贝恩咨询分析方法-Ratioanalysis2.ppt

Author CollinsQian RatioAnalysis March1998 Agenda UsingratiosTypesofkeyratiosprofitabilityturnoverleverageliquiditycoverageReturnonEquityRatioexercisesForecastingexerciseAbbreviationsKeytakeaways AnalyzingRatios Ratiosinisolationaremeaningless Acompany sratiosmustbeexaminedovertimeand oragainstitscompetitors ratios Historicalcomparison Competitivecomparison Comparepresentratioswithsamecompany shistoricalratiosInstablesituations historicalratiosmaybeusedtoprojectfutureperformance Compareacompany sratioswithsimilarfirms ratiosorwithindustryaveragesatthesamepointintime Lookfortrends Lookatrelativeperformance TheArtofRatioAnalysis Whichratiosaremostimportantinagivensituation Whatitemsshouldbeincluded excludedincalculatingtheratios Howmuchinfluencedoesmanagementhaveovertheratios Whatdotheratiossayaboutthefirm sstrategy Ratioanalysisisanartaswellasascience TheNeedforJudgment PotentialProblem Managementcansubstantiallyinfluencefinancialsintheshortterm Implications Needtousejudgmenttounderstandfinancials Ratioanalysisrequireskeenjudgment Financialstatementdataishistorical notproforma Cross companycomparisonsaremeaninglessifadjustmentsarenotmadefordifferentaccountingconventions Thetimingofthereportingperiodinfluencesfundsflowsandrequirements NeedtounderstandthathistorydoesNOTnecessarilypredictfuture Needtobeverysensitiveaboutindustry specificseasonalityandcyclicality Needtostandardizeacrosscompaniestoadjustfordifferentaccountingmethods Agenda UsingratiosTypesofkeyratiosprofitabilityturnoverleverageliquiditycoverageReturnonEquityRatioexercisesForecastingexerciseAbbreviationsKeytakeaways TypesofRatios Ratioshelpusunderstandhowwellacompanyisperforming Specifically howmuchreturnisitgeneratingwithwhatlevelofrisk Howwelldoesthecompanymanagecostsrelativetorevenues Return Risk CoverageInterestchargeFixedchargecoverage LiquidityCurrentratioQuickratio LeverageAssettoequityDebttoequityDebttototalcapital TurnoverReceivablesInventoryPayablesAsset ProfitabilityOperatingmarginROSGrossmargin Howeffectiveisthecompanyinmanagingitsresources Whataretherespectiveclaimsofdebtandequityowners Howriskyisthebusiness Isthecompanyabletomeetitsshort termobligations Isthecompanyabletomeetitslong termobligations ProfitabilityRatios Definitions Thisisnotaprofitabilityratio butitdoesimpactROS Profitabilityratiosuselineitemsfromtheincomestatement Ratios Definitions Grossprofitmargin orgrossmargin Sales costofgoodssoldSales Operatingprofitmargin oroperatingmargin EarningsbeforeinterestandtaxesSales Returnonsales ROS ProfitaftertaxSales Effectivetaxrate TaxesProfitbeforetax ProfitabilityRatios Description Profitability ormargin ratiosareafunctionofboththeindustryandacompany spositionwithintheindustryboundariesaresetbytheoperatingcharacteristicsoftheindustrywithintheseboundariesprofitabilityratiosaredeterminedbyaplayer srelativepositionBaintypicallyusesgrossprofitandoperatingprofittomeasureprofitabilityROScanbealteredbynon operatingactivities suchassourcesoffinancingortaxratemanipulationsExtraordinaryitems becausetheyareforunusualevents suchasdiscontinueditemsorassetsales areexcludedwhenweanalyzetheperformanceofthebasebusiness Profitabilityratiosmeasureafirm sabilitytomanagecostsrelativetorevenues ProfitabilityRatios OverTime Grossprofitmarginshouldstayconstantorincreasebecausecostofgoodssoldshouldbeaconstantpercentofsalesorshoulddecreaseascompanygetspriceincreasesand orvolumediscountsOperatingmarginshouldincreaseasfixedadministrativeandsalescostsarespreadoveragreaternumberofunitsEffectivetaxrateshouldstayconstantordecreasesincealargerfirmisabletotakeadvantageofmoretaxshelters