cf ii interpreting fs 2009 pre lecture (1)

8/3/2019 CF II Interpreting FS 2009 Pre Lecture (1)

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Winter Term 2009 1Markus Neuhaus I Corporate Finance I [email protected]

Corporate FinanceInterpreting Financial Statements

Dr. Markus R. Neuhaus

Dr. Marc Schmidli, CFA


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Corporate Finance: Course overview

18.09. Fundamentals (4 hours) M. Neuhaus & M.Schmidli

25.09 Investment Management M. Neuhaus & P. Schwendener

02.10. Business Valuation (4 hours) M. Neuhaus & M. Bucher

09.10. No Lecture No Lecture

16.10. Value Management M. Neuhaus, R. Schmid & F. Monti



06.11. No lecture No Lecture

13.11. Mergers & Acquisitions I&II (4 hours) M. Neuhaus & D. Villiger

20.11 Tax and Corporate Finance (4 hours) Markus Neuhaus

27.11. Legal Aspects R. Watter

04.12. Financial Reporting M. Neuhaus & M. Jeger

11.12. Turnaround Management M. Neuhaus & Markus Koch

18.12. Summary, repetition M. Neuhaus


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Grade CEO Qualification Doctor of Law (University of Zurich), Certified Tax Expert

Career Development Joined PwC in 1985 and became Partner in 1992.

Subject-related Exp. Corporate Tax

Mergers + Acquisitions

Lecturing SFIT: Corporate Finance, University of St. Gallen: Tax Law

Multiple speeches on leadership, business, governance, commercial

and tax law

Published Literature Author of commentary on the Swiss accounting rules

Publisher of book on transfer pricing

Author of multiple articles on tax and commercial law, M+A,

IPO, etc.

Other professional roles: Member of the board of conomiesuisse, member of the board

and chairman of the tax chapter of the Swiss Institute of

Certified Accountants and Tax Consultants

Markus R. NeuhausPricewaterhouseCoopers AG, Zrich

Phone: +41 58 792 4000Email: [email protected]


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Marc SchmidliPricewaterhouseCoopers AG, Zrich

Phone: +41 58 792 15 64Email: [email protected]

Grade Director

Qualification Dr oec. HSG., CFA charterholder

Career Development Corporate Finance PricewaterhouseCoopers since July 2000

Lecturing Euroforum Valuation in M&A situations

Guest speaker at ZfU Seminars, Uni Zurich, ETH, etc.

Published Literature Finanzielle Qualitt in der schweizerischen

Elektrizittswirtschaft

Various articles in Treuhnder, HZ, etc.


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Contents

Learning targets

Pre-course reading

Lecture Interpreting Financial Statements

Pre-course reading case studies / questions Solutions to case studies


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Learning targets

Framework for financial statement analysis

Understanding the need for financial statement analysis

Understanding the financial reporting system

Refreshing principal elements of financial statements (Balance sheet, income andcash flow statements)

Analysis of financial statements

Understand the purpose and use of ratio analysis

Being able to apply the various ratio analyses

Being able to evaluate corporate performance by the integrated analysis of ratios


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Contents

Learning targets

Pre-course reading




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Pre-course reading

Books

Mandatory reading:

Brigham, Houston (2009): Chapter 4 (pp. 84-109)

White, Sondhi, Fried (2003): Chapter 3 (pp. 74-99) Optional reading:

Brigham, Houston (2009): Chapter 3 (pp. 53-75)

Slides

Slides 1 to 11 mandatory reading

Other Slides optional reading, will be dealt within the lecture


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Contents

Learning targets

Pre-course reading




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Agenda I

1. Introduction

Financial analysis

Classes of users

Need for financial statement analysis

2. Ratio analysis

Significance of ratio analysis

Sources

Financial reporting systems and standards

Important groups of ratio analysis


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Agenda II

3. Case study

Beans Incorporation vs. Garlic Incorporation

4. Q&A and discussion


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Agenda: Introduction

Financial analysis

Classes of users



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Evaluation of a firms performance and development mainly by

identifying the key drivers of a firms performance and financial position

calculating and interpreting important ratios of the firm

Balanced Scorecard (soft hard)

A well rounded financial analysis takes into account not only the financials alone but also

surrounding factors which can have significant influence on the firms development.

Financial management does not operate in a vacuum.

Financial analysis

Source: White, Sondhi, Fried (2003), 2ff.

