NET FREE CASH

EBITDA VS INCOME
VS FLOW
DEFINITION & PURPOSE
A measure of a company's overall financial The cash a company generates after accounting
The total profit of a company after all expenses,
performance and is used as an alternative to for cash outflows to support operations and
including taxes and interest, have been
simple earnings or net income. The purpose maintain capital assets. The purpose is to To
deducted from revenue. The purpose is to
is to provide a clear view of the operational understand how much cash is available for
gauge the overall profitability of a company,
profitability of a company, excluding the reinvestment in the business, debt reduction,
including all its expenses.
effects of financial and accounting decisions dividend payments, or other uses.

CALCULATION

NET INCOME + DEPRECIATION + NET INCOME + DEPRECIATION +

TOTAL REVENUES - TOTAL EXPENSES
-
AMORTIZATION + INTEREST + AMORTIZATION +/- CHANGES IN NWC

TAX CAPEX

KEY RATIOS
EBITDA margin -insights into a company's Net margin - Measures a company's overall operations FCF rate - Percentage of sales available for new
ability to generate operating profits from its by examining the proportion of revenue remaining investments, dividend or debt repayments, after
core operations, excluding the impact of after deducting all expenses, including COGS and covering operating expenses and investments.
financing decisions, tax regulations, and indirect costs FCF Realization - shows you how well you are
non-cash expenses. Return on Equity - Measures the profitability and capable of converting profit into cash flow
efficiency of a company in generating profits from its
shareholders' equity

APPLICABILITY
Useful for comparing companies within Applicable for overall profitability analysis Vital for assessing the liquidity and financial
the same industry and for companies with and is crucial for investors and stakeholders. flexibility of a company, especially for
significant debts or tax structures. investors and creditors.

ADVENTAGES
Get a sense of a company's Incorporates all expenses, including Measures how effectively a company
operational profitability without the operational, financial, and tax-related converts its sales into actual free cash.
impact of financing, taxes, and non- costs
cash items. Helpful in evaluating a company's
Give a complete picture of ability to generate cash and manage its
Provides a way to compare the profitability, Widely used in earnings capital structure.
operational profitability of companies reports and is a key determinant of a
across different tax jurisdictions and company’s share price. Indicates the cash available for
capital structures. dividends, debt repayment, and
reinvestment.

DISADVENTAGES
By ignoring interest, taxes, depreciation, Items like one-off gains or losses, Can be significantly affected by
it can paint an overly optimistic picture, changes in tax laws, or restructuring capital expenditure decisions, which
especially for capital-intensive costs can distort the net profit margin. can vary greatly year-to-year.
businesses.
Different financing structures and tax Requires a deeper understanding of
Companies with a lot of debt or jurisdictions can make comparisons the company’s cash flow statement,
significant capital expenditures might between companies trickier. especially discerning between
appear healthier than they really are. operational cash flows and capital
May not accurately reflect the cash expenditures.
Not under GAAP so it can be subject of position of a company.
speculations

WINNER

FREE CASH FLOW

Bojan Radojicic robojan.gumroad.com Repost
CURRENT ASSETS
MANAGEMENT BY BOJAN RADOJICIC

HOW TO ANALYSE HOW TO FORECAST HOW TO IMPROVE

Whether the company's net Whether the company's net Whether the company's net
ACCOUNT income is a good indicator of
its cash-generating ability.
income is a good indicator of
its cash-generating ability.
income is a good indicator of
its cash-generating ability.
RECEIVABLES Calculate ration net income to Calculate ration net income to Calculate ration net income to
free cash flow free cash flow free cash flow

Whether the company's net Whether the company's net Whether the company's net
CASH AND income is a good indicator of
its cash-generating ability.
income is a good indicator of
its cash-generating ability.
income is a good indicator of
its cash-generating ability.
EQUIVALENTS Calculate ration net income to Calculate ration net income to Calculate ration net income to
free cash flow free cash flow free cash flow

