MBA 6016 Assignment 2 Unit 3 Financial Overview***A++ Rated Tutorial Already* Use as a Guide Paper***

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C3 Took Kit


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 Christopher Buzzard: To calculate the DSO ratio, a 365-day accounting year was used.	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 Brigham: (EBITDA + Lease Payments) / (Interest + Loan Payments + Lease Payments)	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 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		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

NVIDIA 2009 2010 2011 2012 2013 -1.2E-2 -2.69E-2 8.6599999999999996E-2 0.15859999999999999 0.1165224952736322 AMD

2009 2010 2011 2012 2013 -2.1307 1.0742 0.56710000000000005 0.37730000000000002 -1.1117999999999999 Intel 0.1293 0.1082 0.25159999999999999 0.27150000000000002 0.2266

ROE (%)