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Corporate finance ratios are quantitative measures that are used to assess businesses. These ratios are used by financial analysts, equity research analysts, investors, and asset managers to evaluate the overall financial health of businesses, with the end goal of making better investment decisions.
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Ratio analysis is a useful management tool that will improve your understanding of financial results and trends over time, and provide key indicators of organizational performance. Managers will use ratio analysis to pinpoint strengths and weaknesses from which strategies and initiatives can be formed.
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Financial ratio analysis uses historical financial statements to quantify data that will help give investors a feel for a firm’s attractiveness based on factors such as its competitive position, financial strength and profitability.
- CFI Instructors
- Session objectives
- Financial analysis
- Components of ratio analysis
- A breakdown of the income statement
- Vertical analysis
- Efficiency ratio
- Solvency ratio
- Horizontal analysis
- Benefits of horizontal analysis
- There are different ways to benchmark:
- Where can you find a competitor’s statements?
- Conclusion
- Session objectives
- Financial analysis
- Current ratio
- Always use trend analysis to determine:
- Working capital
- Ratios for each
- Accounts receivable efficiency ratios
- PP&E = turnover ratio
- Conclusion
- Session objectives
- Financial analysis
- Analyzing cash flow groups
- Understanding debt
- Debt financing
- Zero coupon
- Convertible
- Bonds with warrants
- Convertible bonds
- Types of syndicated loans
- Standby facilities
- Leasing as an option
- Capital (finance) lease
- Operating lease
- Capital (finance) lease
- Who can tap into the
- Equity consist largely of common shares. Ownership of common shares normally entitles the holder to:
- Redeemable
- Retractable
- Retained earnings
- Managing the financing of business - leverage
- Invest in PP&E Increase cash working capital
- Reason 1
- Reason 2
- Reason 3
- Reason 4
- An effective capital structure
- Conclusion
- Session objectives
- Financial analysis
- ROE levers
- Secondary profitability ratios
- Tax impact
- Total asset turnover
- Secondary leverage ratios
- Net Income / Equity
Meet the global team of CFI instructors Vertical and Horizontal Income Statement Analysis
Learn the key components of the income statement Benchmark against other companies in the industry Perform vertical and horizontal analysis
There are many important steps, such as trend and ratio analysis, in preparing a financial analysis. The starting point is the financial statements: Income statement Balance Sheet Statement of Cash Flows Financial analysis There are many important steps, such as trend and ratio analysis, in preparing a financial analysis. The starting point is the ...
Ratio analysis covers two basic groups. When analysing the income statement, we use performance ratios – specifically those related to profitability.
Sales revenues are the most important components of the income statement and are used in several of the ratios seen throughout the module. Cost of good sold relates to direct labor and raw materials needed to create the product or service that is being sold, as well as depreciation on manufacturing equipment used in production. Gross profit tells u...
Net income Sales Tax Sales Operating income Sales Operating costs Sales Gross profit Sales
The tax ratio is the efficiency ratio that demonstrates how well managing tax. Tax expense Pre-tax income = Tax ratio
The interest coverage ratio tells us whether the company will be able to cover what it owes in interest to its creditors.
Use calculations from the past five years to perform trend analysis and predict future performance Horizontal analysis
Are margins rising or failing? Is performance improving or declining? What is causing margins to fall? Are margins impacted by indirect costs?
Compare your company to two or more competing companies Compare your company’s ratios to the industry average Your competitor/ Industry average Your company
Three key online sites including EDGAR, SEDAR and RNS Competitors’ investor relations websites Historical ratios for companies can be found on MSN Money and Google Finance, but allow very little control over the information and provide little insights on the calculation of ratios. Professional sources such as Bloomberg, Capital IQ, and equity resea...
Understand past performance, to predict future success Use vertical and horizontal analysis, as well as benchmarking, to maximize your company’s performance Income statement analysis is just the first step to the overall analysis Make better investment and credit decisions from outside the company Balance Sheet and Leverage Ratios
Determine the financial strength of a company by analyzing the balance sheet Use the balance sheet to determine how efficiently a company is being run
There are many important steps, such as trend and ratio analysis, in preparing a financial analysis. The starting point is the financial statements: Income statement Balance Sheet Statement of Cash Flows Financial analysis There are many important steps, such as trend and ratio analysis, in preparing a financial analysis. The starting point is the ...
