S3: Working With Financial Statements Flashcards
Sources of Cash
Activities that bring in cash (decrease in asset - selling, increase in liability or equity - receiving/borrowing)
Uses of Cash
Activities that expend cash (increase in asset, buy it - decrease in liability or equity, paying off)
Statement of Cash Flows
- Operating
NI
Dep
A/R
A/R
Inv
_________________
CF from OA - Investing
Gross Fixed Assets
_________________
CF from IA - Financing
N/P
LT Debt
Common Stock
Dividends
__________________
CF from FA
__________________
CF
Current Year RE
Last Year RE (balance sheet) + This Year NI (income statement) - This Year Dividents
Internal Uses of CF Statement
Performance evalves, planning for future
External Uses of CF Statement
Creditor assessments, suppliers, customers predicting longevity, investors determining profitability and growth
Common Size Statements
Present balance sheet items as % of total assets and income statement items as a % of net revenue
Ratio Analysis
Evaluation of various financial metrics in relation to one another
Ratios for Short Term Solvency and Liquidity
- Current Ratio
- Quick Ratio
Ratios for Leverage and Long Term Solvency
- Total Debt
- D/E Ratio
- Equity Multiplier
- Cash Coverage
Ratios for Turnover
- Inventory Turnover
- Total Asset Turnover
Ratios for Market Value
- Earnings per share
- Price to earnings ratio
Ratios for Profitability
- GPM
- Return on Assets
- Return on Equity
Dupont Analysis
Decomposes ROE into its component parts to separately examine profitability, assess use, and financial leverage (High ROE can mask debt)
Dupont Equation
ROE = profit margin * total asset turnover * equity multiplier
PMTATEM
