Productivity and Profitability Assessment Using Financial Statements (Chapter 2)

Productivity and Profitability Assessment using Financial Statements (chapter 2) ------CONTENTS OSIRIS DATABASE

Consolidated data Parent company Subsidiary Segment data

KEY RATIOS

Return on Shareholders Funds (%) =

Profit Margin (%)=

Return on Total Assets (%)=

Solvency Ratio (%) =

1 Productivity and Profitability Assessment using Financial Statements (chapter 2) ------

Price Earning Ratio =

EBIT = Operating Profits/Losses EBITDA = EBIT + Depreciation/Amortization

1. CONTENTS INCOME FUND REPORT

Total debt to total capital

Cash flow to total debt

EBITDA interest coverage

Market capitalization

OPERATING STATISTICS:

2 Productivity and Profitability Assessment using Financial Statements (chapter 2) ------

DEFINITION OF ROE AND ROA FOR THE ANALYSIS

FIRM A FIRM B TOTAL ASSETS 1000 1000 Non Current Liabilities 600 0 Shareholders Funds 400 1000

INCOME STATEMENT FIRM A FIRM B Oper. Rev. / Turn. Sales 300 300 (-) Costs of Goods Sold 100 100 (=) Operating P/L 200 200 (-) Financial Expenses (10%) 40 -

3 Productivity and Profitability Assessment using Financial Statements (chapter 2) ------(=) P/L before Tax 160 200 (-) Taxation (30 %) 48 60 (=) P/L for Period 112 140

EXERCISE: 1. Estimate ROE and ROA 2. Estimate the leverage effect 3. Comment the movements from year 1 to year 2 4. Explore the changes needed for year 3 to achieve a ROE of 10%

Year 1 Year 2 TOTAL ASSETS 1000 1500 Non Current Liabilities 400 900 Shareholders Funds 600 600

INCOME STATEMENT Year 1 Year 2 Oper. Rev. / Turn. Sales 300 450 (-) Costs of Goods Sold 100 300 (=) Operating P/L 200 150 (-) Financial Expenses 40 135 (=) P/L before Tax 160 15 (-) Taxation 48 4.5 (=) P/L for Period 112 10.5