Lecture 6 Reorganizing financial statements Flashcards
Why do we reorganize financial statements?
Because they are not suitable for financial analysis and forecasting future activities
What should financials for valuation show separately?
Operational Items (day to day tasks, buying/selling goods, investing)
Financing Item (raising, repaying debt and equity)
Surplus items
What is captial employed?
The total investments, which the company has in its operations
What are sources of financing?
How the company finances its investments like debt or equity
Difference between traditional working capital and non-cash working capital.
Non-cash WC strips out cash and short-term financial debt
!!! not set in stone
What is net debt?
Represents the exposure the company has to debtholders and shareholders.
Debt - Excess cash/Cash equivalents
!!! Convertible securities and financial leases are part of debt!
What are surplus assets?
Assets, which are not related to the core operating activities of the company
They can be on liability side too! (e.g severance/pension funds,exc. provisions)
What is the most important metric in investment banking?
EBITDA: It reflects the profitability of daily operations before the impact of non-monetary costs (DA)
It is a proxy of cash flows!
What are operational taxes?
Taxes that are paid on EBIT only!
Ebit*t
How is effective tax rate calculated?
Income Taxes/EBT
How is tax shield calculated?
Interest payment*Tax = tax shield for 1 year
Can also be calculated by
Income taxes - Operating taxes.
What is NOPLAT?
It is EBIT minus operating taxes!
How can FCFE be seen by investors in terms of cash?
It shows the free profit available to shareholders, a possible dividend
