Financial Analysis Training & Templates
Includes links with Excel tables and charts
Objectives of this document
Learn how to do a comprehensive financial analysis with a training and templates created by former Deloitte Management Consultants
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Overview - Guiding principles
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Table of content
Financial Analysis
1
The Profit and Loss Statement (P&L)
The Balance Sheet
The Cash Flow Statement
The Key Financial Ratios
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Profit and Loss Statement (P&L) - Definition
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Profit and Loss Statement (P&L) - Description
The Income Statement has three primary components:
Revenues
Expenses
The Money spent to generate revenue which includes: Cost of Goods Sold (COGS): The direct costs attributable to the production of the goods sold by a company Selling Expenses: Cash payments (or equivalent) for marketing services Administrative Expenses: Costs to the firm to cover items such as salaries Interest Expenses: Payments made to cover costs of financing Tax Expense: Payments made to the government to cover income taxes Depreciation Expense: Amount of asset usage (described in the next chapter) that is applied to this year
Net Income
The money earned by the company which includes: The sale of goods and services The interest earned Certain investment activities
Net Income is referred to as Profit or Earnings, when not negative and Loss when negative. It is the company revenues minus its expenses
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Profit and Loss Statement (P&L) Excel template
Insert Your company name
Income Statement
For Period Ending XXX
Executive summary Net Sales $495,000 Gross Profit $370,000 Net Income $155,000 Details
Revenue
Gross sales Sales returns and allowances NET SALES
$500,000 -$5,000
Double click to access the Excel document and enter your own data
Comments
Insert your own comments Insert your own comments Insert your own comments
$495,000
Cost of sales
Beginning inventory Goods purchased / manufactured Ending inventory Total Cost of Goods Sold Gross Profit
$45,000 $100,000 -$20,000
Insert your own comments Insert your own comments Insert your own comments
$125,000 $370,000 Insert your own comments
Selling Expenses
Salaries and wages Advertising Depreciation Other Total Selling Expenses
$45,000 $10,000 $5,000 -$20,000
$40,000
Insert your own comments Insert your own comments Insert your own comments Insert your own comments Insert your own comments
General / Administrative Expenses
Salaries and wages Employee benefits Payroll taxes Insurance Rent Utilities Depreciation & amortization Office supplies Travel & entertainment Postage Equipment maintenance & rental Interest Furniture & equipment Total General / Administrative Expenses Net Income Before Taxes
$45,000 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 $5,000 -$20,000
Cells with formula will be automatically updated
$130,000 $200,000
Insert your own comments Insert your own comments Insert your own comments Insert your own comments Insert your own comments Insert your own comments Insert your own comments Insert your own comments Insert your own comments Insert your own comments Insert your own comments Insert your own comments Insert your own comments Insert your own comments Insert your own comments
Tax
Income Tax Expense
$45,000
Insert your own comments
Net Income
Insert your own comments $155,000 www.slidebooks.com
Table of content
Financial Analysis
1
The Profit and Loss Statement (P&L)
The Balance Sheet
The Cash Flow Statement
The Key Financial Ratios
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Balance Sheet - Definition
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Balance Sheet - Description
The balance sheet must follow the formula Asset = Liabilities + Shareholders Equity
Asset
Liabilities + Shareholders Equity
Current asset
Current liabilities
Where the money is going to
Fixed Assets
Long-term Liabilities
Where the money is coming from
Intangible Assets
Shareholders Equity & Retained Earnings
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Balance Sheet - Excel template
Insert Your company name
Balance Sheet
Insert Date
Executive summary TOTAL ASSET $75,000 TOTAL LIABILITIES $50,000 TOTAL SHAREHOLDERS'S EQUITY $25,000 Details ASSETS
CURRENT ASSETS
Cash in Bank Inventory Accounts Receivables Prepaid Expenses Other TOTAL
$45,000 $0 $0 $10,000 $0
Double click to access the Excel document and enter your own data
LIABILITIES & SHAREHOLDERS'S EQUITY
CURRRENT LIABILITIES
Accounts Payable Taxes Payable Short Terms Notes Payable Current Portion Long-term Debt Other current liabilities (specify) TOTAL
$50,000 $0 $0 $0 $0
$55,000
$50,000
FIXED ASSETS
Property, Plant and Equipement Furniture & Fixtures Leasehold Improvements Other TOTAL
