Financial Statement Analysis

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FinancialStatementAnalysisAssFinal_Summer12022.docx

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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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