Environment

Financial Statements

Business

Macroeconomic situation,industry, market

Balance sheet, income statement,cash flow, stockholders equity, budget

Management, products, margins,technology, knowledge base, competition

Financial

Analysis


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Internal users (such as managers or board members)

External users of financial information encompass a wide range of interests but can be

classified into three general groups:

Credit and equity investors

Government, regulatory bodies, tax authorities

General public and special interest groups, labor unions and consumer groups

Classes of users

Source: White, Sondhi, Fried (2003), 4.


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Internal:

financial statements provide the

company with information on its

performance and development over

time and are a crucial basis for mostfinancial decisions (i.e. investment,

financing)

Costs

Efficiency

Profitability

Investments

Financing (needs)

External:

financial statements facilitate the

interaction between the company

and its business environment by

providing third parties with essentialinformation on the companys

development

Creditors

Investors

Shareholders

Government

Financial analysis has great significance and impact

on a companys development as it influences

expectations on the capital markets


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Agenda: Ratio analysis


Sources


Important groups of ratio analysis


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Ratio analysis

Financial statements help predict the future development of a company

Firm A has total debt of $200m whereas firm B has total debt of $2mm. Which firm isstronger, more liquid? Or which firm is more likely to generate higher cash flows?

Figures standing alone, such as total debt, are not really helpful

By putting debt into perspective with other appropriate figures, we are able to

predict which firm is more likely to succeed

such comparisons are ratio analysis

The debt burden can be evaluated (a) by

comparing each firms debt with its assets and (b) by comparing the

interest the company has to pay with the income it has available

Source: Brigham, Houston (2009), 103.


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As a companys value is determined by its ability to generate cash today and in

the future, ratio analysis has great importance

Share price development

Credit rating

However, there is no generally used list of ratios that could be applied to any company

Groups of ratios1):

Liquidity ratios

Asset management ratios Debt or financing ratios

Profitability ratios

Market value ratios

help predict thefuture development

of a company

1) Details later: see page 25ff.


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Principal elements of financial statements as primary

source for financial analysis

Balance sheet

Income statement

Statement of cash flows

Statement of stockholders equity

Further sources: Broker/analyst reports, Bloomberg, Reuters, Factset etc.

Collectively, these interrelated financial statements providerelevant and timely information about the past and are

essential for making crucial business decisions about

investment or financing activities today and in the future.

Financial statements are a key component to build trust in the

financial community.Source: White, Sondhi, Fried (2003), 5.


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Reporting systems and standards compel the company to meet a great number of

requirements in order to ensure that the financial statements are, above all, transparent

and comparable

The two most commonly used standards are:

IFRS (International Financial Reporting Standards)

US GAAP (United States Generally Accepted Accounting Principles)

Differences are found mainly in the classification of certain events (e.g. whether an

interest payment is reported under operating costs or financing costs etc.). Both aim to

provide a true and fair viewof the companys performance.

In addition, there are local GAAPs (Generally Accepted Accounting Principles). In

Switzerland we have rules in the Code of Obligation which permit hidden reserves and

the FER (Fachempfehlung fr Rechnungslegung) which is a light form of IFRS.

Source: White, Sondhi, Fried (2003), 5ff.


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Balance sheet

Snapshot of the companys assets

and liabilities at a certain reporting

date

Assets = Liabilities + Equity

Balance Sheet

(chf m) 2008 2007

Assets

Cash and cash equivalents 10 80

Accounts receivable 375 315

Inventories 615 415

Current assets 1'000 810

Net plant and equipment 1'000 870

Non-current assets 1'000 870

Total assets 2'000 1'680

Liabilities and Equity

Accounts payable 60 30

Notes payable 110 60

Accruals 140 130

Total current liabilities 310 220

Long-term bonds 750 580

Total debt 1'060 800

Common stock (50'000'000 shares) 130 130

Retained earnings 810 750

Total equity 940 880

Total liabilities and equity 2'000 1'680



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Income statement

Reports on the performance of a firm, the results of its operating activities

Matching principle = revenues and related costs must be accounted for during the same

period of time. This requires the recognition of expenses incurred to generate revenues

in the same period as the related revenues (revenue recognition, accrual method).


