Financial Statements Flashcards
Simply, what goes on an income statement?
Revenue - Expenses = Net Income
Simply, what is on a balance sheet?
Share Holder Equity + Liabilities = Assets
how do you use income statements and balance sheets to analyze a business
Profitability analysis - IS
Asset Analysis - BS
Debt Analysis - BS
Investor Return Analysis - BS
for profitability analysis what are the three main areas to look at?
Revenues
Expenses
Margins
for profitability analysis of revenues, what do you look at?
revenue growth year over year
revenues by segment
for profitability analysis of expenses, what do you look at?
expense growth year over year
expense as a percent of revenue,
vertical anslysis
segment expenses
for profitability analysis of margins, what do you look at?
Gross Margin % of revenue
Operating margin % of revenue
EBITA % of revenue
Net Income % of revenue
Segment Margins
What do you look at on a balance sheet analysis for assets?
Working Capital analysis
Asset Productivity
what is working capital analysis
Current Ratio
Free Cash Flow
AR Turns/Days
Inventory Turns/days
AP Days
Cash Conversion Cycle
What is asset productivity
Fixed asset turnover
asset utilization (Turnover)
Return on Assets (ROA)
what do you look at on a balance sheet analysis for liabilities
Long Term Debt
Cost of Debt
what id long term analysis
total liability to total assets
total liability to total equity
financial leverage
how do you analyze cost of debt?
interest coverage ratio
how do you analyze a balance sheet for shareholders equity?
stock price
stockholder returns
what do you look at when evaluating stock price
P/E Ratio
what do you look at when analyzing stockholder returns?
dividend yield
earnings per share
Return on Equity (ROE)
From a balance sheet analysis, what items link to the income statement?
Fixed asset turnover
Asset utilization (turnover)
Return on Assets (ROA)
Interest Coverage Ratio
Earnings per share
Return on Equity
how do you calculate profitability?
Net Profit % of Revenue
Net Income / Net Revenue
how do you calculate revenue Growth
((Current sales - previous sales) / (previous sales))
how do you do a common-sized statement?
calculate all costs as a % of revenues
how do you a segment analysis
compare segment costs to segment revenues in a common-sized analysis
how do you calculate gross profit % (Gross Margin)
Gross Profit / Sales
How do you calculate Operating Earnings % (Operating Margin)
Operating Earnings / Sales
what is EBITA
Earnings Before Incomes Taxes Depreciation and Amortization
how do you calculate Net Income ( Net Margin)
Net Income / Sales
How do you calculate working capital for asset efficiency?
Current Assets - Current Liabilities
How do you calculate the Current Ratio for asset efficency
Current Assets / Current Liabilities
(Ideally 1.5 or better)
How do you calculate Accounts Receiveable Turnover?
Sales on account / Accounts Receivable = AR Turnover
how do you calculate day’s receivables
365 / AR Turnover
How do you calculate inventory turnover?
COGS / Inventory = Inventory Turnover
how do you calculate day’s inventory
365 / Inventory Turnover
how do you calculate Payable Turnover
COGS / Accounts Payable
How do you calculate Day’s Payable
365 / Payable Turnover
What is the cash conversion cycle?
Days inventory + Day’s Receivable - Day’s payables
How to calculate Asset Utilization
Sales / Total Assets
How to calculate Return on Assets
Net Income / Total Assets
How do you do a Debt Analysis?
Total labilities / Total Assets
What are the green and yellow lights for Debt Analysis
Liab/Asset of less than 60% is fine
liab/Asset of more than 80 is not
how do you calculate interest coverage for debt analysis and what is the floor?
EBIT / Interest Expense
2:1 is the floor
How do you calculate Earnings per share (EPS)?
Net Income / Average Shares Outstanding
How do you figure out the Price Earnings Ratio (P/E)
Market Price Per Share / EPS
larger is better
how do you determine dividend yield?
Dividend per share / market price per share
how do you calculate Return on Equity (ROE)?
Net Income / Total Stockholders Equity
