Chapter 3 Working With Financial Statements 10
10 Chapter 3 Working With Financial Statements
Chapter Outline Standardized Financial Statements Ratio Analysis ■The Du Pont Identity Internal and Sustainable Growth Using Financial Statement Information
11 Chapter Outline n Standardized Financial Statements n Ratio Analysis n The Du Pont Identity n Internal and Sustainable Growth n Using Financial Statement Information
Categories of Financial Ratios o Short-term solvency or liquidity ratios Long-term solvency or financial leverage ratios Asset management or turnover ratios Profitability ratios Market value ratios 12
12 Categories of Financial Ratios n Short-term solvency or liquidity ratios n Long-term solvency or financial leverage ratios n Asset management or turnover ratios n Profitability ratios n Market value ratios
Using the Du Pont Identity ■ROE=PM*TAT*EM Profit margin is a measure of the firm's operating efficiency -how well does it control costs Total asset turnover is a measure of the firm's asset use efficiency -how well does it manage its assets Equity multiplier is a measure of the firm's financial leverage 13
13 Using the Du Pont Identity n ROE = PM * TAT * EM q Profit margin is a measure of the firm’s operating efficiency – how well does it control costs q Total asset turnover is a measure of the firm’s asset use efficiency – how well does it manage its assets q Equity multiplier is a measure of the firm’s financial leverage
Chap 4. Long-Term Financial Planning and Growth 14
14 Chap 4. Long-Term Financial Planning and Growth