Summary Practical Part: Financial Analysis & Valuations

Financial analysis

Income statement items
Interest expense after tax=Interest expense∗(1−tax rate)


Net investment profit after tax ( NIPAT )=( investment income+ interest income )∗come ¿ t t ems( 1−tax rate)


Net operating profit after taxes ( NOPAT ) =Net profit −Net investment profit after tax+ Net interest expense af


Balance sheet items

Operating working capital= ( current assets−excess cas h∧marketable securities ) −( current liabilities−curre


Net non current operating assets=non current tangible∧intangible assets+ derivates−Net deferred tax liabili

Investment assets=Minority equity investments+Other non operating investments + Excess cash∧marketable


Operating assets=Operating working capital+ Net non current operating assets

Business assets=Operating assets+investment assets

Debt=Total interest bearing non current liabilities+ current debt ad curret proportion of non current debt

Capital=Debt + Group equity




Decompose ROE: Traditional approach

ROE=ROA∗Equity multiplier

Net profit
ROA=
Total assets

Total assets
Equity multiplier=
Equity

,Decompose ROE: Alternative approach

NOPAT + NIPAT Interest expenseafter tax
ROE= − =Return onbusiness assets−Spread∗Financial leverage
Equity Equity




assets∗Operating assets assets∗Inve
Return on business assets=Return on operatin g + Return on investment
Business assets Busines

NOPAT
∗Sales
S ales
Return on operating assets=
Operating assets


Ratio’s working capital management

Operating working capital= (Current assets−Excess cas h∧marketable securities )−( Current liabilities−Cur


Operating working capital
Operating working capital ¿ sales ratio=
Sales


Sales
Operating working capital ¿ sales turnover=
Operating working capital


Sales
Trade receivable turnover=
Trade receivable


Cost of sales Cost of materials
Inventoriesturnover = ∨
Inventories Inventories

Purchases Cost of sales Cost of materials
Trade payables turnover= ∨ ∨
Trade payables Trade payables Trade payables


Trade receivables
Day s ' receivable=
Average sales per day


' Inventories Inventories
Day s inventories= ∨
Average cost of sales per day Average cost of materials per day

, Trade payables Trade payables Trade payables
Day s ' payable= ∨ ∨
Average purchases per day Average cost of sales per day Average cost of materials



Ratio’s non-current assets management

Net non current operating assets=Total non current operating assets−Non interest bearing non current liabili

Sales
Net non current operating asset turnover=
Net non current operating assets

Sales
PP∧E turnover=
Net PP∧E


Debt and long-term solvency

Current debt+ Non current debt
Debt ¿ equity ratio=
Shareholdersequity

Current debt+ non current debt
Debt ¿ capital ratio=
Current debt+ Noncurrent debt+ Shareholders equity=Capital

Net profit + Interest expense+Tax expense
Interest coverage ( earnings basis )=
Interest expense

Cash flow
Interest coverage ( cash flow basis ) =¿ operations+ Interest expense +Taxes paid ¿
Interest expense

Sustainable growth rate

Sustainable growthrate=ROE∗( 1−Dividend payout ratio )


Cash dividends paid
Dividend payout ratio=
Net profit


Cash flow analysis