For this assignment, you will complete the Financial Overview component of your course project. To complete this assignment, use the Financial Analysis Toolkit Excel file, provided in the Resources, to complete a financial analysis of your chosen company
Asbleyftownc6For this assignment, you will complete the Financial Overview component of your course project. To complete this assignment, use the Financial Analysis Toolkit Excel file, provided in the Resources, to complete a financial analysis of your chosen company (Apple Inc,) over the last two most recent years available in annual reports. Replace the numbers provided in the Excel file with the appropriate numbers for your firm. Then, write a 2–3 page financial analysis of your company, addressing the following elements:
A great way to integrate your completed calculations from your Excel sheet into your written analysis is to paste pieces of the worksheet directly into your Word document. You are also encouraged to create graphs or charts from the data that may illustrate your analyses as well. | |||||||||||||
| Tool Kit for Analysis of Financial Statements | |||||||||||||
| Financial statements are analyzed by calculating certain key ratios and then comparing them with the ratios of other firms and by examining the trends in ratios over time. We can also combine ratios to make the analysis more revealing, those indicated below are exceptionally useful for this type of analysis. | |||||||||||||
| RATIO ANALYSIS (Section 3.1) | |||||||||||||
| *NVIDIA Fiscal Years starts and ends on Jan 31, such that FY13 represents Jan 31,2012 to Jan31, 2013 | |||||||||||||
| Input Data: | |||||||||||||
| 2013 | 2012 | ||||||||||||
| Year-end common stock price | $12.26 | $13.86 | |||||||||||
| Year-end shares outstanding (in thousands) | 616,756 | 612,191 | |||||||||||
| Tax rate | 15% | 12% | |||||||||||
| After-tax cost of capital | |||||||||||||
| Lease payments (in thousands) | $18,998 | $21,439 | |||||||||||
| Required sinking fund payments | $0 | $0 | |||||||||||
| Balance Sheets | |||||||||||||
| (in thousands of dollars) | |||||||||||||
| Assets | 2013 | 2012 | |||||||||||
| Cash and equivalents | $906,223 | $767,218 | * Added to cash and quivalents prepaid expense and deferred income taxes | ||||||||||
| Short-term investments | $2,995,097 | $2,461,700 | 2013 | 2012 | |||||||||
| Accounts receivable | $454,252 | $336,143 | 69,701 | 49,411 | prepaid expenses and other | ||||||||
| Inventories | $419,686 | $340,297 | 103,736 | 49,931 | deferred income taxes | ||||||||
| Total current assets | $4,775,258 | $3,905,358 | |||||||||||
| Net plant and equipment | $1,636,987 | $1,647,570 | * In addition to equpment also includes goodwill, intangible assets, and other assets | ||||||||||
| Total assets | $6,412,245 | $5,552,928 | 2013 | 2012 | |||||||||
| 641,030 | 641,030 | goodwill | |||||||||||
| Liabilities and equity | 312,332 | 326,136 | intangible assets | ||||||||||
| Accounts payable | $356,428 | $335,072 | 107,481 | 120,332 | other assets | ||||||||
| Notes payable | $0 | $0 | |||||||||||
| Accruals | $619,795 | $594,886 | |||||||||||
| Total current liabilities | $976,223 | $929,958 | |||||||||||
| Long-term bonds | $608,319 | $477,246 | 2013 | 2012 | |||||||||
| Total liabilities | $1,584,542 | $1,407,204 | 3,193,623 | 2,900,896 | additional paid-in capital | ||||||||
