【正文】 e a se ( D e cr e a se ) 5 0 0 , 0 0 0 ? Shows sources and uses of cash ? Sections ? Operating ? Investing ? Financing ? Cash from operations calculated by adding back noncash charges (., depreciation) ? Cash, not earnings, repays debt 169。 2023 Association for Financial Professionals. All rights reserved. Review 1 40 Financial Statement Analysis ? Suppliers determine whether to make sales on credit ? Trading partners assess the financial ability of a counterparty to meet contractual obligations ? Lenders determine whether to extend or maintain credit ? Rating agencies assess credit risk of issues ? Investors make decisions about purchasing and selling corporate debt and equity 169。 2023 Association for Financial Professionals. All rights reserved. Review 1 41 CommonSize Ratios ? Commonsize financial statements ? Commonsize ine statement expresses every line item as a percentage of revenues ? Commonsize profitability percentages are margins ? One example of a monsize ratio is Gross Profit Margin Gr os s P rof itGr os s P rof it M a rgin = ? 1 0 0R e v e nu e s$ 5 , 8 0 0= ? 1 0 0 = 3 8 .7 %$ 1 5 , 0 0 0 169。 2023 Association for Financial Professionals. All rights reserved. Review 1 42 Financial Statement Analysis Ratios ? Liquidity or working capital ratios ? Debt management ratios ? Efficiency ratios ? Performance ratios 169。 2023 Association for Financial Professionals. All rights reserved. Review 1 43 Liquidity or Working Capital: Current Ratio T ot a l C urre nt A s s e t sC urre nt R a t io = T ot a l C urre nt Lia bil itie s$ 8 , 0 0 0 , 0 0 0= $ 3 , 4 0 0 , 0 0 0= 2 .4Measures the degree to which current obligations are covered by current assets 169。 2023 Association for Financial Professionals. All rights reserved. Review 1 44 Liquidity or Working Capital: Quick Ratio C a s h + S ho rt T e rm Inv . + A /RQuic k R a t io = T ot a l C urre nt Lia bil itie s$ 1 , 5 0 0 , 0 0 0 + $ 1 , 3 0 0 , 0 0 0 + $ 1 , 7 0 0 , 0 0 0= $ 3 , 4 0 0 , 0 0 0= 1 .3Measures the degree to which a pany’s current liabilities are covered by its most liquid current assets 169。 2023 Association for Financial Professionals. All rights reserved. Review 1 45 Liquidity or Working Capital: Cash Flow to Total Debt Ratio N e t Inc ome + D e pre c ia t ionC a s h Flow t o T ot a l D e bt = S ho rt T e rm D e bt + Lo ng T e rm D e bt$ 8 5 0 + $ 2 0 0 $ 1 , 0 5 0= = = 0 .2$ 1 , 8 0 0 + $ 3 , 9 0 0 $ 5 , 7 0 0Measures ability to repay debt (a relatively low ratio indicates an inability to repay debt) and can predict financial failure 169。 2023 Association for Financial Professionals. All rights reserved. Review 1 46 Liquidity or Working Capital: Cash Turnover Ratio If a pany has a cash conversion cycle of days, how many cash conversion cycles does the pany go through in a year (cash turnover)? 3 6 5 D a y sC a s h T u r n o v e r = C a s h C o n v e r s i o n C y c l e3 6 5 D a y s= 9 4 . 9 D a y s= 3 . 8 T i m e s169。 2023 Association for Financial Professionals. All rights reserved. Review 1 47 Debt Management: Times Interest Earned (TIE) Ratio Ope ra t ing P rof itT IE = Int e re s t E x pe ns e$ 1 , 6 0 0= = 5 .3 T im e s$300Measures how many times a pany’s EBIT exceed its interest obligations 169。 2023 Association for Financial Professionals. All rights reserved. Review 1 48 Debt Management: LongTerm Debt to Capital Lo ng T e rm D e btL/T D e bt t o C a pit a l = Lo ng T e rm D e bt + E qu ity$ 3 , 9 0 0= = 3 2 .2 %$ 3 , 9 0 0 + $ 8 , 2 0 0Measures what percentage of a pany’s capitalization is provided by longterm debt 169。 2023 Association for Financial Professionals. All rights reserved. Review 1 49 Debt Management: Debt to Tangible Net Worth ? ?T ot a l D e btD e bt t o T a ng ibl e N e t W ort h = T ot a l E qu ity Int a ng ibl e A s s e t s$ 1 , 8 0 0 + $ 3 , 9 0 0= = 6 9 .5 %$ 8 , 2 0 0 $ 0Measures a pany’s debt as a percentage of its tangible worth 169。 2023 Association for Financial Professionals. All rights reserved. Review 1 50 Debt Management: Total Liabilities to Total Assets T ot a l Lia bil itie sT ot a l Lia bil itie s t o T ot a l A s s e t s = T ot a l A s s e t s$ 7 , 3 0 0= = 4 7 .1 %$ 1 5 , 5 0 0Measures the percentage of all liabilities relative to the total asset base of a pany 169。 2023 Association for Financial Professionals. All rights reserved. Review 1 51 Performance and Efficiency: Return on Common Equity E a rning s A v a il a ble t o C ommo n S ha re ho lde r sR e t urn on E qu ity = C ommo n E qu ity$850= = 1 0 .4 %$ 8 , 2 0 0Measures earnings available to mon shareholders ( ine less any preferred stock dividends or amortization) expressed as a percentage of mon equity 169。 2023 Association for Financial Professionals. All rights reserved. Review 1 52 Performance and Efficiency: Return on Sales N e t Inc omeR e t urn on S a le s = R e v e nu e s$ 8 5 0 , 0 0 0= $ 1 5 , 0 0 0 , 0 0 0= 5 .7 %Measures ine as a percentage of sales 169。 2023 Association for Financial Professionals. All rights reserved. Review 1 53 Performance and Efficiency: Return on Total Assets N e t Inc omeR e t urn on T ot a l A s s e t s = T ot a l A s s e t s$ 8 5 0 , 0 0 0= $ 1 5 , 5 0 0 , 0 0 0= 5 .5 %Measures ine as a percentage of total assets 169。 2023 Association for Financial Professionals. All rights reserved. Review 1 54 Performance and Efficiency: Total Asset Turnover R e v e nu e sT ot a l A s s e t T urn ov e r = T ot a l A s s e t s$ 1 5 , 0 0 0