Income Statement

(chf in millions) 2008 2007

Net Sales 3'000.0 2'850.0

Operating Costs (2'616.2) (2'497.0)

EBITDA 383.8 353.0

Amortization - -

Depreciation (100.0) (90.0)

EBIT 283.8 263.0

Interest (88.0) (60.0)

Taxes (78.3) (81.2)

Net Income 117.5 121.8

Common dividends 57.5 53.0

Addition to retained earnings 60.0 68.8


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Statement of cash flow

The cash flow statement represents the cashgenerated by a company during the givenaccounting period

Separated into three categories: (I) operatingactivities, (II) investing activities, (III) financing

activities The investment section illustrates how cash was

spent whereas section III, financing shows howthose investments were financed

In the long run, cash flows from operating activitiesshould considerably increase; investments shouldbe equal to depreciation (plus a bit more tosupport stable growth)

In this example, the company has an operatingproblem as the cash flow from operating activitiesis negative

CAPEX = capital expenditures


Statement of Cash Flow

(chf in millions) 2008

Operating activities

Net Income 117.5

Additions

Depreciation and Amortization 100.0

Increase in accounts payable 30.0

Increase in accruals 10.0

Substractions

Increase in accounts receivable (60.0)

Increase in inventories (200.0)

Net cash provided by operating activities (2.5)

Long-term investing activities

Cash used to acquire fixed assets (CAPEX) ( 230.0)

Financing activities

Increase in notes payable 50.0Increase in bonds 170.0

payments of dividens (57.5)

Net cash provided by financing activities 162.5

Net decrease in cash and equivalents (7 0.0)

Cash and equivalents at beginning of the year 80.0

Cash and equivalents at end of the year 10.0


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Statement of retained earnings

Changes in retained earnings occur because stockholders allow the management to

retain and invest funds that otherwise would be paid out as dividend

Thus, the retained earnings position is not cash and is not available for spending


Statement of retained earnings

(chf in millions) 2008

Balance of retained earnings as of 2007 750.0

Add: Net income 2008 117.5

Less: Dividend to common stockholders (57.5)

Balance of retained earnings as of 2008 810.0


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Important groups of financial ratios

Liquidity ratios

Is the company able to pay its debts as they become due this year?

Asset management ratios

Does the amount of assets seem to be reasonable in relation to current and projected sales? And

how efficiently does the company use its assets?

Debt or financing ratios

To what extent is the company using financial leverage? Risk from capital structure?


How profitable is the company? How much output does the company generate in relation to a

certain input?

Market value ratios

How do the earnings and results appear in relation to the stock price?

Source: Brigham, Houston (2009), 84ff.


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Liquidity ratios

3.2x310

1000

sliabilitieCurrent

assetsCurrentratioCurrent !!!

1.2x310

615-1000

sliabilitieCurrent

sinventorie-assetsCurrentratioQuick !!!

Inventories are a firms least liquid current asset and therefore most likely to suffer losses if they have

to be sold in liquidation. A company should be able to pay current liabilities with current assets less

inventories.

If a company is getting into financial difficulties, it will pay its bills more slowly, borrowing money from

banks and from suppliers. This leads to increased current liabilities which causes the current ratio to

decrease. If current liabilities grow faster than current assets, this is a an indication of financial

difficulties.

Source: Brigham, Houston (2009), 87f.


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Balance sheet and income statement

Balance Sheet

(chf m) 2008 2007

Assets



Inventories 615 415








Accruals 140 130









Income Statement


Net Sales 3'000.0 2'850.0


EBITDA 383.8 353.0

Amortization - -Depreciation (100.0) (90.0)

EBIT 283.8 263.0

Interest (88.0) (60.0)

Taxes (78.3) (81.2)






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Liquidity ratios

3.2x310

1000

sliabilitieCurrent

assetsCurrentratioCurrent !!!

1.2x310

615-1000

sliabilitieCurrent

sinventorie-assetsCurrentratioQuick !!!

Inventories are a firms least liquid current asset and therefore most likely to suffer losses if they have

to be sold in liquidation. A company should be able to pay current liabilities with current assets less

inventories.

If a company is getting into financial difficulties, it will pay its bills more slowly, borrowing money from

banks and from suppliers. This leads to increased current liabilities which causes the current ratio to

decrease. If current liabilities grow faster than current assets, this is a an indication of financial

difficulties.

Source: Brigham, Houston (2009), 87f.


