Chapter Page Term

1. Financial Analysis 12 Ratio's

1. Financial Analysis 13; 14 Assets

1. Financial Analysis 14 Liabilities

1. Financial Analysis 14 Shareholder equity

1. Financial Analysis 14 Net worth
1. Financial Analysis 15 Cash and marketable
securities
1. Financial Analysis 16 Accounts receivable

1. Financial Analysis 17 Inventories

1. Financial Analysis 17 Property, plant, and

equipment
1. Financial Analysis 17 Other Assets

1. Financial Analysis 18 Other Assets

1. Financial Analysis 18 Capital Structure

1. Financial Analysis 19 Accounts payable and
notes payable

1. Financial Analysis 20 Accrued Items

1. Financial Analysis 20 Long Term Debt

1. Financial Analysis 20 Preferred and common

stock

1. Financial Analysis 22 Liquidity

1. Financial Analysis 23 Current Ratio

1. Financial Analysis 23 Quick Ratio

1. Financial Analysis 24 Profitability

1. Financial Analysis 25 Profit Margin

1. Financial Analysis 25 Return on equity (ROE)

1. Financial Analysis 25 Return on Assets

1. Financial Analysis 25 Return on Assets
1. Financial Analysis 25 EBITDA Margin

EBIT
The Conservatism
Principle
Accrual Accounting
Definition
Means to compare different companies by the balance between the distibutions of assets and their financing sou
What a company owns to fulfill their mission. In a balance sheet ordened by their degree of the way they can be

How assets are financed such as debt. Current Liabilities need to be paid back soon. Non Current have are a lon

Value of shareholder investments in a company minus the liabilities

Value of shareholder investments in a company
Cashposition of a company together with their investmenst in securities that can be turned in to cash quick

Accounts receivable are amounts that a com pany expects to receive from its customers in the future.

Inventories are the goods (or the inputs that become those goods) that a com pany intends to sell. Inventories in
products that are being finished and final goods.
(PP&E) is the term for the tangible, long- term assets that a company uses to produce or distribute its product. T
headquarters, factories, machines in those factories, and stores.
The rising importance ofboth cash and other assets are two dominant trends in finance. Other assets can meanm
likely to be intangible assets— things you can’t put your hands on but are valuable nonetheless— things like pat
one twist to this is that accountants don’t assign value to intangible assets unless they know those values precis

The rising importance ofboth cash and other assets are two dominant trends in finance. Other assets can meanm
likely to be intangible assets things you can’t put your hands on but are valuable nonetheless— things like pate
The one twist to this is that accountants don’t assign value to intangible assets unless they know those values p

The ratio between liabilities and shareholder equity as a source of financing the company.
Accounts payable represent amounts due to others, often over a short time, and typically to the com pany’s sup

Accrued items broadly represent amounts due to others foractivities already delivered. One example is salaries:
be produced in the middle of a pay period, and the com pany may owe salaries that have not been paid yet.
Debt is distinctive because it has an explicit interest rate. It is an important indicator on how assets are financed

Shareholders’ equity represents an owner ship claim with variable returns—in effect, the owners get all residual
business after costs and liabilities

Liquidity ratios mea sure this risk by emphasizing the company’s ability to meet short- term obligations with ass
be converted into cash.

The current ratio asks a question on behalf of a company’s suppliers: Will this com pany be able to pay its suppl
close?
The quick ratio resembles the current ratio, but excludes inventories from the numerator

For every dollar of revenue, how much money does a firm get to keep after all relevant costs?
There are several different mea sures of profits that consider dif fer ent sets of costs. Gross profit only subtracts
to the production of goods from revenue, while operating profit also subtracts other operating costs, such as sel
administrative costs. Finally, net profit also subtracts interest and tax expenses from operating profit.

Return on equity (ROE), measures the annual return that shareholders earn. In par ticUlar, for every dollar of eq
invest in a business, what is their annual FLow of income?
How much profit does a company generate for every dollar of assets?
EBIT = Operating Profit. DA = Depreciattion & Amortization
Let’s begin by breaking it into two parts— EBIT and DA. EBIT is just a fancy nance term for something you alread
prot. If you work up from the bottom of the prot statement, you can recharacterize operating prot as “earnings b
taxes,” or EBIT. Since some companies have dif fer ent tax burdens and capital structures, EBIT provides a way
for mances more directly. DA stands for “depreciation and amortization.” Depreciation refers to how physical as
and equipment, lose value over time, and amortization refers to that same phenomenon but for intangible asset
emphasize DA is because they are expenses that are not associated with the outlay of cash; it is just an approxi
value of an asset.

