PROFESSIONAL QUALIFICATION

FINANCIAL

“Analyzing Financial
Statement”
Analysis Tools Tool Box
for analysis

Common-Size Financial Ratio Graphical Analysis

Activity Ratio Stacked-column graph

Balance Sheet
Liquidity Ratio Line graph
Percentage of Total Asset
Solvency Ratio Regression Analysis
Income Statement
Profitability Ratio
Percentage of Total Revenue
Cash Performance Ratio

Cash Flow Statement Coverage Ratio

Percentage of Total Revenue Dupont Analysis

Pyramid of Ratio
Common-Size Balance Sheet
Balance Sheet (in $mio) PT A PT B Balance Sheet (in %) PT A PT B
Asset Asset
Cash 100 2,000 Cash 7% 13%
Account Receivables 200 3,000 Account Receivables 13% 20%
Inventories 300 5,000 Inventories 20% 33%
Land 600 - Land 40% 0%
PPE (net of Acc. Depr) 300 5,000 PPE (net of Acc. Depr) 20% 33%
Total Asset 1,500 15,000 Total Asset 100% 100%
Liability Liability
Account Payable 200 1,000 Account Payable 13% 7%
Unearned Revenue 100 3,000 Unearned Revenue 7% 20%
Bank’s Loan 500 6,000 Bank’s Loan 33% 40%
Total Liability 800 10,000 Total Liability 53% 67%
Equity Equity
Contributed Capital 300 2,000 Contributed Capital 20% 13%
Retained Earnings 400 3,000 Retained Earnings 27% 20%
Total Equity 700 5,000 Total Equity 47% 33%
 Common-Size Income Statement
Income Statement (in $mio) PT A PT B Income Statement (in %) PT A PT B
Sales 500 3,000 Sales 100% 100%
COGS 200 2,000 COGS 40% 67%
Gross Profit 300 1,000 Gross Profit 60% 33%
Wages Expense 50 300 Wages Expense 10% 10%
Utility Expense 50 100 Utility Expense 10% 3%
Earnings Bef. Int., Tax, Depr, & Amort. 200 600 Earnings Bef. Int., Tax, Depr, & Amort. 40% 20%
(EBITDA) (EBITDA)
Depreciation Expense 20 100 Depreciation Expense 4% 3%
Earnings Before Interest and Tax (EBIT) 180 500 Earnings Before Interest and Tax (EBIT) 36% 17%
Interest Expense 20 100 Interest Expense 4% 3%
Earnings Before Tax (EBT) 160 400 Earnings Before Tax (EBT) 32% 13%
Income Tax 10 100 Income Tax 2% 3%
Net Income 150 300 Net Income 30% 10%
Common-Size Cash-Flow Statement
Income Statement (in $mio) PT A PT B Cash Flow Statement (in $mio) PT A PT B
Sales 500 3,000 Cash Flow from Customer 300 2,000
COGS 200 2,000 Cash Flow to Supplier -100 -1,000
Cash Flow for Operational -100 -400
Gross Profit 300 1,000
Cash Flow for Interest -20 -100
Wages Expense 50 300 Cash Flow for Tax -10 -100
Utility Expense 50 100
Cash Flow from Operating Activities (CFO) 70 400
Earnings Bef. Int., Tax, Depr, & Amort. 200 600
Purchase Property, Plant, & Equipment (PPE) -250 -2,000
(EBITDA)
Selling PPE 100 3,000
Depreciation Expense 20 100
Cash Flow from Investing Activities (CFI) -150 1,000
Earnings Before Interest and Tax (EBIT) 180 500
Loan Repayment -200 -2,500
Interest Expense 20 100 Debt Borrowing 300 500
Earnings Before Tax (EBT) 160 400 Cash Flow from Financing Activities (CFF) 100 -2,000
Income Tax 10 100 Net Cash Flow (NCF) 20 -600
Net Income 150 300 Beginning Cash Balance 80 2,600
Ending Cash Balance 100 2,000
Common-Size Cash-Flow Statement
Cash Flow Statement (in $mio) PT A PT B
Cash Flow from Customer 60% 67%
Cash Flow to Supplier -20% -33%
Cash Flow for Operational -20% -13%
Cash Flow for Interest -4% -3%
Cash Flow for Tax -2% -3%
Cash Flow from Operating Activities (CFO) 14% 13%
Purchase Property, Plant, & Equipment (PPE) -50% -67%
Selling PPE 20% 100%
Cash Flow from Investing Activities (CFI) -30% 33%
Loan Repayment -40% -83%
Debt Borrowing 60% 17%
Cash Flow from Financing Activities (CFF) 20% -67%
Net Cash Flow (NCF) 4% -20%
Beginning Cash Balance 16% 87%
Ending Cash Balance 20% 67%
Financial Ratios

1. We cannot analyze standalone ratio

(need benchmark).

2. If we compare Income Statement (numerator) and

Balance Sheet Item (denominator), we need to use
average Balance Sheet figures.

3. Conclusion cannot be made by calculating a single

ratio. All ratios must be viewed relative to one
another.
Activity Ratios Measure how efficiently the firm is managing its assets

Receivables cycles within a period

Number of days for customers to pay

Inventory cycles within a period

Number of days for inventory being kept

Payables cycles within a period

Number of days for the company to pay suppliers

Activity Ratios Measure how efficiently the firm is managing its assets

Revenue generated from Assets

Revenue generated from Fixed Assets

Revenue generated from Working Capital

Revenue generated from Cash & Equivalents

 Measure a firm’s financial leverage and ability to
Solvency Ratios meet long-term obligation

Composition of Debt vs Equity

Composition of Debt from Total Capital

Debt contribution to Total Assets

Measures risk to equity holders

Firm’s ability to repay its debt obligations

Firm’s ability to repay its debt obligations (for a company that

has a significant lease financing, e.g. airlines)
Profitability Ratios Measure overall firm’s performance

How much net income generated per dollar revenue

How much gross income generated per dollar revenue

Margin from main business operation

Margin before contribution to government

Profitability Ratios Measure overall firm’s performance

MISSLEADING!

Return generated from Assets

Return on Asset that includes both interest and taxes

Return generated from fund invested by shareholders and debtholders

Return generated to shareholders

Cash Performance Ratios

Measures the amount of CFO generated for each dollar of revenue.

Measures the return of CFO attributed to all providers of capital.

Measures the return of operating cash flow attributed to shareholders.

Measures the ability to generate cash from firm operations.

Variation of basic EPS measured by using CFO instead of Net Income.

Coverage Ratios

Measures financial risk and leverage.

Measures the firm’s ability to meet its interest obligations.

Measures the firm’s ability to acquire long-term assets with CFO.

Measures the firm’s ability to satisfy long-term debt with CFO.

Measures the firm’s ability to make dividend payments from CFO.

Measures the firm’s ability to purchase assets, satisfy debts, and pay
dividends.
DuPont Analysis

Net Profit
Asset Turnover Financial Leverage
Margin

Interest Op. Profit

Tax Burden Asset Turnover Financial Leverage
Burden Margin
Exercise

• Create Common-Size and All Financial Ratios from the Financial Statement given
from 2019 to 2022.
• Interpret the Result
 Terima Kasih

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