Asacompanygrows itsreturnonsalesshouldincrease Higherreturnonsales ProfitabilityRatios MarketLeader Grossprofitmarginshouldbehighersinceamarketleadercantypicallychargemoreforitsgoodsand orreceivethegreatestvolumediscountsfromsuppliersOperatingprofitmarginshouldbesignificantlyhigher becausehighervolumemeansfixedcostsarespreadovermoreunitsandbecausethegrossprofitmarginishigherThereshouldbenosignificantdifferenceintheeffectivetaxrateReturnonsalesshouldbesignificantlyhigherbecausetheoperatingmarginshouldbesignificantlyhigher Themarketleaderinanindustryshouldhavethebestprofitabilityratios ThisisconsistentwiththeROS RMSconceptwhichsaysthatcompanieswithhighrelativemarketsharehavehighreturnsonsales TurnoverRatios Definitions Note Average YearBeginning YearEnd 2 Salesisoftenagoodproxy Costofgoodssoldisoftenagoodproxy Typicallyweuse365days i e 1year fortheperiod Turnoverratiosuseacombinationofincomestatementandbalancesheetitems Ratios Definitions Receivablesturnover Creditsalesinperiod Accountsreceivableaveragebalance Inventoryturnover CostofgoodssoldinperiodAverageinventoryinperiod Payablesturnover Purchasesonaccount Accountspayableaveragebalance Assetturnover SalesinperiodAverageassets Anyturnoverratiocanbeexpressedasaperiodratiowhichmeasuresthenumberofdaysinthecycle Daysinperiod Turnoverratio Periodratio TurnoverRatios TransactionCycle Accountspayable inventory andaccountsreceivablearethemajorcomponentsofworkingcapital Itiscriticalforafirmtomanageitspayables inventory andreceivables Cashinflow Cashcollectedforsalesmade Cashoutflow Rawmaterialspurchased Cashdisbursedforrawmaterialspurchased Finishedgoodsinventory Salesmade Accountsreceivableperiod Accountspayableperiod X X X TurnoverRatios Description TurnoverratiosmeasureshowmanytimesperyearagivenresourceisconsumedPeriodratiosmeasurethenumberofdaysthatistakesforagivenresourceto turnover Management sobjectiveistostretchouttheaccountspayableperiod i e havelowaccountspayableturnover andshortentheperiodsforaccountsreceivableandinventory i e havehighaccountsreceivableandinventoryturnover Turnoverratiosmeasurehowwellafirmismanagingitsresources TurnoverRatios Tradeoffs RatioImprovements Decreasethereceivablescollectionperiodi e collecttheaccountsreceivablefasterDecreasetheinventoryholdingperiodi e sellcompletedproductsfasterIncreasetheaccountpayableperiodi e takelongertopaysuppliers StrategicTradeoff Ifthereceivablescollectionperiodistooshort customersmaybuyatacompetitorthathasmoregenerouscreditterms Oftenthisperiodisdictatedbyindustrynorms Iftheinventoryholdingperiodistooshortthecompanymaynothaveenoughinventorytofillabigorder Also thecompanymaynotbeabletooutlastastrike eitheratitsownfacilityoratoneofitsprimarysuppliers facilitiesIftheaccountspayableperiodistoolong supplierscouldraisetheirprices chargeinterest oftenatveryhighrates orevenrefusetosupplythefirmoncredit Also workersmaygetrestlessiftheyhavetowaitlongertoreceivetheirpaychecks Managingturnoverratiosmeansmanagingstrategictrade offs LeverageRatios Definitions Allthreeratiosherearecalled leverage ratiosbydifferentpeople sobesuretounderstandwhichratioisbeingusedwhensomeoneistalkingaboutleverage Leverageratiosuselineitemsfromthebalancesheet Ratios Definitions DuPontleverageratio AssetsEquity Debttoequityratio Long termdebtEquity Debttototalcapitalordebttototalassetsratio TotalliabilitiesDebt equity TotalliabilitiesAssets LeverageRatios Description Moneycanberaisedfromdebtsources banks bondmarkets orequitysources stockholders LeverageratiosreflectboththefinancingpoliciesofthefirmandtheriskinessofthebusinessInordertoanalyzeafirm