| Preferred stock (2,00,000 shares: none issued) | $0 | $0 | -1,622,709 | -1,496,904 | treasury stock | ||||||||
| Common stock (616,756,134 shares oustanding 2013 and 612,191,412 outstanding in 2012 | $720 | $700 | 9981 | 10,614 | accumulated other comprehensive income | ||||||||
| Retained earnings | $3,246,088 | $2,730,418 | |||||||||||
| Total common equity | $4,827,703 | $4,145,724 | * Added to Total Common equity additional paid-in capital, treasuary stock, and accumulated other comprehensive income | ||||||||||
| Total liabilities and equity | $6,412,245 | $5,552,928 | |||||||||||
| Income Statements | |||||||||||||
| (in thousands of dollars) | |||||||||||||
| 2013 | 2012 | ||||||||||||
| Net sales | $4,280,159.0 | $3,997,930.0 | |||||||||||
| Operating costs | $3,631,920.0 | $3,349,631.0 | |||||||||||
| Earnings before interest, taxes, depr. & amort. (EBITDA) | $648,239.0 | $648,299.0 | |||||||||||
| Depreciation | $0.0 | $0.0 | |||||||||||
| Amortization | $0.0 | $0.0 | |||||||||||
| Depreciation and amortization | $0.0 | $0.0 | |||||||||||
| Earnings before interest and taxes (EBIT) | $648,239.0 | $648,299.0 | |||||||||||
| Less interest | -$13,800.0 | -$15,097.0 | |||||||||||
| Earnings before taxes (EBT) | $662,039.0 | $663,396.0 | |||||||||||
| Taxes (15.0%, 12.4%) | $99,503.0 | $82,306.0 | |||||||||||
| Net income before preferred dividends | $562,536.0 | $581,090.0 | |||||||||||
| Preferred dividends | $0.0 | $0.0 | |||||||||||
| Net income available to common stockholders | $562,536.0 | $581,090.0 | |||||||||||
| Common dividends | $0.0 | $0.0 | |||||||||||
| Addition to retained earnings | $562,536.0 | $581,090.0 | |||||||||||
| Calculated Data: Operating Performance and Cash Flows | |||||||||||||
| 2013 | 2012 | ||||||||||||
| Net operating working capital (NOWC) | $803,938.0 | $513,700.0 | |||||||||||
| Total operating capital | $2,440,925.0 | $2,161,270.0 | |||||||||||
| Net Operating Profit After Taxes (NOPAT) | $551,003.2 | $567,909.9 | |||||||||||
| Net Cash Flow (Net income + Depreciation) | $562,536.0 | $581,090.0 | |||||||||||
| Operating Cash Flow (OCF) | $551,003.2 | $567,909.9 | |||||||||||
| Free Cash Flow (FCF) | $271,348.2 | N/A | |||||||||||
| Calculated Data: Per-share Information | |||||||||||||
| 2013 | 2012 | ||||||||||||
| Earnings per share (EPS) | $0.91 | $0.95 | |||||||||||
| Dividends per share (DPS) | $0.00 | $0.00 | |||||||||||
| Book value per share (BVPS) | $7.83 | $6.77 | |||||||||||
| Cash flow per share (CFPS) | $0.91 | $0.95 | |||||||||||
| Free cash flow per share (FCFPS) | $0.44 | N/A | |||||||||||
| LIQUIDITY RATIOS (Section 3.2) | Industry | ||||||||||||
| 2013 | 2012 | Average | |||||||||||
| Liquidity ratios | |||||||||||||
| Current Ratio | 4.89 | 4.20 | 2.22 | ||||||||||
| Quick Ratio | 4.46 | 3.83 | 1.3 | ||||||||||
| ASSET MANAGEMENT RATIOS (Section 3.3) | Industry | ||||||||||||
| 2013 | 2012 | Average | |||||||||||
| Asset Management ratios | |||||||||||||
| Inventory Turnover | 10.20 | 11.75 | 4.78 | ||||||||||
| Days Sales Outstanding | 38.7 | 30.69 | 25.6 | *Industry leader | |||||||||
| Fixed Asset Turnover | 2.61 | 2.43 | 1.89 | *Industry leader | |||||||||
| Total Asset Turnover | 0.67 | 0.72 | 0.63 | ||||||||||
| DEBT MANAGEMENT RATIOS (Section 3.4) | Industry | ||||||||||||
| 2013 | 2012 | Average | |||||||||||
| Debt Management ratios | |||||||||||||
| Debt Ratio | 24.71% | 25.34% | 39.30% | *Industry leader | |||||||||
