity (ROE) The return on equity (ROE) percentage shows how profitable is a company's equity in generating revenue.
ROE can be computed as:
This number tells you what the firm can do with what it has, i.e. how many euros of earnings they derive from each euro of equity they invest. Its a useful number for comparing competing companies in the same industry. The number will vary widely across different industries.
It is better when ROE > ke
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Equity
IncomeNetROE E
NI
ANALYSIS, USING AND UNDERSTANDING FINANCIAL STATEMENTS OF THE FIRM [AUFSF2009]
ANALYSIS, USING AND UNDERSTANDING FINANCIAL STATEMENTS OF THE FIRM [AUFSF2009]ANALYSIS, USING AND UNDERSTANDING FINANCIAL STATEMENTS OF THE FIRM [AUFSF2009]
Ex. ROE: Calculate ROE if you know that in the firm SARKA in 200(X-1) & 200(X), NI200(X-1)= 1318, NI200X= 5556, E200(X-1)=E200X=61000, D200(X-1)= 41528, D200X= 54057, βu200(X-1)=βu200(X) = 0,63.
Typical results for firms from SARKA branch are on fig.:
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ANALYSIS, USING AND UNDERSTANDING FINANCIAL STATEMENTS OF THE FIRM [AUFSF2009]
ANALYSIS, USING AND UNDERSTANDING FINANCIAL STATEMENTS OF THE FIRM [AUFSF2009]ANALYSIS, USING AND UNDERSTANDING FINANCIAL STATEMENTS OF THE FIRM [AUFSF2009]
Liquidity indicators Current ratio (current ratio) is the ratio of current assets and current liabilities:
Current ratio is an indication of a firm's market liquidity and ability to meet creditor's demands.
Acceptable current ratios vary from industry to industry.
Some types of businesses usually operate with a current ratio less than one. For example, if inventory turns over much more rapidly than the accounts payable become due, then the current ratio will be less than one (this is true for FastFoods). This can allow a firm to operate with a low current ratio.
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CL
CACurRat
ANALYSIS, USING AND UNDERSTANDING FINANCIAL STATEMENTS OF THE FIRM [AUFSF2009]
ANALYSIS, USING AND UNDERSTANDING FINANCIAL STATEMENTS OF THE FIRM [AUFSF2009]ANALYSIS, USING AND UNDERSTANDING FINANCIAL STATEMENTS OF THE FIRM [AUFSF2009]
Ex. CurRat: Calculate CurRat if you know that in the firm SARKA in 200(X-1) & 200(X), CA200(X-1)= 28845, CA200X= 24174, CL200(X-1)= 2528, CL200X= 8057.
Typical results for firms from SARKA branch are on fig.:
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