Financial Statement Analysis

BCO312 – Financial Statement Analysis Task brief & rubrics

 

Task

Final Assignment

· Individual task

· You must answer all the questions.

· When solving problems, you must clearly explain all the steps you are doing, and why are you making those steps.

· Show all your workings, a numeric answer is not enough.

· You should submit an excel sheet with the financial statements and your calculations.

Formalities:

· Font: Arial 12,5 pts.

· Text alignment: Justified.

· Make sure that the document can be read properly.

 

Submission: Week (8) – In class. Via Moodle (Turnitin).

Weight: This task is a 60% of your total grade for this subject.

 

It assesses the following learning outcomes:

· Apply a more efficient and effective approach to interpreting and analysing financial statements.

· Analyse current and potential future situation of a company based on its financial statements.

· Develop a deep understanding on how to compare companies in similar industries and form opinions as to the relative strength of one company versus another supporting these opinions with financial data.

· Critically evaluate financial ratios.

· Demonstrate a deep understanding of the tools of analysis in financial statement analysis.

· Compare and contrast information about enterprises with relevant benchmarks

 

 

 

Tasks:

 

Problem 1

The company BBB has the following financial statements and related financial information:

 

Income Statement 31/12/2012 31/12/2013 31/12/2014
       
Revenues 89.721 92.158 91.612
Other Revenues 210 215 253
Total Revenues 89.931 92.373 91.865
   % Change YoY 7,4 % 2,7 % (0,5 %)
Cost of Goods Sold -47.500 -48.111 -47.553
Gross Profit 42.431 44.262 44.312
   % Change YoY 7,0 % 4,3 % 0,1 %
   % Gross Margins 47,2 % 47,9 % 48,2 %
Selling General & Admin Expenses -27.295 -28.115 -28.062
R&D Expenses -1413 -1503 -1628
Other Operating Expenses -121 -303 -70
Other Operating Expenses -28.829 -29.921 -29.760
Operating Income 13.602 14.341 14.552
   % Change YoY 4,0 % 5,4 % 1,5 %
   % Operating Margins 15,1 % 15,5 % 15,8 %
Interest Expense -552 -580 -521
Interest And Investment Income 108 199 89
Income (Loss) On Equity Invest. 1253 1264 8003
Other Non Operating Income (Expenses) -24 -2 -11
EBT Excl. Unusual Items 14.387 15.222 22.112
Merger & Restructuring Charges -170 -294 -286
Impairment of Goodwill -14 -114 -1908
Gain (Loss) On Sale Of Investments 41 583 43
Gain (Loss) On Sale Of Assets 135 -1173 -514
Asset Writedown -74 -143 -159
Legal Settlements -369 -380 -411
Other Unusual Items     -606
EBT Incl. Unusual Items 13.936 13.701 18.271
Income Tax Expense -3259 -3256 -3367
Earnings From Continuing Operations 10.677 10.445 14.904
Earnings Of Discontinued Operations      
Net Income to Company 10.677 10.445 14.904
Minority Interest -449 -430 -448
Net Income 10.228 10.015 14.456
       
 
Balance Sheet 31/12/2012 31/12/2013 31/12/2014
       
Cash And Equivalents 5713 6415 7448
Short Term Investments 3583 638 1433
Trading Asset Securities 492 99 86
Total Cash And Short Term Investments 9788 7152 8967
Accounts Receivable 9539 9367 10.283
Other Receivables 4481 3990 4084
Total Receivables 14.020 13.357 14.367
Inventory 8939 8382 9172
Prepaid Expenses 821 762 565
Other Current Assets 452 413 890
Total Current Assets 34.020 30.066 33.961
Gross Property Plant And Equipment 52.315 53.118 56.106
Accumulated Depreciation -25.739 -26.223 -27.685
Net Property Plant And Equipment 26.576 26.895 28.421
Long-term Investments 16.565 16.865 14.142
Goodwill 32.688 31.039 34.557
Other Intangibles 13.018 12.673 19.800
Loans Receivable Long-Term      
Deferred Tax Assets Long-Term 2899 2243 2058
Other Long-Term Assets 111 661 511
Total Assets 125.877 120.442 133.450
Accounts Payable 14.627 16.072 17.437
Accrued Expenses 3078 3185 3759
Short-term Borrowings 13.490 7241 5569
Current Portion of Long-Term Debt 5123 4359 3682
Current Portion of Capital Lease Obligations 52 44 46
Current Income Taxes Payable 1608 1276 1264
Other Current Liabilities 619 740 1138
Total Current Liabilities 38.597 32.917 32.895
Long-Term Debt 8834 10.165 12.207
Capital Leases 174 198 189
Pension & Other Post Retirement Benefits 8360 6279 8081
Deferred Tax Liability Non Current 2240 2643 3191
Other Non Current Liabilities 5008 4101 5003
Total Liabilities 63.213 56.303 61.566
Common Stock 322 322 322
Additional Paid In Capital      
Retained Earnings 80.397 85.252 90.839
Treasury Stock -2078 -2196 -3918
Comprehensive Income and Other -17.634 -20.803 -17.113
Total Common Equity 61.007 62.575 70.130
Minority Interest 1657 1564 1754
Total Equity 62.664 64.139 71.884
Total Liabilities And Equity 125.877 120.442 133.450
       