| Debt-to-Equity Ratio | 0.33 | 0.34 | 0.65 | *Industry leader | |||||||||
| Market Debt Ratio | 17.33% | 14.23% | 24.40 | *Industry leader | |||||||||
| Times Interest Earned | 46.97 | 42.94 | 196.79 | *Incorrect for 2013 and 2012 as interest combined is income not expense | |||||||||
| EBITDA Coverage Ratio | 128.36 | 105.60 | N/A | ||||||||||
| PROFITABILITY RATIOS (Section 3.5) | Industry | ||||||||||||
| 2013 | 2012 | Average | |||||||||||
| Profitability ratios | |||||||||||||
| Profit Margin | 13.14% | 14.53% | 19.96% | ||||||||||
| Basic Earning Power | 10.11% | 11.67% | 17.63% | *Industry leader | |||||||||
| Return on Assets | 8.77% | 10.46% | 12.56% | ||||||||||
| Return on Equity | 11.65% | 14.02% | 19.43% | ||||||||||
| MARKET VALUE RATIOS (Section 3.6) | Industry | ||||||||||||
| 2013 | 2012 | Average | |||||||||||
| Market Value ratios | |||||||||||||
| Price-to Earnings Ratio | 13.44 | 14.60 | 25.77 | *NVIDIA doesn't account for depreciation in their 10-K statements Same P/E P/CF Ratio because there is no depreciation | |||||||||
| Price-to-Cash Flow Ratio | 13.44 | 14.60 | 9.66 | ||||||||||
| Price-to-EBITDA | 11.66 | 13.09 | 5.13 | *Industry Leader | |||||||||
| Market-to-Book Ratio | 1.57 | 2.05 | 3.59 | ||||||||||
| TREND ANALYSIS, COMMON SIZE ANALYSIS, AND PERCENT CHANGE ANALYSIS (Section 3.7) | |||||||||||||
| TREND ANALYSIS | |||||||||||||
| Trend analysis allows you to see how a firm's results are changing over time. For instance, a firm's ROE may be slightly below the benchmark, but if it has been steadily rising over the past four years, that should be seen as a good sign. | |||||||||||||
| A trend analysis and graph have been constructed on this data regarding Nvidia's ROE over the past 5 years. (Nvidia and indusry average data for earlier years has been provided.) | |||||||||||||
| ROE | |||||||||||||
| NVIDIA | AMD | Intel | |||||||||||
| 2009 | -1.2% | -213.1% | 12.93% | ||||||||||
| 2010 | -2.7% | 107.4% | 10.82% | ||||||||||
| 2011 | 8.7% | 56.7% | 25.16% | ||||||||||
| 2012 | 15.9% | 37.7% | 27.15% | ||||||||||
| 2013 | 11.7% | -111.2% | 22.66% | ||||||||||
| Figure 3-1 Rate of Return on Common Equity | |||||||||||||
| COMMON SIZE ANALYSIS | |||||||||||||
| In common size income statements, all items for a year are divided by the sales for that year. | |||||||||||||
| Figure 3-2 Common Size Income Statements | |||||||||||||
| Industry Composite | Nvidia | ||||||||||||
| 2013 | 2013 | 2012 | |||||||||||
| Net sales | 100.0% | 100.0% | 100.0% | ||||||||||
| Operating costs | 72.1% | 84.9% | 83.8% | ||||||||||
| Earnings before interest, taxes, depr. & amort. (EBITDA) | 27.9% | 15.1% | 16.2% | ||||||||||
| Depreciation and amortization | 0.0% | 0.0% | 0.0% | ||||||||||
| Earnings before interest and taxes (EBIT) | 27.9% | 15.1% | 16.2% | ||||||||||
| Less interest | 0.0% | -0.3% | -0.4% | ||||||||||
| Earnings before taxes (EBT) | 27.9% | 15.5% | 16.6% | ||||||||||
| Taxes (15.0%, 12.4%) | 7.3% | 2.3% | 2.1% | ||||||||||
| Net income before preferred dividends | 20.6% | 13.1% | 14.5% | ||||||||||
| Preferred dividends | 0.0% | 0.0% | 0.0% | ||||||||||
| Net income available to common stockholders (profit margin) | 20.6% | 13.1% | 14.5% | ||||||||||
| In common sheets, all items for a year are divided by the total assets for that year. | |||||||||||||
| Figure 3-3 Common Size Balance Sheets | |||||||||||||