Earnings Before Income Tax

The conservatism principle implies that companies should rec ord lower estimated values of their assets and, by
estimates of their liabilitie
The rules of accrual accounting try to smooth out both revenues and costs in an effort to better reflect economic
company to capitalize an investment as an asset, and to expense it as depreciation charges every year over the
instance.
Insight

Companies that focus on selling to other businesses (B2B) tend to have a larger
Accounts Receivable position (compared to their sales revenu) than those who sell to
consumers. As B2B deliver large volumes to other companies, payments are agreed
through T&C that allow x days to payment. While consumers pay directly.

Companies that show a large number accounts payable could indicate a possibility of
financial trouble. There is a relation to the accounts receivable. If these numbers are in
balance, is there is a constant flow of goods between both.

The long term debt has to be taken in consideration together with the cash position
(assets in cash)of a company.
Venture capital rms, which provide funding for entrepreneurial ventures, almost always
receive preferred stock in exchange for their funding. Why do they prefer this form of
financing? Venture capital firms, which provide funding for entrepreneurial ventures,
almost always receive preferred stock in exchange for their funding. Why do they prefer
this form of nancing?

Suppliers like to see high liquidity ratios because they want to ensure that their
customers can pay them. For shareholders, greater liquidity creates a trade- off. Yes,
they want to ensure that the company doesn’t go bankrupt. But highly liquid assets, like
cash and marketable securities, may not provide much of a return.

This ratio is a key way to think about if a supplier should extend credit to a company and
if a company will be able to survive the next six or twelve months.
For companies with high- risk inventory, the quick ratio provides a more skeptical view
of their liquidity.

For example, Airbus Group, the European aerospace and defense manufacturer, built a
new factory in Mobile, Alabama, that cost $600 million. Because of accrual accounting,
Airbus would report more moderate profits over time rather than losses in 2015 and
then profits after the plant started production. But this representation of profits is quite
distinct from their true cash out flows, obscures the time value of money, and may
reflect managerial discretion while cash flows would not.
Relevant to subject Used In Formula
-
Balance sheet - Assets - Current / Non Current Current Ratio
Assets
Balance sheet - Liabilities - Current / Non Current -
Liabilities
Balance sheet - Liabilities - Shareholder Equity
Balance sheet - Liabilities - Shareholder Equity
Balance sheet - Current Assets

Balance sheet - Current Assets

Balance sheet - Current Assets Quick Ratio

Balance sheet - Non Current Assets - (PP&E)

Balance sheet - Non Current Assets - Other Assets Current Ratio

Quick Ratio

Balance sheet - Non Current Assets - Other Assets Current Ratio

Quick Ratio

Balance sheet - Liabilities - Shareholder Equity

Balance sheet - Liabilities - Current Liabilities -
Accounts payable and notes payable

Balance sheet - Liabilities - Non Current Liabilities -

Accrued Items
Balance sheet - Liabilities - Non Current Liabilities -
Long Term Debt
Balance sheet - Liabilities - Non Current Liabilities -
Preferred and common stock

current assets / current liabilities

(Current assets − inventory) / current liabilities

Net Profit / Revenu

Net Profit / Shareholders Equity

Net Profit / Total Assets

EBITDA / Revenu
 BALANCE SHEET *% A
Assets
Cash and marketable securities 35
WHAT THE COMPANY Accounts receivable 10
OWNS Inventories 19
Other current assets 1
Plant and equipment (net) 22
Other assets 13
Total assets *sum 100
Total assets *rounded to 100 100

Total liabilities and shareholder equity

Notes payable 0
HOW ASSETS ARE

Accounts payable 41
Accrued items 17
FINANCED

Other current liabilities 0

Long- term debt 9
Other liabilities 7
Preferred stock 0
Shareholders’ equity 25
Total liabilities and shareholder equity *rounded to 100 100

