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Financial Statement Reformulation

Financial Statement Reformulation. The Wendy’s Company. Enterprise Valuation Approach. This approach requires separating operating (enterprise) and funding (financing) activities This involves: Dividing the balance sheet into Net enterprise assets (or liabilities)

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Financial Statement Reformulation

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  1. Financial Statement Reformulation The Wendy’s Company

  2. Enterprise Valuation Approach • This approach requires separating operating (enterprise) and funding (financing) activities • This involves: • Dividing the balance sheet into • Net enterprise assets (or liabilities) • Net financial liabilities (or assets) • Dividing the income statement into • Enterprise profits (losses) after taxes • Financial expenses (revenues) after taxes

  3. Key Distinction • Difference between finance and enterprise items • Enterprise items represent the operations of a given organization • Financial items represent the funding for a given organization

  4. Reformulating the Balance Sheet • E • Enterprise assets or liabilities • F • Financial assets or liabilities

  5. Net Enterprise Assets (NEA)

  6. Net Financial Liabilities (NFL)

  7. Check Your Work • Net enterprise assets – Net financial liabilities = Shareholders’ equity

  8. Reformulating the Income Statement • E • Enterprise revenue or expenses • F • Financial revenue or expenses

  9. Enterprise Profits After Taxes (EPAT)

  10. Financial Expenses After Taxes (FEAT)

  11. Check Your Work • Enterprise profits after tax – Financial expenses after tax = Comprehensive income

  12. Unanswered Questions • This analysis focused solely on the financial statements • Contingent on further detail, several items classified as enterprise may actually be financial • From the balance sheet • Other current assets • Deferred income tax benefit • Deferred costs and other assets • From the income statement • Other operating expenses • Other income

  13. End.

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