10287089
Description
Mind Map by Ngan Ha Nguyen, updated more than 1 year ago
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Created by Ngan Ha Nguyen
over 6 years ago
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Corporate finance
analysis (horizontal,
vertical, ratios)
- Profitability
- Gross margin = gross profit / net sales
- Net margin = net profit / net sales
- ROCE (Return on capital employed: the relationship between the
profit and amount of funds that were employed in making the profits)
---> = profit bf interest & tax/(total assets - current liabilities)
- ROE = (profit after tax & preference dividend)/equity shareholders' funds
- Asset turnover = revenue / capital employed (the ability of asset to generate revenue)
- Profit margin
- Gross margin = gross profit / net sales
- Liquidity
- Current ratio = current assets / current liabilites ---> shows how much
money to come to pay off current liabilities ---> if low, may have
liquidity risk, if too high, use asset for short term purposes too much,
should consider long term goals
- Quick ratio = (current
asset - inventory)/
current liabilties)
- DI = avr inventory / COGS x 365 -> if high, not good at
trading; if low, might have shortage if demands rise or
insufficient inventory for manufacturing
- DAP = avr trade payables / purchase x 365 ---> if high,
good at manage temporary capital, if too high -> credit
ranking may fall
- DSO = avr trade receivables /sales x 365 -> if high, poor credit
control; if too low, may lose customers as they cannot pay off
their debt in short run
- Current ratio = current assets / current liabilites ---> shows how much
money to come to pay off current liabilities ---> if low, may have
liquidity risk, if too high, use asset for short term purposes too much,
should consider long term goals
- Solvency: the ability of a
company to manage its debt
burden in the long run
- Gearing = interest bearing debt / (shareholders' equity + interest
bearing debt) ---> if it is to high and continue to rise, there will be
a risk that interest paid exceeds profit
- Interest cover = profit bf interest & tax /
interest charges ---> if low, the profits of
shareholders are likely vulnerable
- Gearing = interest bearing debt / (shareholders' equity + interest
bearing debt) ---> if it is to high and continue to rise, there will be
a risk that interest paid exceeds profit
- Inverstor's ratios
- EPS (earnings per share) = profit attributable to
ordinary shareholders / no of ord. shares in
issue ---> the return on each ordinary share in the year
- P/E = current share price / EPS ---> if high,
strong shareholder confidence in the company
and its future
- Dividend cover = earnings per share / dividend per share --->
shows the proportion of profit for the year that is available
for distribution to shareholders (if = 2, retain 50% earnings
for business operation, the rest pay the shareholders)
- EPS (earnings per share) = profit attributable to
ordinary shareholders / no of ord. shares in
issue ---> the return on each ordinary share in the year
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