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Balance Sheet

(chf m) 2008 2007

Assets



Inventories 615 415








Accruals 140 130

Total current liabilities3

1022

0







Income Statement


Net Sales 3'000.0 2'850.0


EBITDA 383.8 353.0


EBIT 283.8 263.0

Interest (88.0) (60.0)

Taxes (78.3) (81.2)







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DSO shows the average collection period or how long customers usually take to pay their bills. The

higher the DSO, the more money is lost, because the company has to finance the gap with

expensive loans etc.

4.9x615

3000

Inventory

SalesratioturnoverInventory !!!

days46

365

3000

375

365/Sales

sReceivable

daypersalesAverage

sReceivablegoutstandinsalesDays !!!!

3.0x1000

3000

assetsfixedNet

SalesratioturnoverassetFixed !!!

Inventory turnover indicates whether a company (compared with peer companies) holds too much

inventory, which is very unproductive and represents an investment with a low return

The fixed assets turnover ratio indicates how effectively the company is using its fixed assets

compared with peer companies.



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Balance Sheet

(chf m) 2008 2007

Assets



Inventories 615 415








Accruals 140 130


220







Income Statement


Net Sales 3'000.0 2'850.0


EBITDA 383.8 353.0


EBIT 283.8 263.0

Interest (88.0) (60.0)

Taxes (78.3) (81.2)







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4.9x615

3000

Inventory


days46

365

3000

375

365/Sales

sReceivable

daypersalesAverage


3.0x1000

3000

assetsfixedNet








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Balance Sheet

(chf m) 2008 2007

Assets



Inventories 615 415








Accruals 140 130


220







Income Statement


Net Sales 3'000.0 2'850.0


EBITDA 383.8 353.0


EBIT 283.8 263.0

Interest (88.0) (60.0)

Taxes (78.3) (81.2)







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4.9x615

3000

Inventory


days46

365

3000

375

365/Sales

sReceivable

daypersalesAverage


3.0x1000

3000

assetsfixedNet








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Balance Sheet

(chf m) 2008 2007

Assets



Inventories 615 415








Accruals 140 130


220







Income Statement


Net Sales 3'000.0 2'850.0


EBITDA 383.8 353.0


EBIT 283.8 263.0

Interest (88.0) (60.0)

Taxes (78.3) (81.2)







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53.0%2000

1060

assetsTotal

debtTotalassetstotaltodebtTotal !!!

3.2x88

284

Interest

EBITratioearned-interest-Times !!!

Creditors prefer a low debt to equity ratio whereas stockholders may want more leverage as it can

magnify expected earnings ( pecking order theory). The optimal ratio between debt and assets is

highly dependent on the firms business and industry.

The TIE ratio measures the extent to which operating costs can decline before the firm is unable to

meet its interest costs. Not being able to pay interest costs will bring legal troubles and can result in

bankruptcy.



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Balance Sheet

(chf m) 2008 2007

Assets



Inventories 615 415








Accruals 140 130


220







Income Statement


Net Sales 3'000.0 2'850.0


EBITDA 383.8 353.0


EBIT 283.8 263.0

Interest (88.0) (60.0)

Taxes (78.3) (81.2)







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53.0%2000

1060

assetsTotal

debtTotalassetstotaltodebtTotal !!!

3.2x88

284

Interest

EBITratioearned-interest-Times !!!

Creditors prefer a low debt to equity ratio whereas stockholders may want more leverage as it can

magnify expected earnings ( pecking order theory). The optimal ratio between debt and assets is

highly dependent on the firms business and industry.

The TIE ratio measures the extent to which operating costs can decline before the firm is unable to

meet its interest costs. Not being able to pay interest costs will bring legal troubles and can result in

bankruptcy.



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Balance Sheet

(chf m) 2008 2007

Assets



Inventories 615 415








Accruals 140 130








Income Statement


Net Sales 3'000.0 2'850.0


EBITDA 383.8 353.0


EBIT 283.8 263.0

Interest (88.0) (60.0)

Taxes (78.3) (81.2)







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3.9%3000

118

Sales

incomeNetsalesonmarginprofit(Net) !!!

14.2%2000

284

assetsTotal

EBITpowerearningBasic !!!

The profit margin on sales shows the profit per unit of sales

12.5%940

118

equityCommon

incomeNetequitycommononReturn !!!

Stockholders want to earn a return on their money invested. This ratio indicates the profitability of a

stockholders invested money from an accounting perspective

This ratio shows the raw earning power of the firms assets excluding potential influence from interest

payments or leverage effects.