Whether the company's net Whether the company's net Whether the company's net
income is a good indicator of income is a good indicator of income is a good indicator of
INVENTORY its cash-generating ability. its cash-generating ability. its cash-generating ability.
Calculate ration net income to Calculate ration net income to Calculate ration net income to
free cash flow free cash flow free cash flow

Whether the company's net Whether the company's net

SHORT- Whether the company's net
income is a good indicator of income is a good indicator of income is a good indicator of
TERM its cash-generating ability. its cash-generating ability.
Calculate ration net income to
its cash-generating ability.
Calculate ration net income to
Calculate ration net income to
INVESTMENT free cash flow free cash flow free cash flow

Whether the company's net Whether the company's net Whether the company's net
PREPAID income is a good indicator of
its cash-generating ability.
income is a good indicator of
its cash-generating ability.
income is a good indicator of
its cash-generating ability.
EXPENSES Calculate ration net income to Calculate ration net income to Calculate ration net income to
free cash flow free cash flow free cash flow

Bojan Radojicic robojan.gumroad.com Repost

END-TO-END
FINANCIAL STATEMENTS
ANALYSIS
Balance sheet 2022 2023 Change Profit and Loss Account
BUILD 3 STATEMENTS
2022 2023 Change
Cash flow statement 2022 2023
$ thousands $ thousands
$ thousands

Cash
Account Receivable
175
450
1,310
500
1,135
50
Revenue
COGS variable
10,000
6,000
11,000
6,600
1,000
600
Net income 1,190 1,390 Determine the financial health and
Inventories
Other current assets
200
100
300
150
100
50
COGS fixed
COGS
200
6,200
200
6,800
0
600
Depreciation and amortization
Impairment of receivables
100
10
100
10
performance of a business. This
Current assets 925 2,260 1,335
Gross profit 3,800 4,200 400
Impairment of inventories
Losses (gains) from sale of non-current assets, net
10
70
10
40
includes evaluating aspects such as
profitability, liquidity, solvency, and
0
Intangible assets 100 200 100 (Incerease) or decrease of other current assets (100) (60)
Overhead - variable 1,000 1,100 100 (Incerease) or decrease in account receivables (250) (60)
Tangible assets 300 400 100

operational efficiency.
Overhead - fixed 1,000 1,100 100 (Incerease) or decrease in inventories (120) (100)
Other investments and assets 100 150 50
Overhead costs 2,000 2,200 200 Increase (decrease) in trade payables (120) 250
Non-current assets 500 750 250
0 Increase (decrease) in other liabilities (100) 25
Gains from sale of non-current assets 50 50 0 CF from operating activities 690 1,605
Total assets 1,425 3,010 1,585 Losses from sale of non-current assets 120 90 (30)
Impairment of receivables 10 10 0 Sales of non-current assets 200 125
Trade payables 100 350 250 Impairment of inventories 10 10 0 Purchase of non-current assets 650 515

Identify trends within the financial

Financial liabilities 200 200 0 Other 190 160 (30) CF from investing activities (450) (390)
Other liabilities 125 150 25

data over time. This involves

Current liabilities 425 700 275 EBITDA / Operating profit 1,610 1,840 230 Increase of share capital 0 100
Increase (decrease) in financial liabilities (70) 20

looking at historical data to discern

Long term financial debt 250 250 0 Depreciation and amortization 100 100 0 Dividends paid (45) (200)
Other long term liabilities 250 270 20 CF from financing activities (115) (80)

patterns in revenue, expenses,

Long term fin. liabilities 500 520 20 EBIT 1,510 1,740 230
Total cash flow 125 1,135
Equity 500 1,790 1,290
assets, liabilities, and equity.
Interest and financial expenses 50 50 0 Cash at the beginning of period 50 175
Financial income 10 10 0
Total Equity and liabilities 1,425 3,010 1,585 EBT 1,470 1,700 230 Cash at the end of period 175 1,310

ACT vs. LY VARIANCE ANALYSIS

ACT vs. BUD

10% 5%
10% 2%
0% 33%
Magnitude Industry
10% 2%
Benchmarking
11% 9%

10% -8%
Direction
10%
10%
-8%
-8%
External Factors
11% 38%
Trends
0% 0%
0% 0%
0% 0%