 
Cash Flow Statement 31/12/2012 31/12/2013 31/12/2014
       
Net Income 10.228 10.015 14.456
Depreciation & Amortization 2655 2864 2782
Amortization of Goodwill and Intangible Assets 102 86 137
Total Depreciation & Amortization 2757 2950 2919
Amortization of Deferred Charges 292 215 139
(Gain) Loss From Sale Of Asset -53 1255 514
Asset Writedown & Restructuring Costs 88 257 2067
(Income) Loss On Equity Investments 585 657 716
Stock-Based Compensation 156 154 156
Net Cash From Discontinued Operations      
Other Operating Activities -305 -1297 -6238
Change In Accounts Receivable -26 -257 -892
Change In Inventories 287 -157 -534
Change In Accounts Payable 1655 1585 912
Change in Other Net Operating Assets 4 -385 485
Cash from Operations 15.668 14.992 14.700
Memo: Change in Net Working Capital 1920 786 -29
Capital Expenditure -5273 -4928 -3914
Sale of Property, Plant, and Equipment 130    
Cash Acquisitions -10.916 -321 -1986
Divestitures 142 421 321
Sale (Purchase) of Intangible assets -325 -402 -509
Investment in Marketable and Equity Securities 1967 2772 3114
Other Investing Activities -216 852 -98
Cash from Investing -14.491 -1606 -3072
Total Debt Issued 7551 3814 2202
Total Debt Repaid -1650 -8334 -3954
Issuance of Common Stock 1199 60  
Repurchase of Common Stock -532 -481 -1617
Common Dividends Paid -6213 -6552 -6863
Common & Preferred Stock Dividends Paid -6213 -6552 -6863
Other Financing Activities -369 -665 -405
Cash from Financing -14 -12.158 -10.637
Foreign Exchange Rate Adjustments -219 -526 42
Net Change in Cash 944 702 1033
Supplementary Data:      
Free Cash Flow 10.395 10.064 10.786
   % Change YoY 92,5 % (3,2 %) 7,2 %
   % Free Cash Flow Margins 11,6 % 10,9 % 11,7 %
Cash and Cash Equivalents, Beginning of Period 4769 5713 6415
Cash and Cash Equivalents, End of Period 5713 6415 7448

 

 

 

 

 

 

You are asked to analyse the company financial statements from different perspectives to assess how the company is positioned vs its main competitor. They provide you with some key indicators.

· 1- Analyse the profitability of the company.

· To do that calculate:

· The gross margin percentage (4 points)

· The return on total assets (4 points)

· The return on equity (4 points)

· They provide you with some key indicators of the company main competitor. How is the BBB corporation compared to their main competitor in terms of profitability? (4 points)

· Gross Profit margin= 38.6%

· ROE= 34.4%

 

· 2- Assess the liquidity and asset management of the company

· To do that calculate:

· Working capital. (4 points)

· The current ratio. (4 points)

· The acid-test ratio. (4 points)

· The average collection period. (4 points)

· The average sale period. (4 points)

· The operating cycle (4 points)

· Use the calculations above to asses how the company is positioned in terms of liquidity and asset management. They provide you with some key indicators of the company main competitor. How is the BBB corporation compared to their main competitor? (4 points)

· Current ratio= 1.29

· Average collection days= 32

· Average sales days= 57

 

· 3- Assess the company solvency :

· In order to do that, calculate:

· The debt-to-equity ratio. (4 points)

· The times interest earned ratio (4 points)

· They provide you with the key indicator below of the company main competitor. How is the BBB corporation position compared to it? (4 points)

· Debt-to-Equity= 4

 

 

· 4- Summarize which are the strengths and weaknesses of BBB corporation vs its main competitor based on the analysis and comparison performed. Which recommendations would you give to the company management to improve its competitive position? Support your answer on your calculations. (4 points)

 

· 5.-Explain why a difference between Net income and operating Cash Flow is there, explain the reasons using the actual data of company BBB. (20 points)

Problem 2.

Given the following information, complete the balance sheet shown next.(20 points)

 

Collection period 71 days
Days’ sales in cash 34 days
Current ratio 2.6
Inventory turnover 5 times
Liabilities to assets 75%
Payables period 36 days

 

(All sales are on credit. All calculations assume a 365-day year. Payables period is based on cost of goods sold.)

Assets
Current assets:  
Cash $1,100,000
Accounts receivable  
Inventory  1,900,000
Total current assets  
Net fixed assets
Total assets 8,000,000
Liabilities and shareholders’ equity  
Current liabilities:  
Accounts payable  
Short-term debt
Total current liabilities  
Long-term debt  
Shareholders’ equity
Total liabilities and equity  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rubrics

 

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