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Balance Sheet

(chf m) 2008 2007

Assets



Inventories 615 415








Accruals 140 130








Income Statement


Net Sales 3'000.0 2'850.0


EBITDA 383.8 353.0


EBIT 283.8 263.0

Interest (88.0) (60.0)

Taxes (78.3) (81.2)







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3.9%3000

118

Sales


14.2%2000

284

assetsTotal



12.5%940

118

equityCommon








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Balance Sheet

(chf m) 2008 2007

Assets



Inventories 615 415








Accruals 140 130








Income Statement


Net Sales 3'000.0 2'850.0


EBITDA 383.8 353.0


EBIT 283.8 263.0

Interest (88.0) (60.0)

Taxes (78.3) (81.2)







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3.9%3000

118

Sales


14.2%2000

284

assetsTotal



12.5%940

118

equityCommon








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Balance Sheet

(chf m) 2008 2007

Assets



Inventories 615 415








Accruals 140 130








Income Statement


Net Sales 3'000.0 2'850.0


EBITDA 383.8 353.0


EBIT 283.8 263.0

Interest (88.0) (60.0)

Taxes (78.3) (81.2)







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Market value ratios

9.8x

50

118

23

shareperEarnings

shareperPriceratioingsPrice/earn !!!

5.3

50

100118

23.00

shareperflowCash

shareperPriceratioflowPrice/cash !

!!

This ratio shows how much an investor is willing to pay per unit of reported earnings. Thus, the P/E

ratio indicates, by comparison with its peers, whether a company is regarded as being risky or

expected to have poor growth.

1.2x

50

940

23.00

sharepervalueBook

shareperPriceratiokMarket/boo !!!

The market to book ratio typically exceeds 1.0 as the balance sheet does not reflect inflation or

goodwill. In addition, this ratio provides an indication whether a company is able to earn high returns.

Depending on the industry, a firms stock price is tied more closely to cash flow than net income.

Remember: Net income + D&A = cash flow

Numbers of shares:50m

Share price: 23

Cash flow = net income + D&A



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Balance Sheet

(chf m) 2008 2007

Assets



Inventories 615 415








Accruals 140 130








Income Statement


Net Sales 3'000.0 2'850.0


EBITDA 383.8 353.0


EBIT 283.8 263.0

Interest (88.0) (60.0)

Taxes (78.3) (81.2)







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Market value ratios

9.8x

50

118

23

shareperEarnings


5.3

50

100118

23.00

shareperflowCash


!!




1.2x

50

940

23.00

sharepervalueBook







Share price: 23




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Balance Sheet

(chf m) 2008 2007

Assets



Inventories 615 415








Accruals 140 130








Income Statement


Net Sales 3'000.0 2'850.0


EBITDA 383.8 353.0


EBIT 283.8 263.0

Interest (88.0) (60.0)

Taxes (78.3) (81.2)







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Market value ratios

9.8x

50

118

23

shareperEarnings


5.3

50

100118

23.00

shareperflowCash


!!




1.2x

50

940

23.00

sharepervalueBook







Share price: 23




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Balance Sheet

(chf m) 2008 2007

Assets



Inventories 615 415








Accruals 140 130








Income Statement


Net Sales 3'000.0 2'850.0


EBITDA 383.8 353.0


EBIT 283.8 263.0

Interest (88.0) (60.0)

Taxes (78.3) (81.2)







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Agenda: Case study

Beans Incorporation vs. Garlic Incorporation


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Case study: Interpretation of financial statements

Your client tells you he is interested in investing in a company from the food industry as he sees

great growth potential in this industry

He has already selected two potential targets and now wants your professional advice on which

company is more likely to report good results in the future

Please try to give your client your opinion based on what you have learned in this course

Read the financial statements and calculate the ratios based on 2008 figures

Compare these ratios with those of the other company and with those of the industry average

Beans Inc. Garlic Inc.vs.


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Case study: Beans Incorporation I

Beans Inc.