| Industry Composite | Nvidia | ||||||||||||
| 2013 | 2013 | 2012 | |||||||||||
| Assets | |||||||||||||
| Cash and equivalents | 13.0% | 14.1% | 13.8% | ||||||||||
| Short-term investments | 11.5% | 46.7% | 44.3% | ||||||||||
| Accounts receivable | 7.1% | 7.1% | 6.1% | ||||||||||
| Inventories | 5.6% | 6.5% | 6.1% | ||||||||||
| Total current assets | 37.2% | 74.5% | 70.3% | ||||||||||
| Net plant and equipment | 62.8% | 25.5% | 29.7% | ||||||||||
| Total assets | 100.0% | 100.0% | 100.0% | ||||||||||
| Liabilities and equity | |||||||||||||
| Accounts payable | 12.6% | 5.6% | 6.0% | ||||||||||
| Notes payable | 0.4% | 0.0% | 0.0% | ||||||||||
| Accruals | 2.3% | 9.7% | 10.7% | ||||||||||
| Total current liabilities | 15.3% | 15.2% | 16.7% | ||||||||||
| Long-term bonds | 61.1% | 9.5% | 8.6% | ||||||||||
| Total liabilities | 76.4% | 24.7% | 25.3% | ||||||||||
| Preferred stock | 0.0% | 0.0% | 0.0% | ||||||||||
| Total common equity | 23.6% | 75.3% | 74.7% | ||||||||||
| Total liabilities and equity | 100.0% | 100.0% | 100.0% | ||||||||||
| PERCENT CHANGE ANALYSIS | |||||||||||||
| In percent change analysis, all items are divided by the that item's value in the beginning, or base, year. | |||||||||||||
| Figure 3-4 Income Statement Percent Change Analysis | |||||||||||||
| Base year = | 2012 | Percent Change in | |||||||||||
| 2013 | |||||||||||||
| Net sales | 7.1% | ||||||||||||
| Operating costs | 8.4% | ||||||||||||
| Earnings before interest, taxes, depr. & amort. (EBITDA) | (0.0%) | ||||||||||||
| Depreciation and amortization | 0.0% | ||||||||||||
| Earnings before interest and taxes (EBIT) | (0.0%) | ||||||||||||
| Less interest | (8.6%) | ||||||||||||
| Earnings before taxes (EBT) | (0.2%) | ||||||||||||
| Taxes (15.0%, 12.4%) | 20.9% | ||||||||||||
| Net income before preferred dividends | (3.2%) | ||||||||||||
| Preferred dividends | 0.0% | ||||||||||||
| Net income available to common stockholders | (3.2%) | ||||||||||||
| Balance Sheet Percent Change Analysis (not in textbook) | |||||||||||||
| Base year = | 2012 | Percent Change in | |||||||||||
| 2013 | |||||||||||||
| Assets | |||||||||||||
| Cash and equivalents | 18.1% | ||||||||||||
| Short-term investments | 21.7% | ||||||||||||
| Accounts receivable | 35.1% | ||||||||||||
| Inventories | 23.3% | ||||||||||||
| Total current assets | 22.3% | ||||||||||||
| Net plant and equipment | -0.6% | ||||||||||||
| Total assets | 15.5% | ||||||||||||
| Liabilities and equity | |||||||||||||
| Accounts payable | 6.4% | ||||||||||||
| Notes payable | 0.0% | ||||||||||||
| Accruals | 4.2% | ||||||||||||
| Total current liabilities | 5.0% | ||||||||||||
| Long-term bonds | 27.5% | ||||||||||||
| Total liabilities | 12.6% | ||||||||||||
| Preferred stock (2,00,000 shares: none issued) | 0.0% | ||||||||||||
| Common stock (616,756,134 shares oustanding 2013 and 612,191,412 outstanding in 2012 | 2.9% | ||||||||||||
| Retained earnings | 18.9% | ||||||||||||
| Total common equity | 16.5% | ||||||||||||
| Total liabilities and equity | 15.5% | ||||||||||||
| DU PONT ANALYSIS (Section 3.8) | |||||||||||||
| ROE = | (Profit margin) | (TA turnover) | (Equity Multiplier) | ||||||||||
| Nvidia | 2013 | 11.65% | 13.14% | 0.67 | 1.33 | ||||||||
| Nvidia | 2012 | 14.02% | 14.53% | 0.72 | 1.34 | ||||||||
| Industry Average | 20.72% | 19.96% | 0.63 | 1.65 | |||||||||
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