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
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