Horizontal analysis
$
2024 2025 2026 2027 2028 HORISONTAL & VERTICAL
12%

11%
42%

-2%
Vertical analysis 2024 2025 2026 2027 2028
$

Revenues 8% 11% 11% 11% 11% 12% 56% Revenues 100% 100% 100% 100% 100%
COGS variable
COGS fixed
8%
8%
11%
11%
11%
11%
11%
11%
11%
11%
Used in mulitple Use in single COGS variable 60% 60% 60% 60% 60%

COGS 8% 11% 11% 11% 11% periods period COGS fixed

COGS
2%
62%
2%
62%
2%
62%
2%
62%
2%
62%

Gross profit 8% 11% 11% 11% 11%

Revenue growth vs Salaries share in Gross profit 38% 38% 38% 38% 38%

Overhead - variable
Overhead - fixed
-2%
9%
41%
14%
13%
10%
13%
10%
10%
10% LY Revenue Overhead - variable 9% 12% 12% 12% 12%
Overhead - fixed 10% 10% 10% 10% 10%
Overhead costs 4% 26% 12% 11% 10%
Overhead costs 19% 22% 22% 22% 22%

EBITDA / Operating profit 16% -8% 5% 20% 15% Trends More control EBITDA / Operating profit 18% 15% 14% 15% 16%

Depreciation and amortization 95% 92% 11% 12% 6%

Depreciation and amortization 2% 3% 3% 3% 3%
Interest and financial expenses -21% 18% 15% 13% 12%
Interest and financial expenses 0% 0% 0% 0% 0%
Financial income -50% 0% 0% 0% 0%
Financial income 0% 0% 0% 0% 0%
EBT 12% -19% 4% 22% 18%

PROFITABILITY ANALYSIS
EBT 16% 12% 11% 12% 13%

Tax -8% -19% 4% 22% 18%

Tax 2% 2% 2% 2% 2%

Net income 16% -19% 4% 22% 18% Net income 14% 10% 9% 10% 11%

LIQIUDITY ANALYSIS

EFICIENCY ANALYSIS

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16 WAYS TO ANALYSE
SALES & MARGINS

PRICE VOLUME MIX SEGMENT ANALYSIS

Evaluating how different Analyzing sales by
price levels affect sales specific market
volume. segment
LOCATION ANALYSIS
BUDGET VS ACTUAL
Studying sales
Comparing actual sales
performance in
with budgeted forecasts.
different geographical
areas.
SALES MANAGER
CUSTOMER ANALYSIS PERFORMANCE
Examining sales trends Assessing sales
and patterns among figures by individual
different customer sales managers.
groups.
COMPETITOR ANALYSIS PRODUCT LINE
ANALYSIS
Comparing sales
performance against key Evaluating sales by
competitors. different product
lines.
COMPARISON VS LAST
PERIOD CHANNEL ANALYSIS
Comparing current sales Analyzing sales across
with the previous period different distribution
(monthly, quarterly, channels (online,
yearly). retail, wholesale).
TIME SERIES SALES CONVERSION
RATES
Studying sales trends
over time to identify Analyzing the
patterns. percentage of
inquiries or leads that
CUSTOMER LIFE TIME SEASONAL SALES turn into sales.
VALUE ANALYSIS
Estimating the total Assessing how seasons
value a customer will and holidays affect
bring over their sales.
lifetime.
CROSS / UP SELLING
SALES CYCLE LENGTH
Analyzing the success of
Measuring the average sales strategies for selling
time from initial contact additional products to
to sale completion. existing customers.