sleverageratios oneneedstounderstandthedefinitionsofdebtandequity Leverageratiosmeasuretherespectiveclaimsofdebtandequityholders DebtVersusEquity ContractualpaymentsoverthelifeoftheloanInvestorlegallyguaranteedfullreturnofprincipleplusinterestnothingabovethatIncaseofliquidation debtorhaspreferentialclaimonproceedsfromsaleofassets NoguaranteedpaymentsfromcommonstockInvestor owns partoffirmrighttoappreciationoffirm svalueIncaseofliquidation equityownertakeswhatisleft maybenothing Debtandequityhaveverydifferentcharacteristics Debt anythingthatcontractuallyrequirespaymentstobemadebeforetheequityholdershaveaccesstothefirm searnings Equity thevalueofthefirmleftoverafterallthedebtholdershavebeenpaid Lowerrisktoinvestor investordemandslowerreturn Higherrisktoinvestor investordemandshigherreturn DebtQuestions DebtandEquity DebtinLeverageRatiosBaintypicallylooksonlyatlong termdebt debtwithatermof1yearormore Accountantsmeasuredebtasshort termdebtpluslongtermdebtEquityinLeverageRatiosBaintypicallyusesthemarketvalueofequity I e thesharepricemultipliedbythenumberofshares Othersmayusethebookvalueofequity whichistheamountshownonthebalancesheet DebtQuestions Accountspayable Short termdebt Long termdebt Cancelableleases Noncancelableleases Preferredstock Commonstock Deferredtax Wouldyoudefinethefollowingasdebt DebtAnswers AccountspayableShort termdebtLong termdebtCancelableleasesNoncancelableleases Someitemsareclearlydebt othersareclearlynotdebt stillothersaredebatable Notdebt Itispartofworkingcapital andis secured bytheinventoryandreceivablesthatitisusedtofinance Debt ifitusedtofinancecapitalexpansionsofthecompanyNotdebt ifitusedtofinanceworkingcapital Debt Notdebt Becausetheyarecancelable theyarenotcontractualobligations Debt Becausetheyarenon cancelable theyarecontractualobligations ForallpubliclytradedUScompanies thepresentvalueofallthenoncancelableleasepaymentsmustbedisclosedinbalancesheetfootnotes DebatableArgumentforequity contractualobligationstopaydividendsonpreferredstockaremetafterdebtholders claimsaremetArgumentfordebt thereisacontractualobligationtopaydividendsonpreferredstockbeforecommonstockdividendpaymentscanbemade Notdebt Itisequity Commonstock Debt butdebatable Oftenconsidereddebtgivenlong termnature Deferredtax Preferredstock LiquidityandCoverageRatios Definitions Liquidityratiosuselineitemsfromthebalancesheet Coverageratiosuselineitemsfromtheincomestatement Ratios Definitions Currentratio CurrentassetsCurrentliabilities Quickratio acidtest Cash marketablesecurities receivablesCurrentliabilities Interestcoverageratio EarningsbeforeinterestandtaxesInterestexpense Fixedchargecoverage EarningsbeforeinterestandtaxesAllessentialpayments includingleasepayments Liquidity Coverage LiquidityandCoverageRatios Description Acceptablevaluesfortheseratiosdifferbyindustry However whenthecurrentratioorcoverageratiosfallbelow1thatmeansthefirmisunabletomeetitsobligationsItisausefulexercisetocalculatehowmuchrevenuecoulddrop orcostsrise beforecoveragewoulddropbelow1 Liquidityratiosmeasurethefirm sabilitytomeetitsshort termobligations Coverageratiosmeasurethefirm sabilitytomeetitslong termobligations Agenda UsingratiosTypesofkeyratiosprofitabilityturnoverleverageliquiditycoverageReturnonEquityRatioexercisesForecastingexerciseAbbreviationsKeytakeaways ReturnonEquity Returnonequityisdefinedasprofitaftertax earnings dividedbyequity Itrelateseconomicoutputs profit toinputs equity Ittellsustheamountofprofitsthecompanyearnedoneachdollarthestockholdersinvestedinthefirm Itisimportanttonotethatnotalloftheearningsarepaidtothestockholderswhentheyareearned