Unit6_assignment2

C3 Took Kit

Name: Stanley Thompson
MBA 6016
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)
*AMAZON 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			$398.79	$250.87
Year-end shares outstanding (in thousands)			459,000	454,000
Tax rate
After-tax cost of capital
Lease payments (in thousands)			$1,011,000	$588,000
Required sinking fund payments			$0	$0
Balance Sheets
(in thousands of dollars)
Assets			2013	2012
Cash and equivalents			$8,658,000	$8,084,000	* Added to cash and quivalents prepaid expense and deferred income taxes
Short-term investments			$3,789,000	$3,364,000		2013	2012
Accounts receivable			$4,767,000	$3,817,000		69,701	49,411	prepaid expenses and other
Inventories			$7,411,000	$6,031,000		103,736	49,931	deferred income taxes
Total current assets			$24,625,000	$21,296,000
Net plant and equipment			$10,949,000	$7,060,000
Total assets			$40,159,000	$32,555,000	* Added to Total assets goodwill and other assets
						2013	2012
Liabilities and equity						2,655,000	2,552,000	Goodwill
Accounts payable			$15,133,000	$13,318,000		1,930,000	1,647,000	Other Assets
Notes payable			$0	$0
Accruals			$7,847,000	$5,684,000
Total current liabilities			$22,980,000	$19,002,000
Long-term bonds and other long-term liabilities			$7,433,000	$5,361,000		2013	2012
Total liabilities			$30,413,000	$24,363,000		9,573,000	8,347,000	additional paid-in capital
Preferred stock (2,00,000 shares: none issued)			$0	$0		-1,837,000	-1,837,000	treasury stock
Common stock (459,000,000 shares oustanding 2013 and 454,000,000 outstanding in 2012			$5,000	$5,000		-185000	-239,000	accumulated other comprehensive loss
Retained earnings			$2,190,000	$1,916,000
Total common equity			$9,746,000	$8,192,000	* Added to Total Common equity additional paid-in capital, treasuary stock, and accumulated other comprehensive income
Total liabilities and equity			$40,159,000	$32,555,000
Income Statements
(in thousands of dollars)
			2013	2012
Net sales			$74,452,000.0	$61,093,000.0
Operating costs			$73,707,000.0	$60,417,000.0
Earnings before interest, taxes, depr. & amort. (EBITDA)			$745,000.0	$676,000.0
Depreciation			$0.0	$0.0
Amortization			$0.0	$0.0
Depreciation and amortization			$0.0	$0.0
Earnings before interest and taxes (EBIT)			$576,000.0	$481,000.0	* EBIT consists of other income and interest income
Less interest			-$141,000.0	-$92,000.0		2013	2012
Earnings before taxes (EBT)			$435,000.0	$389,000.0		-136000	-80000	other income/(expense)
Taxes			$161,000.0	$428,000.0		38000	40000	interest income
Net income before preferred dividends			$274,000.0	-$39,000.0		-71000	-155000	Equity-method investment activity, net of tax
Preferred dividends			$0.0	$0.0
Net income available to common stockholders			$274,000.0	-$39,000.0
Common dividends			$0.0	$0.0
Addition to retained earnings			$274,000.0	-$39,000.0
Calculated Data: Operating Performance and Cash Flows
			2013	2012
Net operating working capital (NOWC)			($2,144,000.0)	($1,070,000.0)
Total operating capital			$8,805,000.0	$5,990,000.0
Net Operating Profit After Taxes (NOPAT)			$576,000.0	$481,000.0
Net Cash Flow (Net income + Depreciation)			$274,000.0	($39,000.0)
Operating Cash Flow (OCF)			$576,000.0	$481,000.0
Free Cash Flow (FCF)			($2,239,000.0)	N/A
Calculated Data: Per-share Information
			2013	2012
Earnings per share (EPS)			$0.60	-$0.09
Dividends per share (DPS)			$0.00	$0.00
Book value per share (BVPS)			$21.23	$18.04
Cash flow per share (CFPS)			$0.60	($0.09)
Free cash flow per share (FCFPS)			($4.88)	N/A
LIQUIDITY RATIOS (Section 3.2)				Industry
		2013	2012	Average
Liquidity ratios
Current Ratio		1.07	1.12	2.22
Quick Ratio		0.75	0.80	1.3
ASSET MANAGEMENT RATIOS (Section 3.3)				Industry
		2013	2012	Average
Asset Management ratios
Inventory Turnover		10.05	10.13	4.78
Days Sales Outstanding		23.4	22.80 Christopher Buzzard: To calculate the DSO ratio, a 365-day accounting year was used.	25.6	*Industry leader
Fixed Asset Turnover		6.80	8.65	1.89	*Industry leader
Total Asset Turnover		1.85	1.88	0.63
DEBT MANAGEMENT RATIOS (Section 3.4)				Industry
		2013	2012	Average
Debt Management ratios
Debt Ratio		75.73%	74.84%	39.30%	*Industry leader