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 RETURNS CALCULATOR
RETURN ON INVESTED CAPITAL - ROIC START WITH FINANCIALS
Gives insight into how effectively a company is using the money Income statement 2023 2024 Balance sheet 2023 2024
invested in it to generate profits. It's a metric that can help Revenue 85,000 91,617 Cash 4,500 5,348
investors determine the quality of a management and their ability COGS 40,000 42,204
Account Receivable 7,800 10,163
to generate a return on the total capital Inventories 5,000 5,222
Gross profit 45,000 49,413
Other current assets 750 806
Suitable for evaluating Current assets 18,050 21,539
EBIT (1-Tax rate) Overhead - variable 26,850 33,288
companies that rely Intangible assets 35,000 37,046
Overhead - fixed 5,149 0
heavily on a combination Overhead costs 31,999 33,288
Tangible assets 21,000 24,291
of debt and equity for Other investments and assets 10,000 9,311
TOTAL INVESTED CAPITAL their operations Non-current assets 66,000 70,648
Other 1,350 1,423

Total assets 84,050 92,187

EBITDA / Operating profit 11,651 14,702

Trade payables 19,500 20,852

RETURN ON EQUITY - ROE Depreciation and amortization 3,250 3,437 Financial liabilities
Other liabilities
3,520
1,500
3,141
2,792
EBIT 8,401 11,265
Current liabilities 24,520 26,785
Measures the profitability and efficiency of a company in Interest and financial expenses 500 875 Long term financial debt 32,500 35,657
generating profits from its shareholders' equity. Financial income 200 200 Other long term liabilities 10,836 12,472
EBT 8,101 10,590 Long term fin. liabilities 43,336 48,129
Tax 2,198 2,100 Equity 16,194 17,273
Best used for companies
NET INCOME
where equity financing is Net income 5,903 8,490 Total Equity and liabilities 84,050 92,187
dominant, making it ideal
for sectors like services,
ASSETS - LIABILITIES
finance or IT.

CALCULATE
RETURN ON ASSETS - ROA Returns 2021 2022 2023 2024
ROE 29% 41% 36% 49%
Measures the profitability and efficiency of a company in ROCE 8% 12% 10% 13%
generating profits from its total assets. ROA 6% 8% 7% 9%
ROIC 9% 12% 11% 15%
NET INCOME
Most useful for comparing
companies in the same
TOTAL ASSETS industry. Different industries
use assets differently.
60% VISUALIZE
50%
40%
RETURN ON CAPITAL ENGAGED - ROCE
30%
20%
Measures the profitability and efficiency of a company in
generating returns from both its equity and debt capital. 10%
0%
EBIT Most suitable when comparing
the performance of companies
2021 2022 2023 2024
in capital-intensive sectors, like
EQUITY + LONG TERM manufacturing or utilities ROE ROCE ROA ROIC
DEBT

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DUPONT ANALYSIS
EXPLAINED
WHAT IS HOW IT WORKS

Three key financial indicators are instrumental in

DuPont analysis serves as an effective method for
breaking down the various factors contributing to influencing ROE:
return on equity (ROE). This detailed dissection of ROE
enables investors to concentrate on individual aspects Operating efficiency, indicated by the net
of financial performance, thereby pinpointing specific
areas of strength and weakness.
1 profit margin or the ratio of net income to
total sales or revenue.

2
Asset utilization efficiency, assessed through
the asset turnover ratio.

FORMULA
Financial leverage, gauged by the equity
DuPont = Net profit margin x Asset turnover x Equity 3 multiplier, calculated as average assets
divided by average equity.
multiplier

Net Income Revenues Average Assets

DuPont = X X
Revenues Average Assets Average Equity

EXAMPLE DUPONT VS TYPICAL ROE

Through a DuPont analysis, investors and analysts gain

Year 1 Year 2 the ability to delve deeper into the factors influencing
variations in ROE, or the reasons behind an ROE being
Revenue 15,000 16,500 perceived as high or low. Specifically, a DuPont analysis
assists in determining whether it's the company's
Net income 1,580 1,985 profitability, asset utilization, or leverage that's
Profit Margin 11% 12% influencing the ROE.

