Financial Ratios / Comparables Analysis

PowerPoint Diagram Pack Financial Ratios/Comparables Analysis Evaluating Financial Ratios (or Comparables) is a crucial method for evaluating the financial and competitive health of a company relative to its competitive peers. This document provides an overview to Financial Analysis, as well as deep dive into 20 widely used Financial Ratios. ,[object Object],[object Object],[object Object],Profitability/ Efficiency Ratios Liquidity Ratios Solvency Ratios Investment Ratios 1 2 3 4

Financial analysis – Introduction INPUTS TO FINANCIAL ANALYSIS ,[object Object],[object Object],[object Object],DIMENSIONS OF FINANCIAL ANALYSIS ,[object Object],Cost Structure Analysis ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Ratio/Trends Analysis ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],THIS IS A PARTIAL PREVIEW You can preview the full PowerPoint document and download it at http://learnppt.com/powerpoint/

Financial analysis – introduction (cont.) ,[object Object],Transactions in year Cash received and paid credit given and received ONGOING STREAM OF EVENTS PROFIT AND LOSS ACCOUNT Revenues relevant to year = Expenditure relevant to year = -- Opening BALANCE SHEET Assets Fixed Assets Working capital Financing Owners’ interests Outside liabilities Closing BALANCE SHEET Assets Fixed Assets Working capital Financing Owners’ interests Outside liabilities CASHFLOW STATEMENT Operating activities Investing activities Servicing of financing Taxation Financing PROFIT AND LOSS P&L—Matches costs to associated revenues in a given year to give a representative picture of profitability. Hence, assets are Depreciated over time and charged to P&L gradually as the asset is “used up” over its useful life to enable the revenues to be created. CASHFLOW Shows the real cash flows associated with income and expenses in a given year, to show the actual change in cash position. Costs and revenues are not matched. BALANCE SHEET Summarizes the value of what a company owns less what it owes, and balances them with the sources of financing (debt and shareholders’ funds). Stated at a specified point in time (not for a period) Income Expenses Profit (loss) THIS IS A PARTIAL PREVIEW You can preview the full PowerPoint document and download it at http://learnppt.com/powerpoint/ Trading Revenues Recorded in Year Expenditure Recorded in Year Other Capital Paid In Borrowing Assets Purchased

Financial analysis – introduction (cont.) ,[object Object],THIS IS A PARTIAL PREVIEW You can preview the full PowerPoint document and download it at http://learnppt.com/powerpoint/ ,[object Object],Depreciation ,[object Object],Capital ,[object Object],Capitalization ,[object Object],Cash flow ,[object Object],Common Shares (or Common Stock) ,[object Object],[object Object],Cost of Goods Sold ,[object Object],Cost of Debt ,[object Object],Debt (Liability) ,[object Object],Book Value ,[object Object],Assets ,[object Object],Accounts Receivable (or Trade Credit) ,[object Object],Accounts Payable

Financial ratio analysis – Introduction ,[object Object],[object Object],What It Is ,[object Object],[object Object],[object Object],[object Object],[object Object],Why We Use It ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Strengths & Limitations Key strategic ratios Other ratios a ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Profitability/ Efficiency Ratios Liquidity Ratios Solvency Ratios Investment Ratios 1 2 3 4 1 To be used selectively, according to the industry and/or the level of detail required. THIS IS A PARTIAL PREVIEW You can preview the full PowerPoint document and download it at http://learnppt.com/powerpoint/

Financial ratio analysis – how to do it ,[object Object],Profitability/Efficiency Ratios Ratio Profit Margin (also known as operating margin) Formula ,[object Object],[object Object],[object Object],[object Object],[object Object],What It Does ,[object Object],[object Object],[object Object],Drivers ,[object Object],[object Object],[object Object],[object Object],Gross Margin ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],1 Costs that are altered by a change in output. THIS IS A PARTIAL PREVIEW You can preview the full PowerPoint document and download it at http://learnppt.com/powerpoint/

Financial ratio analysis – how to do it ,[object Object],Profitability/Efficiency Ratios (cont.) Ratio ,[object Object],[object Object],[object Object],Formula ,[object Object],[object Object],[object Object],[object Object],What It Does ,[object Object],[object Object],Drivers ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Return on Equity (ROE): What is shareholders’ profit? Ratio ROE Formula ,[object Object],[object Object],[object Object],What It Does ,[object Object],[object Object],[object Object],Drivers ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Return on Net Assets (RONA): How profitable is this company? THIS IS A PARTIAL PREVIEW You can preview the full PowerPoint document and download it at http://learnppt.com/powerpoint/

Financial ratio analysis – how to do it ,[object Object],Profitability/Efficiency Ratios (cont.) Ratio Current Ratio Formula ,[object Object],[object Object],What It Tells ,[object Object],[object Object],[object Object],[object Object],[object Object],Drivers ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],THIS IS A PARTIAL PREVIEW You can preview the full PowerPoint document and download it at http://learnppt.com/powerpoint/

Financial analysis – illustrative output ,[object Object],Trends in ratios can similarly be plotted Source: Dawson International THIS IS A PARTIAL PREVIEW You can preview the full PowerPoint document and download it at http://learnppt.com/powerpoint/

Financial ratio analysis – illustrative output ,[object Object],Margin Costs Asset Base $ Levers Shareholder Value RONA/Dupont Model THIS IS A PARTIAL PREVIEW You can preview the full PowerPoint document and download it at http://learnppt.com/powerpoint/

END OF PARTIAL PREVIEW You can preview the full PowerPoint document and download it at http://learnppt.com/powerpoint/

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Financial Ratios / Comparables Analysis

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