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Financial Analysis and Planning: From Annual Reports to Ratios and Forecasting

Explore the importance of annual reports, financial position statements, income statements, and taxes in corporate finance. Learn how to analyze financial statements using liquidity, solvency, asset management, profitability, and market value ratios. Understand the Du Pont identity and financial planning concepts.

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Financial Analysis and Planning: From Annual Reports to Ratios and Forecasting

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  1. Chapter 3 Financial Analysis and Planning

  2. Overview of Lecture

  3. Corporate Finance in the News Insert a current news story here to frame the material you will cover in the lecture.

  4. The Annual Report

  5. The Statement of Financial Position

  6. Figure 3.1The Statement of Financial Position

  7. The Balance Sheet Equation

  8. Example 3.1Building the Statement of Financial Position

  9. Example 3.1Building the Statement of Financial Position

  10. Net Working Capital

  11. Market vs Book Value

  12. Example 3.2Market Value versus Book Value

  13. Example 3.2Market Value versus Book Value

  14. The Income Statement

  15. The Income Statement

  16. The Income Statement

  17. Taxes

  18. Which Tax Rate Should You Use in Financial Decisions?

  19. Cash Flow

  20. Work the Web • Now is a good time to download a set of company accounts and look through them in detail.

  21. Financial Statement Analysis

  22. Ratio Analysis

  23. Liquidity or Short-Term Solvency Ratios

  24. Short-Term Solvency Ratios

  25. Financial Leverage or Long-Term Solvency Ratios

  26. Long-Term Solvency Ratios

  27. Asset Management or Turnover Ratios

  28. Asset Management Ratios

  29. Profitability Ratios

  30. Profitability Ratios

  31. Market Value Ratios

  32. Market Value Ratios

  33. The Du Pont Identity

  34. The Du Pont Identity: Proof

  35. Using Financial Statement Information: Choose a Benchmark

  36. Financial Statement Analysis: Some Issues

  37. Financial Planning

  38. Example: Chute SA Assume that all variables are a constant percentage of sales What happens if sales grow by 20 percent?

  39. Example: Chute SA How can net income be €240 but equity only increases by €50?

  40. The Percentage of Sales Approach

  41. Example: Bogle plc Costs are a constant percentage of sales (i.e. Constant profit margin) Dividend payout ratio is constant What happens with a 25 percent increase in sales?

  42. Example: Bogle plc (25% increase in Sales) Dividend payout ratio = Cash dividends / Net income = £48/£144 = 1/3 Projected dividends paid to shareholders = £180  1/3 = £ 60 Projected addition to retained earnings = €180  2/3 = 120 £180

  43. Example: Bogle plcStatement of Financial Position

  44. Example: Bogle plcNew Statement of Financial Position

  45. External Financing Needed For Bogle plc:

  46. Bogle plcPossible Scenario

  47. External Financing and Growth: Hoffman AG

  48. External Financing and Growth: Hoffman AG

  49. Financing and Growth: Hoffman AG • You forecast sales of €600 next year. What will be the new debt-equity ratio?

  50. Financing and Growth: Hoffman AG Assume Hoffman borrows €47.2, New DE Ratio is £297.2/£302.8 = .98

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