dupont & z-score
DESCRIPTION
Management PerformanceTRANSCRIPT
Corporate Performance Analysis using Excel ProgramJakarta, 25-26 June 2008 1
Dupont Analysisand
Z-Score
Analysis of Return on Stockholders’ Equity (ROE)
Presented byMuslim
Corporate Performance Analysis using Excel ProgramJakarta, 25-26 June 2008 2
The Dupont EquationReturn on Equity (ROE)
EquityNIROE =
Corporate Performance Analysis using Excel ProgramJakarta, 25-26 June 2008 3
The Dupont EquationReturn on Equity (ROE)
EquityAssetsX
AssetsSalesX
SalesNIROE
EquityNIROE
=
=
Corporate Performance Analysis using Excel ProgramJakarta, 25-26 June 2008 4
The Dupont EquationReturn on Equity (ROE)
XityprofitabilROE
XSalesNIROE
)(=
=
Corporate Performance Analysis using Excel ProgramJakarta, 25-26 June 2008 5
The Dupont EquationReturn on Equity (ROE)
XefficiencyXityprofitabilROE
XAssetsSalesX
SalesNIROE
)()(=
=
Corporate Performance Analysis using Excel ProgramJakarta, 25-26 June 2008 6
The Dupont EquationReturn on Equity (ROE)
)()()( leverageXefficiencyXityprofitabilROE
EquityAssetsX
AssetsSalesX
SalesNIROE
=
=
Corporate Performance Analysis using Excel ProgramJakarta, 25-26 June 2008 7
The Dupont EquationReturn on Equity (ROE)
)()()( leverageXefficiencyXityprofitabilROE
EquityAssetsX
AssetsSalesX
SalesNIROE
=
=
Corporate Performance Analysis using Excel ProgramJakarta, 25-26 June 2008 8
The Dupont EquationReturn on Equity (ROE)
)()()( leverageXefficiencyXityprofitabilROE
EquityNI
EquityAssetsX
AssetsSalesX
SalesNIROE
=
==
Corporate Performance Analysis using Excel ProgramJakarta, 25-26 June 2008 9
The Dupont EquationReturn on Equity (ROE)
EquityAssetsX
AssetsSalesX
SalesNIROE
EquityNIROE
=
=
Corporate Performance Analysis using Excel ProgramJakarta, 25-26 June 2008 10
Altman’s Z-score• The original Z-score equation was devised by Altman in 1968
and further developed in 1977. The original equation is:
• Z = 1.2X1 + 1.4X2 + 3.3X3 + 0.6X4 + 0.999 X5
• X1 = Working capital/Total assets• X2 = Retained earnings/Total assets• X3 = Earnings before interest and tax/Total assets• X4 = Market capitalization/Book value of debt• X5 = Sales/Total assets
Corporate Performance Analysis using Excel ProgramJakarta, 25-26 June 2008 11
Altman’s Z-score
• Altman identified two benchmarks. Companies scoring over 3.0 are unlikely to fail and should beconsidered safe, while companiesscoring under 1.8 are very likely to fail.
• The value of 3 has since been reviseddown to 2.7. Z-scores between 1.8 and 2.7 are in the grey area.
Corporate Performance Analysis using Excel ProgramJakarta, 25-26 June 2008 12
Altman’s Z-score (1983)
Altman’s Z-score is• = 6.56 x (working capital/total assets)• + 3.26 x (retained earnings/total assets)• + 6.72 x (EBIT/total assets)• + 1.05 x (book value of equity/book value of debt)
Corporate Performance Analysis using Excel ProgramJakarta, 25-26 June 2008 13
Altman’s Z-score (1983)
• Indicator of overall financial health• Cutoffs: les than 1.1 bankrupt
1.1 – 2.6 gray areagreater than 2.6 healthy
• A Z-score of 1.1 or less does not mean the company is bankrupt, but does suggest that financial problems may exist
Corporate Performance Analysis using Excel ProgramJakarta, 25-26 June 2008 14
Thank you
Presented [email protected]
MY CONSULTINGWisma Nugra Santana 12 Floor Suite 1216Jl Jend Sudirman Kav 7-8Jakarta 10220, INDONESIATel 6221 5704791Fax 6221 [email protected]