Quick ratio Current ratio Accounts receivable Inventory Cash
What are the ratios doing? Are they improving or deteriorating? Short term liquidity ratios are an early warning signal to cash flow issues.
Current Asset – Current Liabilities Working capital overview Working capital Inventory Receivables Payables Operating activities Working capital overview Working capital Accounts receivable Inventory Accounts payable Operating activities
Inventory, Accounts receivable, Accounts payable + Working capital efficiency ratio
. . Receivable turnover ratio Receivable days ratio
If the ratio is comparatively low, it means either sales are low or you have invested too much in PP&E.
Financial analysis is important in understanding a company’s financial condition and performance With ratio and trend analysis you can build expectations of future performance Use in conjunction with information from the income statement to gain valuable company insights Performance can be improved to increase operational efficiencies Cash Flow Sta...
Understand the inflows and outflows of cash throughout the year Calculate solvency and leverage ratios Examine funding options for an organization looking to grow
There are many important steps, such as trend and ratio analysis, in preparing a financial analysis. The starting point is the financial statements: Income statement Balance Sheet Statement of Cash Flows
Asset management Asset management relates specifically to the management of investment in the company and is where commitment to growth can be seen. Working capital Absorbing Releasing Capital expenditure >amortization •
There are many options available when looking for debt financing:
Net Income Sales Sales Total Assets Total Assets Equity The primary ratios make up the second tier of the pyramid. This is where the three levers of ROE are situated. Operating Income Sales Net Income Pretax Profit Sales PP&E Sales Working Capital Gross Debt or Net Debt EBITDA Secondary ratios are on the third tier of the pyramid. The ratios give a...
Net Income Sales Sales Total Assets Total Assets Equity The primary ratios make up the second tier of the pyramid. This is where the three levers of ROE are situated. Operating Income Sales Net Income Pretax Profit Sales PP&E Sales Working Capital Gross Debt or Net Debt EBITDA Secondary ratios are on the third tier of the pyramid. The ratios give a...
Net Income Sales Sales Total Assets Total Assets Equity The primary ratios make up the second tier of the pyramid. This is where the three levers of ROE are situated. Operating Income Sales Net Income Pretax Profit Sales PP&E Sales Working Capital Gross Debt or Net Debt EBITDA Secondary ratios are on the third tier of the pyramid. The ratios give a...
Net Income Sales Sales Total Assets Total Assets Equity The primary ratios make up the second tier of the pyramid. This is where the three levers of ROE are situated. Operating Income Sales Net Income Pretax Profit Sales PP&E Sales Working Capital Gross Debt or Net Debt EBITDA Secondary ratios are on the third tier of the pyramid. The ratios give a...
Net Income Sales Sales Total Assets Total Assets Equity The primary ratios make up the second tier of the pyramid. This is where the three levers of ROE are situated. Operating Income Sales Net Income Pretax Profit Sales PP&E Sales Working Capital Gross Debt or Net Debt EBITDA Secondary ratios are on the third tier of the pyramid. The ratios give a...
Net Income Sales Sales Total Assets Total Assets Equity The primary ratios make up the second tier of the pyramid. This is where the three levers of ROE are situated. Operating Income Sales Net Income Pretax Profit Sales PP&E Sales Working Capital Gross Debt or Net Debt EBITDA Secondary ratios are on the third tier of the pyramid. The ratios give a...
Net Income Sales Sales Total Assets Total Assets Equity The primary ratios make up the second tier of the pyramid. This is where the three levers of ROE are situated. Operating Income Sales Net Income Pretax Profit Sales PP&E Sales Working Capital Gross Debt or Net Debt EBITDA Secondary ratios are on the third tier of the pyramid. The ratios give a...
Net Income Sales Sales Total Assets Total Assets Equity The primary ratios make up the second tier of the pyramid. This is where the three levers of ROE are situated. Operating Income Sales Net Income Pretax Profit Sales PP&E Sales Working Capital Gross Debt or Net Debt EBITDA Secondary ratios are on the third tier of the pyramid. The ratios give a...
Net Income Sales Sales Total Assets Total Assets Equity The primary ratios make up the second tier of the pyramid. This is where the three levers of ROE are situated. Operating Income Sales Net Income Pretax Profit Sales PP&E Sales Working Capital Gross Debt or Net Debt EBITDA Secondary ratios are on the third tier of the pyramid. The ratios give a...