Revenue 15,000 16,500 DRAWBACKS

Average assets 4,500 4,600
Asset turnover 3.3 3.6 1.Overemphasis on ROE: DuPont Analysis focuses heavily
on ROE, which might not always provide a complete picture
Average assets 4,500 4,600 of a company's financial health.
2.Historical Data: The analysis relies on historical financial
Average equity 2,400 2,500
data, which may not always be indicative of future
Financial leverage 1.9 1.8 performance
3.Industry-Specific Limitations: Different industries have
ROE (DuPont) 66% 79% different capital structures and business models, which
means the components of ROE may have varying relevance
across sectors.
4.Ignoring Market Conditions

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PROFITABILITY ANALYSIS
Gather the data from Apply formula for Compare with last
Financial Statements calculation period and budget

Compare with
Understand the industry peers
meaning of the ratio
Result interpretation

Risk assessment
and action plan

Profitability ratios 2022 2023 Budget vs LY vs BUD Nissan Audi BMW

Gross profit margin 38.0% 38.2% 35.0% 0% 3% 35.0% 35.0% 35.0%

EBITDA margin 16% 17% 15% 1% 2% 15% 15% 15%
Net profit rate 12% 13% 14% 1% -1% 25% 20% 25%
ROE 238% 78% 75% -160% 3% 35% 30% 12%
ROCE 119% 61% 65% -58% -4% 40% 40% 12%
ROA 84% 46% 50% -37% -4% 25% 25% 15%
Revenue per employee 625 688 650 63 37.5 750 350 400
Profit per employee 74 87 80 13 6.9 95 80 75
EBITDA per employee 101 115 110 14 5.0 150 150 120

Measures the profitability of core operations by examining the proportion of

GROSS PROFIT
revenue remaining after deducting the direct costs associated with Gross profit / Revenues
MARGIN
producing or delivering goods or services.

Provides insights into a company's ability to generate operating profits from

EBITDA its core operations, excluding the impact of financing decisions, tax EBITDA / Revenues
MARGIN regulations, and non-cash expenses.

Measures a company's overall operations by examining the proportion of

NET PROFIT
revenue remaining after deducting all expenses, including COGS and Net profit / Revenues
MARGIN
indirect costs (operating expenses, taxes, interest, etc.)

Measures the profitability and efficiency of a company in generating profits

RETURN ON EQUITY from its shareholders' equity. It indicates the return earned by shareholders Net profit / Equity
on their investment in the company

RETURN ON CAPITAL Measures the profitability and efficiency of a company in generating returns Net profit /
EMPLOYED from both its equity and debt capital. (Equity + Long term debt)

Measures the profitability and efficiency of a company in generating profits

RETURN ON ASSETS from its total assets. It indicates how effectively a company utilizes its assets Net profit / Total assets
to generate earnings.

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SENSITIVITY ANALYSIS TEMPLATE
DISCOUNTING CASH FLOW EQUITY VALUE
Assumptions At valuation
Valuation date

Discount rate - WACC 10.5%

1.5% Cumulated DCF 4,185
Long term CF growth rate
Terminal Value 14,533
Discounted Terminal Value 8,812
Discounted Cash Flows 2024 2025 2026 2027 2028
EBIT 1,938 1,589 1,655 2,019 2,372
DCF value of operations 12,997
Non-operating assets adjustments 1,379
Tax (286) (232) (241) (295) (346)
Enterprise value 14,376
Non-cash items added back 317 549 692 514 527
Net Working capital adjustments (1,193) (169) (215) (240) (272) Interest bearing debt (700)
CAPEX adjustments (750) (1,050) (450) (150) (150) Debt equivalents (165)
Free Cash Flow 27 687 1,440 1,849 2,131 Hybrid claims and non controlling interests
Discount factor 1.105 1.222 1.350 1.492 1.649 (225)

DCF 24 563 1,067 1,239 1,292 Equity value 13,286

Spread value of this Spread value of this This value will vary
assumptions from assumptions from due do assumption
4.52% to 16.52% e.g. 0.00% to 3.5% e.g. changes