Current Ratio 1.12

Quick Ratio 0.79
Profit Margin -0.001
Return on Equity
Return on Assets -0.001
EBITDA Margin

Gross Profit 59
B C D E F G H I J K L

4 27 25 20 54 64 9 5 16 4 2
4 21 7 16 12 5 3 4 26 6 2
38 3 4 0 1 0 3 21 17 21 3
9 8 5 4 4 6 6 2 4 1 2
16 4 8 46 7 16 47 60 32 36 60
29 37 52 14 22 10 32 7 5 32 31
100 100 101 100 100 101 100 99 100 100 100
100 100 100 100 100 100 100 100 100 100 100

0 8 3 5 2 0 0 11 0 4 4
22 24 2 6 3 2 8 18 12 13 2
15 8 1 5 3 3 9 4 5 5 1
9 9 9 6 18 2 7 11 10 4 2
2 11 17 29 9 10 33 25 39 12 32
17 17 24 38 9 5 18 13 10 7 23
15 0 0 0 0 0 0 0 0 0 0
19 23 44 12 55 78 25 17 24 54 36
100 100 100 100 100 100 100 100 100 100 100

1.20 1.20 2.73 1.82 2.73 10.71 0.88 0.73 2.33 1.23 1.00
0.37 1.14 2.47 1.82 2.69 10.71 0.75 0.25 1.70 0.42 0.67
-0.023 0.042 0.247 0.015 0.281 0.010 0.117 0.015 0.061 0.030 0.090

-0.042 0.050 0.078 0.021 0.153 0.004 0.177 0.061 0.091 0.064 0.016
M N

16 7
2 83
0 0
5 0
69 0
9 10
101 100
100 100

1 50
6 21
6 0
12 3
16 13
22 4
0 0
38 10
100 100

0.92 1.22
0.92 1.22
0.025 0.107

0.023 0.004
INCOME STATEMENT *%
Income
Revenue $ 5,052,779.00
Cost of Goods Sold $ (298,113,961.00)
Gross Profit $ 663,114.00
Selling, general and administrative expenses
100
-40
60
Technology Sourcing £ 3,822,227.00
Revenue
Services Revenue £ 1,230,552.00
Total Revenue £ 5,052,779.00

Adjusted Gross Profit £ 663,114.00

Administrative expenses -£ 511,622.00
Adjusted Operating Profit £ 151,492.00

Adjusted1 net interest -£ 5,241.00

£ 146,251.00
Adjusted1 profit/(loss) before tax
ANNUAL FINANCIAL REPORT 2020
YOUR COMPANY NAME

KEY METRICS Tap to change report Key Metrics

REVENUES PROFIT AFTER TAX INTEREST DEPRECIATION OPERATING PROFIT

$134,137 $34,943 $2,746 $4,518 $64,207

7% 9% 10% 0% 7%

ALL METRICS Do not modify the information below. Tap to enter Financial Data

METRIC REPORT YEAR (2020) PREVIOUS YEAR (2019) % CHANGE 2 YEAR TREND

REVENUES $134,137.45 $125,000.00 7%

OPERATING EXPENSES $70,962.31 $65,000.00 9%

OPERATING PROFIT $64,207.30 $60,000.00 7%

DEPRECIATION $4,517.77 $4,500.00 0%

INTEREST $2,745.82 $2,500.00 10%

NET PROFIT $54,761.08 $54,000.00 1%

TAX $23,920.54 $22,000.00 9%

PROFIT AFTER TAX $34,943.49 $32,000.00 9%

METRIC 1 $12.81 $12.80 0%

METRIC 2 $18.59 $18.20 2%

METRIC 3 $20.55 $19.10 8%

METRIC 4 $12.21 $12.10 1%

METRIC 5 $0.79 $0.75 5%

METRIC 6 $0.25 $0.23 9%

INPUT YOUR FINANCIAL DATA
YOU CAN DEFINE UP TO 25 KEY METRICS FOR 7 YEARS
Tap to view Financial Report