Debt-to-Equity Ratio		3.12	2.97	0.65	*Industry leader
Market Debt Ratio		14.25%	17.62%	24.40	*Industry leader
Times Interest Earned		4.09	5.23	196.79	*Incorrect for 2013 and 2012 as interest combined is income not expense
EBITDA Coverage Ratio		2.02 Brigham: (EBITDA + Lease Payments) / (Interest + Loan Payments + Lease Payments)	2.55	N/A
PROFITABILITY RATIOS (Section 3.5)				Industry
		2013	2012	Average
Profitability ratios
Profit Margin		0.37%	-0.06%	19.96%
Basic Earning Power		1.43%	1.48%	17.63%	*Industry leader
Return on Assets		0.68%	-0.12%	12.56%
Return on Equity		2.81%	-0.48%	19.43%
MARKET VALUE RATIOS (Section 3.6)				Industry
		2013	2012	Average
Market Value ratios
Price-to Earnings Ratio		668.05	-2920.38	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		668.05	-2920.38 Christopher Buzzard: P/CF ratio is calculated by dividing the price by the net cash flow per share.	Brigham: (EBITDA + Lease Payments) / (Interest + Loan Payments + Lease Payments)	Christopher Buzzard: To calculate the DSO ratio, a 365-day accounting year was used.	9.66
Price-to-EBITDA		245.70	168.48	5.13	*Industry Leader
Market-to-Book Ratio		18.78	13.90	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 Amazon's ROE over the past 5 years. (Nvidia and indusry average data for earlier years has been provided.)
		ROE
		AMAZON	EBAY	ALIBABA
	2009	22.8%	19.7%	20.54%
	2010	19.0%	12.4%	27.72%
	2011	8.7%	20.0%	26.53%
	2012	-0.5%	13.5%	21.76%
	2013	2.8%	13.0%	54.26%
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%	99.0%	98.9%
Earnings before interest, taxes, depr. & amort. (EBITDA)			27.9%	1.0%	1.1%
Depreciation and amortization			0.0%	0.0%	0.0%
Earnings before interest and taxes (EBIT)			27.9%	0.8%	0.8%
Less interest			0.0%	-0.2%	-0.2%
Earnings before taxes (EBT)			27.9%	0.6%	0.6%
Taxes			7.3%	0.2%	0.7%
Net income before preferred dividends			20.6%	0.4%	-0.1%
Preferred dividends			0.0%	0.0%	0.0%
Net income available to common stockholders (profit margin)			20.6%	0.4%	-0.1%
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%	21.6%	24.8%
Short-term investments		11.5%	9.4%	10.3%
Accounts receivable		7.1%	11.9%	11.7%
Inventories		5.6%	18.5%	18.5%
Total current assets		37.2%	61.3%	65.4%
Net plant and equipment		62.8%	27.3%	21.7%
Total assets		100.0%	100.0%	100.0%
Liabilities and equity
Accounts payable		12.6%	37.7%	40.9%
Notes payable		0.4%	0.0%	0.0%
Accruals		2.3%	19.5%	17.5%
Total current liabilities		15.3%	57.2%	58.4%
Long-term bonds and other long-term liabilities		61.1%	18.5%	16.5%
Total liabilities		76.4%	75.7%	74.8%
Preferred stock		0.0%	0.0%	0.0%
Total common equity		23.6%	24.3%	25.2%
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			21.9%
Operating costs			22.0%
Earnings before interest, taxes, depr. & amort. (EBITDA)			10.2%
Depreciation and amortization			0.0%
Earnings before interest and taxes (EBIT)			19.8%
Less interest			53.3%
Earnings before taxes (EBT)			11.8%
Taxes			(62.4%)
Net income before preferred dividends			(802.6%)
Preferred dividends			0.0%
Net income available to common stockholders			(802.6%)
Balance Sheet Percent Change Analysis (not in textbook)
Base year =	2012		Percent Change in
			2013
Assets
Cash and equivalents			7.1%
Short-term investments			12.6%
Accounts receivable			24.9%
Inventories			22.9%
Total current assets			15.6%
Net plant and equipment			55.1%
Total assets			23.4%
Liabilities and equity
Accounts payable			13.6%
Notes payable			0.0%
Accruals			38.1%
Total current liabilities			20.9%
Long-term bonds and other long-term liabilities			38.6%
Total liabilities			24.8%
Preferred stock (2,00,000 shares: none issued)			0.0%
Common stock (459,000,000 shares oustanding 2013 and 454,000,000 outstanding in 2012			0.0%
Retained earnings			14.3%
Total common equity			19.0%
Total liabilities and equity			23.4%
DU PONT ANALYSIS (Section 3.8)
		ROE =	(Profit margin)	(TA turnover)	(Equity Multiplier)
AMAZON	2013	2.81%	0.37%	1.85	4.12
AMAZON	2012	-0.48%	-0.06%	1.88	3.97
Industry Average		20.72%	19.96%	0.63	1.65

AMAZON 2009.0 2010.0 2011.0 2012.0 2013.0 0.2275 0.1901 0.0866 -0.0049 0.0281140980915247 EBAY

2009.0 2010.0 2011.0 2012.0 2013.0 0.1969 0.1243 0.1995 0.1354 0.1298 ALIBABA 0.2054 0.2772 0.2653 0.2176 0.5426

ROE (%)