Onlysomeportionoftheearningswillbereturnednowintheformofdividends Theremainder retainedearnings willbere investedinthecompanytofinancegrowthThesizeofthedividedisdecidedbytheboardofdirectors anindividualstockholderhasnoinfluenceoverwhenhe sheactuallyreceivesthereturnthathe shehasearnedItisacombinationofprofitability turnover andleverageratios Returnonequity ROE istheacidtestofsuccessforabusiness DuPontFormula ByseparatingROEintoitscomponents onecangaininsightintohowtoimprovetheperformanceofabusiness ROE ProfitaftertaxEquity ROE ProfitaftertaxSales SalesAssets AssetsEquity X X ReturnonAssets Leverage ROS Assetturnover ThisisknownastheDuPontformula ROE ProfitabilityXTurnoverXLeverage Agenda UsingratiosTypesofkeyratiosprofitabilityturnoverleverageliquiditycoverageReturnonEquityRatioexercisesForecastingexerciseAbbreviationsKeytakeaways UnidentifiedIndustriesExercise Theobjectiveofthisexerciseistotestyourunderstandingoffinancialratios Exercise Thebalancesheets inpercentageform andselectedratiosforsixindustriesaregivenonthefollowingpage Pleasematcheachofthesixindustriestothefinancialinformation CoalminingGrocerystoresHotelsandmotelsLegalservicesPackagedsoftwarePotatochipsandsnacks UnidentifiedIndustriesExercise Data UnidentifiedIndustriesExercise Answer Characteristics Financialratios Companies HotelsandMotels VeryhighfixedassetsLowinventoryShortcollectionperiodLowassetturnoverHighgrossmarginHighleverage Fixedassets 65 Inventory 1 Collectionperiod 9daysAssetturns 0 7xGrossmargin 64 Totalliabilitiestonetworth 127 A CoalMining VeryhighfixedassetsLowinventoryLongcollectionperiod Fixedassets 52 Inventory 2 Collectionperiod 52days B PotatoChips Snacks LowpercentageofcashLongcollectioncycle Cash 5 Collection 31days C GroceryStores HighpercentageofcashLowaccountsreceivableShortcollectionperiodHighinventoryGoodliquidityratios Cash 14 Accountsreceivable 5 Collectionperiod 3daysInventory 33 Quickratio 0 6x currentratio 1 9x D LegalServices HighpercentageofcashAlmostzeroinventoryHighassetturnoverHighprofitabilityLongcollectionperiod Cash 31 Inventory 1 Assetsturns 4 0 xGrossmargin 57 ROS 12 ROE 29 Collectionperiod 52days E PrepackagedSoftware HighpercentageofcashHighaccountsreceivableLowinventoryHighgrossmarginLowfixedassetsSignificantintangibleassets patents Cash 22 Accountsreceivable 32 Inventory 5 Grossmargin 59 Fixedassets 19 Othernon currentassets 13 4 F GilletteExercise Exercise PleasecalculateGilletteCompany skeyfinancialratiosbasedonits1996annualreport ProfitabilityTurnoverLeverageLiquidityandcoverage Theobjectiveofthisexerciseistotestyourabilitytocalculatekeyfinancialratios Note Forthisexercise donotincludemerger relatedcostsinthecalculations GilletteExercise ProfitabilityRatios Thisisnotaprofitabilityratio butitdoesimpactROS Excludingmerger relatedcosts Non operatingchargesshouldnotbeincludedintheoperatingprofitmargin Ratios GilletteRatioCalculations Grossprofitmargin orgrossmargin Sales costofgoodssoldSales Operatingprofitmargin oroperatingmargin Earningsbeforeinterestandtaxes Sales Returnonsales ROS Profitaftertax Sales Effectivetaxrate TaxesProfitbeforetax 2 049 39 697 7 21 1 1 231 79 697 7 12 7 p 24 p 24 p 24 p 27 p 24 PageNumberin1996AnnualReport 1 636 3 413 09 697 7 948 7 283 09 697 7 GilletteExercise TurnoverRatios Note Average YearBeginning YearEnd 2 Salesisoftenagoodproxy Costofgoodssoldisoftenagoodproxy Ratios GilletteRatioCalculations Receivablesturnover Creditsalesinperiod Accountsreceivableaveragebalance 9 697 7 2 724 6 2 290 8 2 3 87 p 24 p 25 or 3653 87 94days Inventoryturnover CostofgoodssoldinperiodAverageinventoryinperiod 3 681 7 1 358 2 1 267 6 