Input tested
value in this cell

SENSITIVITY ANALYSIS

Long term CF growth rate

13,286 0.00% 0.50% 1.00% 1.50% 2.00% 2.50% 3.00% 3.50%
4.52% 35,723 39,653 44,698 51,411 60,784 74,787 97,978 143,810
5.52% 27,809 30,175 33,065 36,672 41,303 47,465 56,068 68,921
6.52% 22,462 23,997 25,810 27,984 30,638 33,951 38,205 43,866
7.52% 18,644 19,693 20,904 22,315 23,981 25,980 28,420 31,466
8.52% 15,805 16,551 17,396 18,362 19,475 20,774 22,307 24,146
Even though Mercedes hit higher sales, BMW is
9.52% 13,628 14,175 14,786 15,473 16,251 17,140 18,165 19,361
WACC
10.52% 11,918 12,328 12,782 13,286 13,849 14,482 15,199 16,018
Apply TABLE excel 11.52% 10,547 10,861 11,205 11,584 12,002 12,467 12,986 13,569
function to get all 12.52% 9,430 9,674 9,940 10,230 10,548 10,897 11,283 11,711
values in the table 13.52% 8,506 8,699 8,907 9,133 9,379 9,646 9,940 10,262
14.52% 7,732 7,886 8,052 8,231 8,423 8,632 8,859 9,106
15.52% 7,077 7,202 7,335 7,478 7,631 7,796 7,974 8,168
16.52% 6,518 6,619 6,728 6,843 6,966 7,098 7,240 7,393

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 COCA COLA VS PEPSI CO
FINANCIAL ANALYSIS
BALANCE SHEET PROFITABILITY LIQUIDITY
Coca
Balance sheet Coca Cola Pepsi Difference Profitability ratios Cola Pepsi Diff Coca
$ mio Liquidity Cola Pepsi Difference
Cash 11,631 5,348 (6,283) Gross profit margin 59.1% 53.9% 5%
Account Receivable 3,487 10,163 6,676 EBITDA margin 35% 16% 18%
Inventories 4,233 5,222 989 Net profit rate 24% 9% 15% Net working capital (5,992) (7,453) 1,461
Other current assets 3,240 806 (2,434) ROE 42% 48% -6%
Curr. assets - Curr. liabilities 2,867 (5,246) 8,113
Current assets 22,591 21,539 (1,052) ROCE 15% 13% 2%
Current ratio 1.15 0.80 0.3
ROA 12% 9% 3%
Intangible assets 41,566 37,046 (4,520) Cash ratio 0.59 0.20 0.4
Revenue per employee 546 291 255
Tangible assets 9,841 24,291 14,450
Profit per employee 131 26 104 Quick ratio 0.77 0.58 0.2
Other investments and assets 18,765 9,311 (9,454)
EBITDA per employee 189 47 142 27%
Non-current assets 70,172 70,648 476 Working capital ratio 3% -24%
Free cash flow rate 23% 8% 15%
Total assets 92,763 92,187 (576)

Trade payables 15,865 20,852 4,987

Financial liabilities 2,772 3,141 369
➢ Coca Cola is more profitable ➢ Both companies recorded negative
Other liabilities 1,087 2,792 1,705 especially looking into net net working capital. They are
Current liabilities 19,724 26,785 7,061 profitability which implies better significantly financed by account
expenditure utilization. payables.
Long term financial debt 36,377 35,657 (720)
Other long term liabilities 10,836 12,472 1,636
Long term fin. liabilities 47,213 48,129 916 ➢ Free cash flow rate is significantly ➢ Current ratio at Pepsi is less than 1
better at Coca Cola that could be sign that is not good sign.
Equity 25,826 17,273 (8,553) of better cash management.
Total Equity and liabilities 92,763 92,187 (576)

