Performance AnalysisPerformance AnalysisAre you feeling Lost?

Begin your performance analysis by developing a strategy.

What issues are important to you?

Profitability? Solvency? Share Value? Dividends? Asset Utilization? Social Responsibility, Other?

Checklist to beginChecklist to begin

Select an industryPrepare an

overview of the industry

Select a Target Select a

Benchmark

Get Annual Reports on both companies

Summarize stock price history

Collect current news on both companies

Organize your data

1) Profit, Equity, & Share Value

mgt.2) Debt mgt.3) Cash mgt.4) Asset mgt.5) Relationship mgt.6) Positioning

Your Investigation Begins…Your Investigation Begins…Follow the nightly news

Read the Wall Street Journal and other important business newspapers

Read the NY TimesSearch online

This is the Surveillance Stage1. Enter two years of financial data for the target

company2. Review the results & make notes3. Perform the same procedure for the Benchmark4. Compare Target to Benchmark & note results5. Read all Footnotes6. Look for inconsistencies (e.g. increases in profits

and decreases in cash type (liquid) accounts)7. Check current news. Look for qualitative

performance issues such as ethical behavior, good/bad relationships, and positioning for the future

Profit, Equity, and Share Value Profit, Equity, and Share Value managementmanagement

1.01) Income to Revenue

1.02) Margin1.03) Operating

Efficiency1.04) Tax/Pretax

Earnings1.05) ROE

1.06) Paid-in/Total Capital

1.07) Earned/Total Capital

1.08) % Capital in Change

1.09) Basic EPS1.10) Diluted EPS

Profit, Equity, and Share Value Profit, Equity, and Share Value managementmanagement

1.11) Share Price1.12) Price/Earnings1.13) Diluted EPS/Basic1.14) Book Value/Share1.15) Book

Value/Market1.16) Dividends

1.17) Dividend Payout1.18) Dividend Yield 1.19) Invest

Productivity1.20) Time to Payback1.21) Price Potential1.22) Beta

Debt managementDebt managementPart One:

2.23) Current Debt/Total Debt

2.24) Non-Debt/Total Debt

2.25) Total Debt/Total Assets

2.26) Current Assets/Total Assets

2.27) Non-Current Assets/Tot al Assets

Part Two:

2.28) Times Interest Earned

2.29) Current Cash Coverage

2.30) A/P turnover

2.31) Av. Payment Period

2.32) Total Debt / Equity

Cash managementCash management

3.33) Working Capital3.34) Working

Capital/Revenue3.35) Current Ratio3.36) Quick Ratio3.37) Operating Cash

Flow/Sales3.38) Cash Emphasis

Asset managementAsset management(Effective use of company assets)

4.39) Sales/Total Assets4.40) Net Inc/Total

Assets4.41) A/R turnover4.42) Average Collect4.43) Inventory

turnover4.44) Age of Inventory

Relationship/Ethical issuesRelationship/Ethical issues5.29) Employee Relations5.30) Customer Relations5.31) Competitor Relations5.32) Director Relations5.33) Government Relations5.34) Environmental record5.35) Sensitivity: Good/Bad

Citizenship & community sensitivity

5.36) Stockholder Relations5.37) Communication5.38) Public Persona5.39) Vendor Relations

Strategic PositioningStrategic Positioning

6.40) Vision & Mission6.41) Competitive Advantage6.42) Environment: External6.43) Environment: Internal6.44) Expansion: Plans and Progress