2 2 80 p 24 p 25 or 3652 80 130days Payablesturnover Purchasesonaccount Accountspayableaveragebalance 3 681 7 547 3 498 0 2 7 04 p 24 p 29 or 3657 04 52days 3651 00 Assetturnover SalesinperiodAverageassets 9 697 7 10 435 3 8 940 1 2 1 00 p 24 p 25 or 365days PageNumberin1996AnnualReport GilletteExercise LeverageRatios Allthreeratiosherearecalled leverage ratiosbydifferentpeople sobesuretounderstandwhichratioisbeingusedwhensomeoneistalkingaboutleverage Theinclusionofdeferredincometaxesinlong termdebtisdebatable Ratios GilletteRatioCalculations DuPontleverageratio AssetsEquity Debttoequityratio Long termdebt Equity Debttototalcapitalordebttototalassetsratio p 25 14 5 1 490 4 298 94 490 9 0 40 p 25 5 944 410 435 3 0 57 p 25 PageNumberin1996AnnualReport 1 803 84 490 9 TotalliabilitiesDebt equity TotalliabilitiesAssets GilletteExercise LiquidityandCoverageRatios Ratios GilletteRatioCalculations Currentratio CurrentassetsCurrentliabilities Quickratio acidtest Cash marketablesecurities receivablesCurrentliabilities Interestcoverageratio Earningsbeforeinterestandtaxes Interestexpense Fixedchargecoverage Earningsbeforeinterestandtaxes Allessentialpayments includingleasepayments Liquidity Coverage 4 753 22 934 7 1 62 p 25 76 9 7 0 2 724 62 934 7 0 96 p 25 2 049 3 44 476 8 9 9 29 97 p 24 2 049 3 44 4 76 8 9 9 93 0 12 54 p 24 p 31 PageNumberin1996AnnualReport Othercharges net undernon operatingchargeshavebeenincludedherebecausetheyappeartoberecurringandthuswillimpactthecompany sabilitytomakeitsinterestpayments Agenda UsingratiosTypesofkeyratiosprofitabilityturnoverleverageliquiditycoverageReturnonEquityRatioexercisesForecastingexerciseAbbreviationsKeytakeaways ForecastingExercise Data FinancialstatementshavebeenconstructedforthisexercisebasedinpartonTheGilletteCompany s1996AnnualReport Sincethedatahavebeenchangedsignificantly youshouldnotusethemtoanalyzeGillette sfinancialperformance Forthisexercise assumethathistoricaldataisagoodindicatorof1997financials Networkingcapitalinyear1994is 854million CumulativeCAPEXattheendof1994is 3 139million TheNewEnglandRazorCompanyStatementofOperations Millions Revenues COGS Grossprofit SG A EBIT Taxes Netincome WorkingCapitalBalanceSheet yearend Millions Accountsreceivable Inventory Accountspayable Networkingcapital CashFlowStatement Millions EBIT Depreciation Increaseinworkingcapital Taxespaid Capitalexpenditure Cashflow 1997 Assumptions UsingabbreviatedfinancialstatementsforTheNewEnglandRazorCompanyin1995and1996 forecastthestatementsfor1997 ForecastingExercise Answer TheNewEnglandRazorCompanyStatementofOperations Millions Revenues COGS Grossprofit SG A EBIT Taxes Netincome WorkingCapitalBalanceSheet yearend Millions Accountsreceivable Inventory Accountspayable Networkingcapital CashFlowStatement millions EBIT Depreciation Increaseinworkingcapital Taxespaid Capitalexpenditure Cashflow 1995 8 834 6 769 2 065 266 1 799 667 1 132 2 291 269 1 610 950 1 799 266 96 667 593 709 1996 1997 Assumptions 10 annualgrowth 76 2 ofsales 3 0 ofsales 37 1 effectivetaxrate 27 1 ofsales 4 1 ofCOGS 25 3 ofCOGS 6 5 ofsalesin1998 11 735 1998 7 4 ofcumulativeCAPEX ForecastingExercise Assumptions p 1 Assumptionsshouldbemadebasedonthecompany shistoricalfinancialdata aswellasyourjudgmentregardingfuturetrends LineItem Assumptions Rationale Alternativemethodofmakingassumption Revenuegrowth Historicalgrowthrateof10 Historicalratejudgedtobeagoodpredictoroffuturerate Industryforecastedgrowthrate COGS AverageratioofCOGS Salesin1995and1996 COGSisdirectlyrelatedtosales EstimatefixedandvariableportionsofCOGSandthenapplyratioofvariablecosttosalestothes