$20,000 $0 $0 $0
LONG-TERM LIABILITIES
Bank Loans Payable (greater than 12 months) Less: Short-term Portion Notes Payable to Stockholders Other long-term debt (specify) TOTAL
$0 $0 $0 $0
$20,000
$0
OTHER ASSETS
Specify Specify Specify TOTAL TOTAL ASSET
$0 $0 $0
OTHER LIABILITIES
Specify Specify Specify TOTAL TOTAL LIABILITIES
$0 $0 $0
$0 $75,000
$0 $50,000
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SHAREHOLDERS' EQUITY
Capital Stock Retained Earnings TOTAL TOTAL SHAREHOLDERS'S EQUITY TOTAL LIABILITIES & SHAREHOLDERS'S EQUITY
$10,000 $15,000
$25,000 $25,000 $75,000
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Table of content
Financial Analysis
1
The Profit and Loss Statement (P&L)
The Balance Sheet
The Cash Flow Statement
The Key Financial Ratios
12
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Cash Flow Statement - Definition
13
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Cash Flow Statement - Description
Starting cash position Sources of cash
Cash Flow Statement
Closing Cash Position Uses of cash
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Cash Flow Statement - Excel Template
Insert Your company name
Cash Flow Statement
For Period XXX
Executive summary Starting Cash Position $100,000 Change During Year $50,000 Closing Cash Position $150,000 Details
Comments
Starting Cash Position $100,000 Insert your own comments Insert your own comments Insert your own comments Insert your own comments Insert your own comments Insert your own comments
Double click to access the Excel document and enter your own data
Incoming
Cash sales Collections from accounts receivable Other cash receipts Total Incoming
$100,000 $50,000 $50,000
$200,000
Outgoing Fixed Costs
Administration Marketing Operation Total Outgoing Fixed Costs
$45,000 $50,000 -$20,000
$75,000
Insert your own comments Insert your own comments Insert your own comments Insert your own comments
Outgoing Variable Costs
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Administration Marketing Operation Total Outgoing Variable Costs Change During Year Closing Cash Position
$45,000 $50,000 -$20,000
$75,000 $50,000 $150,000 www.slidebooks.com
Insert your own comments Insert your own comments Insert your own comments Insert your own comments Insert your own comments Insert your own comments
Table of content
Financial Analysis
1
The Profit and Loss Statement (P&L)
The Balance Sheet
The Cash Flow Statement
The Key Financial Ratios
16
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There are 6 categories of financial ratios that can be used to analyse a companys performance
1.Efficiency ratios
2.Solvency ratios
3.Liquidity ratios
4.Profitabili ty ratios
5.Leverage ratios
6.Return on investment ratios
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1.Efficiency ratios are are typically used to analyze how well a company uses its assets and liabilities internally
Ratio1 Formula2 Definition2 Result
Inventory turnover ratio
COGS / Average inventory
The length of time it takes a company to sell inventory
Insert your own text
Accounts receivable turnover ratio Accounts payable turnover ratio
Sales / Average accounts receivable
The length of time it takes a company to collect accounts receivable
Insert your own text
COGS / Average accounts payable
The length of time it takes a company to pay its creditors
Insert your own text
Asset turnover ratio
Sales / Average net assets
The efficiency of asset usage within a company
Insert your own text
Fixed asset turnover ratio
Sales / Average fixed assets
The efficiency of fixed asset usage within a company
Insert your own text
Working capital turnover ratio
1365 2The
Sales / Average working capital
How effectively is a company using its working capital (= current assets current liabilities) to generate sales
Insert your own text
/ turnover ratio gives you the days outstanding average equals the value at the beginning of the year + the value at the end of the year divided by 2 Click here to download the editable PowerPoint
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2.Solvency ratios are used to analyze the degree of financial risk that a business faces at a certain point in time
Ratio Formula Definition Result
Debt to equity ratio
Total liabilities / shareholders equity
The amount of equity to support creditors in case of financial difficulties. A high debt/equity ratio generally means that a company has been aggressive in financing its growth with debt
Insert your own text
Debt ratio
Total liabilities / Total assets
The amount of equity to support creditors in case of financial difficulties
Insert your own text
Times interest earned (TIE) ratio
EBIT / Interest charges
It indicates how many times a company can cover its interest charges on a pretax basis
Insert your own text
Cash ratio
(Current assets Inventories Receivables) / Current liabilities
