7/27/2019 Chapter 28 BMA

1/4

Networkingcapital =Thedifferencebetweenthecurrentassetsandcurrentliabilities..Itroughlymeasuresthe

companyspotentialreservoirofcash

EBIT=Earningsbeforeinterestandtaxes=totalrevenuescostsdepreciation

marketcapitalization=numberofsharesoutstandingxcommon stock price

marketvalueadded,thedifferencebetweenthemarketvalueofthefirmssharesandtheamountofmoneythat

shareholdershaveinvestedinthefirm

market-to-bookratio =valueofequity/bookvalueofequityhowmuchvaluehasbeenaddedforeachdollarthat

shareholdershaveinvested.

PROBLEMICONMARKETINDEXES

Marketvaluemeasurescanbenoisymeasuresofcurrentperformance. Youcantlookupthemarketvalueofprivatelyownedcompanieswhosesharesarenottraded.Norcanyou

observethemarketvalueofdivisionsorplantsthatarepartsoflargercompanies.

.

after-tax interest+net income after-tax interest+net incometotal capital average capital

ROC= seilcapitaleecambiatodurantelanno

ReturnonEquity(ROE)Wemeasurethereturnonequity(ROE)astheincometoshareholdersperdollarinvested.

net income net income

equity average equityROE= seilcapitaleazionarioecambiatodurantelanno

after-tax interest+net income

total assetsROA=

PROBLEMI:- Nonincludealcuniassetsbrandname,softwaresviluppatoneglianniprecedenti

MARKETINDEXES

PROFITABILITYMEASURES(EVAandAccountingRatesofReturn ricavabilidaifinancialstatements)

Economicvalueadded(Eva)=Theprofitafterdeductingallcosts,includingthecostofcapital

(Costofcapital=opportunitycostx total capitalization (equities+long term debt))

for its debt and equityholders.

After tax interesttocalculatetheincomethatthecompanywouldhaveearnedwithall-equityfinancing.

Net Operating Profit After Tax or NOPAT: NOPAT= after-tax interest - net income

7/27/2019 Chapter 28 BMA

2/4

- Bookvalueofassets(originalcost-depreciation)canbelargelyunder/overestimated(oldassets,buildings,etc.areunderestimated)

ProfitMargin=Net Income

Sales,manondistinguetradebtedequity(unasocietconmoltidebitiavrebbeunNet

IncomepibassoOperatingProfitMargin

OperatingProfitMargin=After Tax Interest Net Income

Sales

+

DupontFormula

=

After Tax Interest Net Income After Tax Interest Net Income SalesROA Return on asset

Assets Sales Assets

Assets turnoverOperating Profit margin

+ +

= = =

SpessoIdueeffettisicompensano:RetailAlto-Basso

Hotel,gioielleriaBassoAlto

SipuopensarediacquisireunfornitorperguadagnareilsuoaltoAssetturnover(masiereditaancheilbasso

operatingprofitmargin)

MEASURESOFEFFICIENCY

Sonodeltipoflow measure

snapshot measure

eindicanounaparticolareareadi(in)efficienza.

AssetTurnoverRatio= sales salestotal assets at start of year average total assets

InventoryTurnover= cost of goods soldinventory at start of year

Averagedaysininventory=1 inventory at start of year

365

daily cost of goods sold

=

Inventory Turnover

ReceivablesTurnover=receivables at start of year

sales

Averagecollectionperiod =1 receivables at start of year

365average daily salesReceivables Turnover

=

potrebbeessereefficienzanelraccoglierelefattureoselezione

(forseeccessiva)deiclienti

CIPOTREBBEROESSEREALTREMISUREDIEFFICIENZALEGATEALPARTICOLAREBUSINESS:

(venditeriferiteallasuperficiedelnegozioretail)

(profittipermigliapasseggerolineaaerea)

(costopertonnellatadiacciaiosiderurgia)

7/27/2019 Chapter 28 BMA

3/4

LEVERAGE:(aumentaiprofittiediminuisceleperdite,peroaumentailrischiofallimento)

Long-termDebtRatio=

Long term debt

Long term debt Equity+

Long-termDebt-EquityRatio =Long term debt

Equity

SiriferisceabookvaluesenonincludeRicerca&Sviluppo,Training,Pubblicit,ecc.(Puoesseregiusto,inquantose

limpresahadeiproblemi,nonsonobenifacilmentevendibili,peroivaloridimercatopossonoesseredifferenti)

Inoltreseidebitiabrevesonocostantineltempo,puoesserepiucorrettousarelaratio

TotalDebtRatio =

Total LiabilitiesTotal Assets

Times-Interest-EarnedRatioextenttowhichinterestobligationsarecoveredbyearnings= EBIT

Interest Payment

CashCoverageRatio= Operating Cash Flow

Interest Payments

EXTENDEDDUPONTFORMULA Net Income Assets Sales After Tax Interest Net Income Net Income

ROEEquity Equity Assets Sales After Tax Interest Net Income

+

= =

+

AssetturnoverOperatingProfitMargin

These2termsdonotdepend

onthestructuredebt/equity

These2termsdependonthe

structuredebt/equity.

Seunoemaggiorediuno,

laltroeminoredi1,percuiil

prodottopuoesseremaggiore

ominoredi1(linfluenzasul

ROE,anchesedisolitoe

maggiore)

Leverage

Ratio

Debt

Burden

7/27/2019 Chapter 28 BMA

4/4

LIQUIDITY

LiquidAssetscanbeturnedquicklyintocashandcanavoidbankruptcy.

- Bookvalueofliquidassetsarereliable ,but,- Liquidassetscanvaryveryquickly

Ahighliquidityispositivewhenaskingforabankloan,butcanbeasignofinefficiency(highreceivables,unusedcash,largeinventory)

Net-Working-Capital-to-Total-AssetsRatio=Net Working Capital

Assets

CurrentRatio=Current Assets

Current Liabilities(attenzione,seaumentanoCurrentAssetsandCurrentLiabilitiesdella

stessaquantitilNet-Working-Capital-to-Total-AssetsRatio noncambiamailCurrentRatio

cambia).

QuickRatio(AcidTest)(siescludonodalnumeratoredelCurrentRatiolinventoryealtriassetsmeno

liquidi)=cash+marketable securities+ receivables

Current Liabilities

CashRatio(siescludonodalnumeratoredelQuickRatioireceivableschepssonoessereincertioritardati)=

cash+ marketable securities

Current Liabilities