Net Income Sales Sales Total Assets Total Assets Equity The primary ratios make up the second tier of the pyramid. This is where the three levers of ROE are situated. Operating Income Sales Net Income Pretax Profit Sales PP&E Sales Working Capital Gross Debt or Net Debt EBITDA Secondary ratios are on the third tier of the pyramid. The ratios give a...
Net Income Sales Sales Total Assets Total Assets Equity The primary ratios make up the second tier of the pyramid. This is where the three levers of ROE are situated. Operating Income Sales Net Income Pretax Profit Sales PP&E Sales Working Capital Gross Debt or Net Debt EBITDA Secondary ratios are on the third tier of the pyramid. The ratios give a...
Net Income Sales Sales Total Assets Total Assets Equity The primary ratios make up the second tier of the pyramid. This is where the three levers of ROE are situated. Operating Income Sales Net Income Pretax Profit Sales PP&E Sales Working Capital Gross Debt or Net Debt EBITDA Secondary ratios are on the third tier of the pyramid. The ratios give a...
Net Income Sales Sales Total Assets Total Assets Equity The primary ratios make up the second tier of the pyramid. This is where the three levers of ROE are situated. Operating Income Sales Net Income Pretax Profit Sales PP&E Sales Working Capital Gross Debt or Net Debt EBITDA Secondary ratios are on the third tier of the pyramid. The ratios give a...
Net Income Sales Sales Total Assets Total Assets Equity The primary ratios make up the second tier of the pyramid. This is where the three levers of ROE are situated. Operating Income Sales Net Income Pretax Profit Sales PP&E Sales Working Capital Gross Debt or Net Debt EBITDA Secondary ratios are on the third tier of the pyramid. The ratios give a...
Net Income Sales Sales Total Assets Total Assets Equity The primary ratios make up the second tier of the pyramid. This is where the three levers of ROE are situated. Operating Income Sales Net Income Pretax Profit Sales PP&E Sales Working Capital Gross Debt or Net Debt EBITDA Secondary ratios are on the third tier of the pyramid. The ratios give a...
Net Income Sales Sales Total Assets Total Assets Equity The primary ratios make up the second tier of the pyramid. This is where the three levers of ROE are situated. Operating Income Sales Net Income Pretax Profit Sales PP&E Sales Working Capital Gross Debt or Net Debt EBITDA Secondary ratios are on the third tier of the pyramid. The ratios give a...
Net Income Sales Sales Total Assets Total Assets Equity The primary ratios make up the second tier of the pyramid. This is where the three levers of ROE are situated. Operating Income Sales Net Income Pretax Profit Sales PP&E Sales Working Capital Gross Debt or Net Debt EBITDA Secondary ratios are on the third tier of the pyramid. The ratios give a...
Net Income Sales Sales Total Assets Total Assets Equity The primary ratios make up the second tier of the pyramid. This is where the three levers of ROE are situated. Operating Income Sales Net Income Pretax Profit Sales PP&E Sales Working Capital Gross Debt or Net Debt EBITDA Secondary ratios are on the third tier of the pyramid. The ratios give a...
Net Income Sales Sales Total Assets Total Assets Equity The primary ratios make up the second tier of the pyramid. This is where the three levers of ROE are situated. Operating Income Sales Net Income Pretax Profit Sales PP&E Sales Working Capital Gross Debt or Net Debt EBITDA Secondary ratios are on the third tier of the pyramid. The ratios give a...
Net Income Sales Sales Total Assets Total Assets Equity The primary ratios make up the second tier of the pyramid. This is where the three levers of ROE are situated. Operating Income Sales Net Income Pretax Profit Sales PP&E Sales Working Capital Gross Debt or Net Debt EBITDA Secondary ratios are on the third tier of the pyramid. The ratios give a...
Net Income Sales Sales Total Assets Total Assets Equity The primary ratios make up the second tier of the pyramid. This is where the three levers of ROE are situated. Operating Income Sales Net Income Pretax Profit Sales PP&E Sales Working Capital Gross Debt or Net Debt EBITDA Secondary ratios are on the third tier of the pyramid. The ratios give a...