The extent to which current liabilities are covered by the current assets that can be converted into cash and used almost instantly
Insert your own text
Quick ratio
(Current assets Inventories) / Current liabilities
The extent to which current liabilities are covered by the current assets that can be converted into cash almost instantly
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Insert your own text
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3.Liquidity ratios are used to analyze a companys ability to meet its credit obligations at a certain point in time
Ratio
Formula
Definition
Result
Current ratio
Current assets / Current liabilities
The extent to which current liabilities are covered by current assets
Insert your own text
Quick ratio
(Current assets Inventories) / Current liabilities
The extent to which current liabilities are covered by the current assets that can be converted into cash almost instantly
Insert your own text
Cash ratio
(Current assets Inventories Receivables) / Current liabilities
The extent to which current liabilities are covered by the current assets that can be converted into cash and used almost instantly
Insert your own text
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4.Profitability ratios are used to analyse a companys ability to generate a profit
Ratio Formula1 Definition Result
Return on sales
Net income / Net sales
The amount of net income earned from each unit of sales. This ratio is also called net profit margin
Insert your own text
Return on equity
(ROE)
Net income / Average shareholders equity
The return stockholders are receiving on their investment in the company
Insert your own text
Return on net assets
Net operating profit after tax (NOPAT) / Total net assets
The amount of net income earned per unit of asset used in the business
Insert your own text
Return on Capital Employed (ROCE) Return on invested capital (ROIC) Return On Funds Employed
1The
Net income / Average working capital
The return a company is realizing from its capital employed, i.e. how efficient is the capital used to generate revenues How well does a company generate cash flow relative to its capital invested. A ratio >1 means that the company is creating value The net operating return the company generates relative to all funds invested. Funds employed = total liabilities
Insert your own text
NOPAT / Average total capital
Insert your own text
NOPAT/ Average funds employed
Insert your own text
average equals the value at the beginning of the year + the value at the end of the year divided by 2
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5.Leverage ratios are used to analyze whether the use of borrowed funds generates increased earnings
Ratio
Formula
Definition
Result
Debt to equity ratio
Total liabilities / shareholders equity
The amount of equity to support creditors in case of financial difficulties. A high debt/equity ratio generally means that a company has been aggressive in financing its growth with debt
Insert your own text
Debt ratio
Total liabilities / Total assets
The amount of equity to support creditors in case of financial difficulties
Insert your own text
Times interest earned (TIE) ratio
EBIT / Interest charges
It indicates how many times a company can cover its interest charges on a pretax basis
Insert your own text
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6.Return on investment ratios are used to analyze how much money shareholders are receiving compared to the money they have invested
Ratio
Formula
Definition
Result
Dividend Yield
Dividends per share / Current market price share Net income Dividends on preferred stocks / average outstanding shares
It shows how much a company pays out in dividends compared to its share price
Insert your own text
Earnings per share (EPS)
The portion of a company's profit allocated to each outstanding share of common stock
Insert your own text
Price / Earnings
Current market price share / EPS
A valuation ratio of a company's current share price compared to its earnings pershare
Insert your own text
Return on Equity (ROE)
Net income / Average shareholders equity
The return stockholders are receiving on their investment in the company
Insert your own text
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Finally, present your results in a graphic way
Example of graphics you can use to present effectively your results
Company X Worst peer 5%
Return on sales (%)
Company Y
Company Z Best peer 8% 9%
2%
Return on equity (%)
4%
8%
X%
Profitability ratios Return on net assets (%)
X%
X%
X%
Return on Capital Employed (%)
X%
X%
Return On Funds Employed (%)
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X%
X%
Value Driver tree Sources of information
Corporate Finance by Pierre Vernimmen
EVA by Stephen F
Competitive Value Management by Hermann J. Stern
Sources of information
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