The completed report should include: A financial statement review. Pro Forma fin
ID: 2384260 • Letter: T
Question
The completed report should include:
A financial statement review.
Pro Forma financial statements (Balance Sheet and Income Statement) for the next two fiscal years, assuming a 10% growth rate in sales and Cost of Goods Sold (COGS) for each of the next two years.
A ratio analysis for the last fiscal year using at least two ratios from each of the following categories:
a. Liquidity
b. Financial leverage
c. Asset management
d. Profitability
e. Market value
Calculate Return on Equity (ROE) using the DuPont system.
Assess management performance by calculating Economic Value Added (EVA).
Evaluate the soundness of the company’s financial policies (e.g. capital structure, debt, leverage, dividend policy, etc.) based on the material covered during class.
A synopsis of your findings, including your recommendations and rationale for whether or not to purchase stock from this company.
Q1 15
Whole Year
2016
2017
*12
Sales
8,214.00
98,568.00
108,424.80
119,267.28
Cost of goods
-4,365.00
-52,380.00
-57,618.00
-63,379.80
Gross Profit
3,849.00
46,188.00
50,806.80
55,887.48
Royalty & commission income
Assumed growth 10%
37.00
444.00
488.40
537.24
Other operating income & expenses
Assumed fixed except for 5% inflation growth
-3,511.00
-42,132.00
-44,238.60
-46,450.53
EBIT
375.00
4,500.00
7,056.60
9,974.19
Income from Associated company
Assumed 10%
9.00
108.00
118.80
130.68
EBIT
384..00
4,608.00
7,175.40
10,104.87
Taxes on income
-108.00
-1,296.00
-2,018.08
-2,841.99
Net earnings to non-controlling interest
-28.00
-336.00
-523.21
-736.81
Balance Sheet
Assets
Q1 2015
Rep as % sales
2016
2017
Sales
98,568.00
108,424.8
119,267.28
Cash & Cash equil.
2,950.00
3%
3,245.00
3,569.50
Inventories
6,480.00
6.6%
7,128.00
7,840.80
Trade Receivables
5,964.00
6.1%
6,560.40
7,216.44
Other current assets (working capital)
2,003.00
2%
2,203.30
2,423.63
Other current assets
1,045.00
1.1%
1,149.50
1,264.45
Current assets
18,442.00
18.7%
20,286.20
22,314.82
Deferred tax assets
1,954.00
2%
2,149.40
2,364.34
Other non-current assets
7,340.00
704%
8,074.00
8,881.40
Non-current assets
9,294.00
9.4%
10,223.40
11,245.74
Total Assets
27,736.00
28.1%
30,509.60
33,560.56
Liabilities & Equity
Current financial liabilities
599.00
0.6%
658.90
724.79
Trade payable
4,667.00
4.7%
5,133.70
5,647.07
Other current liabilities (working capital related)
2,332.00
2.4%
2,565.20
2,821.72
Other current liabilities
1,516.00
1.5%
1,667.60
1,834.36
Current liabilities
3,114.00
9.2%
10,025.40
11,027.64
Deferred taxes
698.00
0.7%
767.80
844.58
Pension provisions
270.00
0.3%
297.00
326.70
Other non-current liabilities
281.00
0.3%
309.10
340.01
Non-current liabilities
1,249.00
1.3%
1,373.90
1,511.29
Shareholder equity
17,373.00
17.6%
19,110.30
21,021.33
Total
27,736.00
28.1%
30,509.60
33,560.56
Q1 15
Whole Year
2016
2017
*12
Sales
8,214.00
98,568.00
108,424.80
119,267.28
Cost of goods
-4,365.00
-52,380.00
-57,618.00
-63,379.80
Gross Profit
3,849.00
46,188.00
50,806.80
55,887.48
Royalty & commission income
Assumed growth 10%
37.00
444.00
488.40
537.24
Other operating income & expenses
Assumed fixed except for 5% inflation growth
-3,511.00
-42,132.00
-44,238.60
-46,450.53
EBIT
375.00
4,500.00
7,056.60
9,974.19
Income from Associated company
Assumed 10%
9.00
108.00
118.80
130.68
EBIT
384..00
4,608.00
7,175.40
10,104.87
Taxes on income
-108.00
-1,296.00
-2,018.08
-2,841.99
Net earnings to non-controlling interest
-28.00
-336.00
-523.21
-736.81
Balance Sheet
Assets
Q1 2015
Rep as % sales
2016
2017
Sales
98,568.00
108,424.8
119,267.28
Cash & Cash equil.
2,950.00
3%
3,245.00
3,569.50
Inventories
6,480.00
6.6%
7,128.00
7,840.80
Trade Receivables
5,964.00
6.1%
6,560.40
7,216.44
Other current assets (working capital)
2,003.00
2%
2,203.30
2,423.63
Other current assets
1,045.00
1.1%
1,149.50
1,264.45
Current assets
18,442.00
18.7%
20,286.20
22,314.82
Deferred tax assets
1,954.00
2%
2,149.40
2,364.34
Other non-current assets
7,340.00
704%
8,074.00
8,881.40
Non-current assets
9,294.00
9.4%
10,223.40
11,245.74
Total Assets
27,736.00
28.1%
30,509.60
33,560.56
Liabilities & Equity
Current financial liabilities
599.00
0.6%
658.90
724.79
Trade payable
4,667.00
4.7%
5,133.70
5,647.07
Other current liabilities (working capital related)
2,332.00
2.4%
2,565.20
2,821.72
Other current liabilities
1,516.00
1.5%
1,667.60
1,834.36
Current liabilities
3,114.00
9.2%
10,025.40
11,027.64
Deferred taxes
698.00
0.7%
767.80
844.58
Pension provisions
270.00
0.3%
297.00
326.70
Other non-current liabilities
281.00
0.3%
309.10
340.01
Non-current liabilities
1,249.00
1.3%
1,373.90
1,511.29
Shareholder equity
17,373.00
17.6%
19,110.30
21,021.33
Total
27,736.00
28.1%
30,509.60
33,560.56
Explanation / Answer
ROE = Asset turnover ratio x Net Profit Margin x Leverage Ratio
ROE = 3.385 * 0.066 * 1.60 = 0.3574.
Asset Turnover = Net sales / Average Assets
Asset Turnover = 108424.60 / 32,035.08 = 3.385
Net Profit Margin = Net Income / Net sales
= 7,175.40 / 108,424.60 = 0.066 = 6.6%
Leverage ratio = Average assets / Average Equity
Leverage ratio = 32,035.08 / $20,065.82 = 1.60.
Average Equity = Equity(t)+Equity(t-1) / 2 = ($19,110.30+$21,021.33) / 2 = $20,065.815.
Average Assets = Assets(t)+Assets(t-1)/2
Average Assets = (30509.60 + 33,560.56)/2 = $32,035.08.
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