METRIC NAME 2019 2020 2021 2022 2023 2024 2025

REVENUES $125,000.00 $134,137.45 $142,728.38 $150,687.46 $165,044.56 $180,026.63 $180,583.88

OPERATING EXPENSES $65,000.00 $70,962.31 $75,924.86 $78,901.27 $81,674.37 $80,883.33 $94,419.45

OPERATING PROFIT $60,000.00 $64,207.30 $68,857.69 $75,643.25 $76,755.26 $77,317.83 $73,425.99

DEPRECIATION $4,500.00 $4,517.77 $4,656.92 $4,974.21 $5,024.11 $5,068.42 $5,546.88

INTEREST $2,500.00 $2,745.82 $2,893.11 $3,136.12 $3,148.53 $3,338.30 $3,789.47

NET PROFIT $54,000.00 $54,761.08 $55,860.81 $59,747.95 $61,483.59 $66,272.10 $67,474.85

TAX $22,000.00 $23,920.54 $25,576.74 $27,498.86 $28,335.67 $29,424.53 $31,408.25

PROFIT AFTER TAX $32,000.00 $34,943.49 $38,418.53 $39,895.05 $40,607.73 $42,438.20 $50,247.68

METRIC 1 $12.80 $12.81 $13.78 $14.29 $15.57 $16.78 $19.96

METRIC 2 $18.20 $18.59 $19.22 $20.17 $20.48 $21.84 $26.01

METRIC 3 $19.10 $20.55 $21.87 $23.19 $24.67 $26.39 $31.08

METRIC 4 $12.10 $12.21 $12.59 $13.70 $13.76 $14.59 $14.92

METRIC 5 $0.75 $0.79 $0.85 $0.89 $0.91 $1.00 $1.03

METRIC 6 $0.23 $0.25 $0.27 $0.28 $0.29 $0.30 $0.34

DEFINE KEY METRICS HERE
SELECT UP TO 5 KEY METRICS TO SHOW AT THE TOP OF THE REPORT
Tap to view Financial Report

1 REVENUES

2 PROFIT AFTER TAX

3 INTEREST

4 DEPRECIATION

5 OPERATING PROFIT
E REPORT
This worksheet is used for the Financial Report calculations and should remain hidden.

Position
This year 2020 3
Previous Year 2019 2

Position #N/A #N/A #N/A

Key Metrics 2016 2017 2018
1 REVENUES #N/A #N/A #N/A
8 PROFIT AFTER TAX #N/A #N/A #N/A
5 INTEREST #N/A #N/A #N/A
4 DEPRECIATION #N/A #N/A #N/A
3 OPERATING PROFIT #N/A #N/A #N/A

All Metrics (works up to 25 metrics)

1 REVENUES #N/A #N/A #N/A
2 OPERATING EXPENSES #N/A #N/A #N/A
3 OPERATING PROFIT #N/A #N/A #N/A
4 DEPRECIATION #N/A #N/A #N/A
5 INTEREST #N/A #N/A #N/A
6 NET PROFIT #N/A #N/A #N/A
7 TAX #N/A #N/A #N/A
8 PROFIT AFTER TAX #N/A #N/A #N/A
9 METRIC 1 #N/A #N/A #N/A
10 METRIC 2 #N/A #N/A #N/A
11 METRIC 3 #N/A #N/A #N/A
12 METRIC 4 #N/A #N/A #N/A
13 METRIC 5 #N/A #N/A #N/A
14 METRIC 6 #N/A #N/A #N/A
15 #N/A #N/A #N/A
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17 #N/A #N/A #N/A
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20 #N/A #N/A #N/A
21 #N/A #N/A #N/A
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24 #N/A #N/A #N/A
25 #N/A #N/A #N/A
 2 3 2
2019 2020
### ### 7%
### ### 9%
$2,500.00 $2,745.82 10%
$4,500.00 $4,517.77 0%
### ### 7%

### ###
### ###
### ###
$4,500.00 $4,517.77
$2,500.00 $2,745.82
### ###
### ###
### ###
$12.80 $12.81
$18.20 $18.59
$19.10 $20.55
$12.10 $12.21
$0.75 $0.79
$0.23 $0.25
#N/A #N/A
#N/A #N/A
#N/A #N/A
#N/A #N/A
#N/A #N/A
#N/A #N/A
#N/A #N/A
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