Balance sheet

(chf m) 2008 2007

Assets



Inventories 548 508

Current assets 1'365 1'042

Net plant and equipment 1'470 1'297


Liabilities and equity



Accruals 75 70



Total debt 1'194 1'015


Retained earnings 1'391 1'074

Total equity 1'641 1'324Total liabilities and equity 2'835 2'339

Share price 152

Book value per share 33

Numbers of shares (in m) 50

Income statement

(chf m) 2008 2007

Net sales 3780 3500

Operating sosts 2650 2500

EBITDA 1130 1000

Amortization 0 0

Depreciation 75 90

EBIT 1055 910

Interest 96 81

EBT 959 829

Taxes 384 332

Net income 576 497

Common dividends 259 224

Addition to retained earnings 317 274

EBITDA margin 29.9% 28.6%

EBIT margin 27.9% 26.0%

Netincome margin 15.2% 14.2%

EPS 11.51 9.95


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Case study: Beans Incorporation II

Beans Inc. By analyzing its financial

statements, what are the

strengths and weaknesses of this

company?

Where do you see risks or

opportunities?


(chf m) 2008


Net income 576

Additions

Depreciation and Amortization 75

Increase in accounts payable 40

Increase in accruals 5

Substractions

Increase in accounts receivable (36)

Increase in inventories (41)

Net cash provided by operating activities 619


Cash used to acquire fixed assets ( 248)

Financing activitiesIncrease in notes payable 34

Increase in bonds 100

Payments of dividends (259)

Net cash provided by financing activities (125)

Netincrease in cash and equivalents 245

Cash and equivalents at beginning of the year 80

Cash and equivalents at end of the year 325


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Case study: Garlic Incorporation I

Garlic Inc.

Balance sheet


Assets



Inventories 541 450

Current assets 1'198 1'010

Net plant and equipment 1'318 1'120


Liabilities and equity



Accruals 130 90





Retained earnings 1'037 970

Total equity 1'287 1'220Total liabilities and equity 2'516 2'130

Share price 32

Book value per share 26

Numbers of shares (in m) 50

Income statement

(chf m) 2008 2007

Net sales 3180 3000

Operating costs 2703 2550EBITDA 477 450

Amortization 0 0

Depreciation 150 120

EBIT 327 330

Interest 123 91

EBT 204 239

Taxes 82 96

Net income 123 143

Common dividends 55 65

Addition to retained earnings 67 79

EBITDA margin 15.0% 15.0%

EBIT margin 10.3% 11.0%

Netincome margin 3.9% 4.8%

EPS 2.45 2.87


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Case study: Garlic Incorporation II

Garlic Inc.


(chf m) 2008


Net income 123

Additions

Depreciation and amortization 150

Increase in accounts payable (21)

Increase in accruals 40

Substractions

Increase in accounts receivable (29)

Increase in inventories (91)

Net cash provided by operating activities 172


Cash used to acquire fixed assets (348)

Financing activitiesIncrease in notes payable (23)

Increase in bonds 322

Payments of dividends (55)

Net cash provided by financing activities 244

Net increase in cash and equivalents 68

Cash and equivalents at beginning of the year 80

Cash and equivalents at end of the year 148

By analyzing its financial

statements, what are the

strengths and weaknesses of this

company?

Where do you see risks or

opportunities?


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Case study: Solution guideline

Liquidity ratios


Debt ratios


Market value ratios

Value Creation

Liquidity Security/Risk

Profitability

Try to assess whether the given company shows a healthy relation between profitability, liquidity and

risk

If a company shows high exposure to risky investments, one expects the profitability to beaccordingly

Try to come to a conclusion on which company is more likely to pursue an expansive strategy and

strengthen its position within the market

In terms of ability to generate cash flows, capital structure and working capital management


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Case study: Solution guideline II

Try to compare the companies with each other and

put the results into perspective using the industry

average values on the right

Industry average figures can be seen as a guide

Why is the company less profitable than

average peer companies?

Why does one company have such a high

P/E multiple and what does that mean for the

operating business?

Financial statements can never fully answersuch questions. However, they can raise the

right questions

Ratios Industry average

Liquidity

Current ratio 4.2x

Quick ratio 2.2x

Asset Management

Inventory turnover 10.9x

Days sales outstanding 36 days

Fixed assets turnover 2.8x

Debt Management

Total debt to total assets 40.0%

Times-interest-earned 6x

EBITDA coverage 4.3x

Profitability

Sales margin 5.0%

Return on total assets 9.0%

Basic earning power 18.0%

Return on common equity

Market Value

Price / EPS 11.3x

Price / cash flow 5.4x

Market / book 1.7x



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Contents

Learning targets

Pre-course reading


Pre-course reading case studies / questions

Solutions to case studies


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Solutions to Case Study

Will be distributed after lecture

cf ii interpreting fs 2009 pre lecture (1)

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