INCOME STATEMENT EFFICIENCY STRUCTURE

Revenue 45,030 91,617 46,587
Coca Coca
COGS 18,399 42,204 23,805
Efficiency Cola Pepsi Diff. Structure Cola Pepsi Diff.
Gross profit 26,631 49,413 22,782
0 DSO 28 40 (12.2) 5%
Total COGS in Revenue 41% 46%
Overhead - variable 7,424 33,288 25,864 DIO 84 45 38.8
COGS variable in revenue 41% 46% 5%
Overhead - fixed 5,149 0 (5,149) DPO 315 180 134.4
Overhead costs 12,573 33,288 20,715 Overhead in revenue 28% 36% 8%
0 Cash conversion (202) (95) (107.8) -1%
Interest expense in loans 3% 2%
Other (1,494) 1,423 2,917 Asset turnover 0.5 0.99 (0.5)
Equity ratio 28% 19% -9%
Fixed asset turnover 0.6 1.3 (0.7)
EBITDA / Operating profit 15,552 14,702 (850) (5.8) Debt ratio 72% 81% 9%
EBITDA TO interest 11 17
Opex per employee 152 106 46.7 Fixed assets in total assets 76% 77% 17%
Depreciation and amortization 1,947 3,437 1,490

EBIT 13,605 11,265 (2,340)

➢ Pepsi is better is inventory efficiency ➢ Thanks to Goodwill, intangible assets
Interest and financial expenses 1,418 875 (543)
Financial income 783 (783)
shares almost 50% in total assets in
EBT 12,970 10,390 (2,580) ➢ Both companies have high DPO, both companies. This should be
0 either they have outstandingly good explored and tested on impairment.
Tax 2,198 2,100 (98) payment terms with suppliers or they
0 have overdue payables. Should be
Net income 10,772 8,290 (2,482)
checked.

QUESTIONS TO ASK
➢ What ware changes in rations ➢ Why net working capital is ➢ How has the operational ➢ How has the operational
comparing last period negative? efficiency changed over time? efficiency changed over time?

➢ What are variance from budget ➢ Why cash ratio is high? ➢ Why current ratio is less than 1 ➢ Why current ratio is less than 1

➢ Is there a balance between ➢ Is high ROE is sustainable? ➢ Why revenue per employee is ➢ Why revenue per employee is
profitability and liquidity? much lower than Coca Cola much lower than Coca Cola

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 VS
FINANCIAL ANALYSIS

BALANCE SHEET INCOME STATEMENT ANALYSIS

300,000 200,000
250,000 Even though Mercedes hit higher
200,000 150,000 sales, BMW is more profitable.
150,000 Both firms excel in cash
100,000 management. The FCF rate
Even though Mercedes is
hit higher
100,000 quite high sales,
and stable.
BMW isHowever,
50,000 50,000 holding over 20 billion in cash
- could lose its value over time if
- not properly invested.
Assets Current Liabilities Current Equity NWC
assets liabilities Revenues Gross profit EBITDA Net inocme

CASH FLOWS PROFITABILITY ANALYSIS

30,000 25.0% EBITDA is higher than GP at BMW
20,000 20.0% which is strange. Should have a
look to EBITDA adjustments.
10,000 15.0%
Mercedes hit better gross
- 10.0% profitability which means better
Operating CF Investing CF Financing CF Free CF 5.0% utilization of direct costs, while
(10,000) BMW is better in net margin which
0.0%
means beater utilization of
(20,000) GP margin EBITDA Net margin FCF rate general, sales and admin resources
(30,000) margin

RETURNS LIQUIDITY ANALYSIS

25%
1.50
20% The ROA is not too high, as
both companies have
15% 1.00 valuable intangibles.
However, both firms achieve
10%
0.50 good ROE, with BMW
5% performing better in returns
- on investments. Mercedes is
0%
slightly better in liquidity.
ROE ROCE ROA Current ratio Cash ratio Quick ratio

EFFICIENCY SOLVENCY ANALYSIS

200 80%
Mercedes has achieved a high
150 60% Days Payable Outstanding (DPO),
which indicates better payment
100 40% terms with suppliers without
impacting gross profit, compared
50 20% to BMW's figures. Overall, cash
- conversion is better at Mercedes.
0%
DSO DIO DPO Cash In terms of solvency, the two
Equity ratio Debt ratio LT debt to Equity firms are equal.
conversion

MARKET DATA MARKET DATA

Market cap 64b Market cap 66.8b

Shrare price 99.5 Shrare price 62.2

P/E (TTM) 5.76 P/E (TTM) 4.40

EPS (TTM) 17.33 EPS (TTM) 14.19

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