Net Income Sales Sales Total Assets Total Assets Equity The primary ratios make up the second tier of the pyramid. This is where the three levers of ROE are situated. Operating Income Sales Net Income Pretax Profit Sales PP&E Sales Working Capital Gross Debt or Net Debt EBITDA Secondary ratios are on the third tier of the pyramid. The ratios give a...
Net Income Sales Sales Total Assets Total Assets Equity The primary ratios make up the second tier of the pyramid. This is where the three levers of ROE are situated. Operating Income Sales Net Income Pretax Profit Sales PP&E Sales Working Capital Gross Debt or Net Debt EBITDA Secondary ratios are on the third tier of the pyramid. The ratios give a...
Net Income Sales Sales Total Assets Total Assets Equity The primary ratios make up the second tier of the pyramid. This is where the three levers of ROE are situated. Operating Income Sales Net Income Pretax Profit Sales PP&E Sales Working Capital Gross Debt or Net Debt EBITDA Secondary ratios are on the third tier of the pyramid. The ratios give a...
Net Income Sales Sales Total Assets Total Assets Equity The primary ratios make up the second tier of the pyramid. This is where the three levers of ROE are situated. Operating Income Sales Net Income Pretax Profit Sales PP&E Sales Working Capital Gross Debt or Net Debt EBITDA Secondary ratios are on the third tier of the pyramid. The ratios give a...
Net Income Sales Sales Total Assets Total Assets Equity The primary ratios make up the second tier of the pyramid. This is where the three levers of ROE are situated. Operating Income Sales Net Income Pretax Profit Sales PP&E Sales Working Capital Gross Debt or Net Debt EBITDA Secondary ratios are on the third tier of the pyramid. The ratios give a...
Net Income Sales Sales Total Assets Total Assets Equity The primary ratios make up the second tier of the pyramid. This is where the three levers of ROE are situated. Operating Income Sales Net Income Pretax Profit Sales PP&E Sales Working Capital Gross Debt or Net Debt EBITDA Secondary ratios are on the third tier of the pyramid. The ratios give a...
Net Income Sales Sales Total Assets Total Assets Equity The primary ratios make up the second tier of the pyramid. This is where the three levers of ROE are situated. Operating Income Sales Net Income Pretax Profit Sales PP&E Sales Working Capital Gross Debt or Net Debt EBITDA Secondary ratios are on the third tier of the pyramid. The ratios give a...
Net Income Sales Sales Total Assets Total Assets Equity The primary ratios make up the second tier of the pyramid. This is where the three levers of ROE are situated. Operating Income Sales Net Income Pretax Profit Sales PP&E Sales Working Capital Gross Debt or Net Debt EBITDA Secondary ratios are on the third tier of the pyramid. The ratios give a...
Net Income Sales Sales Total Assets Total Assets Equity The primary ratios make up the second tier of the pyramid. This is where the three levers of ROE are situated. Operating Income Sales Net Income Pretax Profit Sales PP&E Sales Working Capital Gross Debt or Net Debt EBITDA Secondary ratios are on the third tier of the pyramid. The ratios give a...
Net Income Sales Sales Total Assets Total Assets Equity The primary ratios make up the second tier of the pyramid. This is where the three levers of ROE are situated. Operating Income Sales Net Income Pretax Profit Sales PP&E Sales Working Capital Gross Debt or Net Debt EBITDA Secondary ratios are on the third tier of the pyramid. The ratios give a...
Net Income Sales Sales Total Assets Total Assets Equity The primary ratios make up the second tier of the pyramid. This is where the three levers of ROE are situated. Operating Income Sales Net Income Pretax Profit Sales PP&E Sales Working Capital Gross Debt or Net Debt EBITDA Secondary ratios are on the third tier of the pyramid. The ratios give a...
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Students and readers will learn how to insightfully read a Financial Statement, utilize key financial ratios in order to derive forward-looking investment-related inferences from the accounting data, engage in elementary forecasting and modeling, master the theory of the Time Value of Money, and learn to price stocks and bonds in an environment ...
As such, there are very many different financial ratios out there, and we could potentially invent infinitely many more. In this class, we’ll cover the most common and important ones—the ones that have been found most useful by financial analysts over the decades, and the ones you’re most likely to see referenced in the financial press ...
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Financial Ratios. The use of financial figures to gain significant information about a company. A free best practices guide for essential ratios in comprehensive financial analysis and business decision-making.
