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Financial Analysis Training & Templates

Includes links with Excel tables and charts

Objectives of this document

Learn how to do a comprehensive financial analysis with a training and templates created by former Deloitte Management Consultants

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Overview - Guiding principles

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Table of content

Financial Analysis
1

The Profit and Loss Statement (P&L)

The Balance Sheet

The Cash Flow Statement

The Key Financial Ratios

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Profit and Loss Statement (P&L) - Definition

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Profit and Loss Statement (P&L) - Description


The Income Statement has three primary components:

Revenues

Expenses
The Money spent to generate revenue which includes: Cost of Goods Sold (COGS): The direct costs attributable to the production of the goods sold by a company Selling Expenses: Cash payments (or equivalent) for marketing services Administrative Expenses: Costs to the firm to cover items such as salaries Interest Expenses: Payments made to cover costs of financing Tax Expense: Payments made to the government to cover income taxes Depreciation Expense: Amount of asset usage (described in the next chapter) that is applied to this year

Net Income

The money earned by the company which includes: The sale of goods and services The interest earned Certain investment activities

Net Income is referred to as Profit or Earnings, when not negative and Loss when negative. It is the company revenues minus its expenses

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Profit and Loss Statement (P&L) Excel template


Insert Your company name

Income Statement
For Period Ending XXX
Executive summary Net Sales $495,000 Gross Profit $370,000 Net Income $155,000 Details
Revenue
Gross sales Sales returns and allowances NET SALES
$500,000 -$5,000

Double click to access the Excel document and enter your own data

Comments
Insert your own comments Insert your own comments Insert your own comments

$495,000

Cost of sales
Beginning inventory Goods purchased / manufactured Ending inventory Total Cost of Goods Sold Gross Profit
$45,000 $100,000 -$20,000

Insert your own comments Insert your own comments Insert your own comments

$125,000 $370,000 Insert your own comments

Selling Expenses
Salaries and wages Advertising Depreciation Other Total Selling Expenses
$45,000 $10,000 $5,000 -$20,000

$40,000

Insert your own comments Insert your own comments Insert your own comments Insert your own comments Insert your own comments

General / Administrative Expenses


Salaries and wages Employee benefits Payroll taxes Insurance Rent Utilities Depreciation & amortization Office supplies Travel & entertainment Postage Equipment maintenance & rental Interest Furniture & equipment Total General / Administrative Expenses Net Income Before Taxes
$45,000 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 $5,000 -$20,000

Cells with formula will be automatically updated

$130,000 $200,000

Insert your own comments Insert your own comments Insert your own comments Insert your own comments Insert your own comments Insert your own comments Insert your own comments Insert your own comments Insert your own comments Insert your own comments Insert your own comments Insert your own comments Insert your own comments Insert your own comments Insert your own comments

Tax
Income Tax Expense
$45,000

Insert your own comments

Net Income

Insert your own comments $155,000 www.slidebooks.com

Table of content

Financial Analysis
1

The Profit and Loss Statement (P&L)

The Balance Sheet

The Cash Flow Statement

The Key Financial Ratios

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Balance Sheet - Definition

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Balance Sheet - Description


The balance sheet must follow the formula Asset = Liabilities + Shareholders Equity

Asset

Liabilities + Shareholders Equity

Current asset

Current liabilities

Where the money is going to

Fixed Assets

Long-term Liabilities

Where the money is coming from

Intangible Assets

Shareholders Equity & Retained Earnings

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Balance Sheet - Excel template


Insert Your company name

Balance Sheet
Insert Date
Executive summary TOTAL ASSET $75,000 TOTAL LIABILITIES $50,000 TOTAL SHAREHOLDERS'S EQUITY $25,000 Details ASSETS
CURRENT ASSETS
Cash in Bank Inventory Accounts Receivables Prepaid Expenses Other TOTAL
$45,000 $0 $0 $10,000 $0

Double click to access the Excel document and enter your own data

LIABILITIES & SHAREHOLDERS'S EQUITY


CURRRENT LIABILITIES
Accounts Payable Taxes Payable Short Terms Notes Payable Current Portion Long-term Debt Other current liabilities (specify) TOTAL
$50,000 $0 $0 $0 $0

$55,000

$50,000

FIXED ASSETS
Property, Plant and Equipement Furniture & Fixtures Leasehold Improvements Other TOTAL
$20,000 $0 $0 $0

LONG-TERM LIABILITIES
Bank Loans Payable (greater than 12 months) Less: Short-term Portion Notes Payable to Stockholders Other long-term debt (specify) TOTAL
$0 $0 $0 $0

$20,000

$0

OTHER ASSETS
Specify Specify Specify TOTAL TOTAL ASSET
$0 $0 $0

OTHER LIABILITIES
Specify Specify Specify TOTAL TOTAL LIABILITIES
$0 $0 $0

$0 $75,000

$0 $50,000

Cells with formula will be automatically updated

SHAREHOLDERS' EQUITY
Capital Stock Retained Earnings TOTAL TOTAL SHAREHOLDERS'S EQUITY TOTAL LIABILITIES & SHAREHOLDERS'S EQUITY
$10,000 $15,000

$25,000 $25,000 $75,000

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Table of content

Financial Analysis
1

The Profit and Loss Statement (P&L)

The Balance Sheet

The Cash Flow Statement

The Key Financial Ratios

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Cash Flow Statement - Definition

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Cash Flow Statement - Description

Starting cash position Sources of cash

Cash Flow Statement


Closing Cash Position Uses of cash

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Cash Flow Statement - Excel Template


Insert Your company name

Cash Flow Statement


For Period XXX
Executive summary Starting Cash Position $100,000 Change During Year $50,000 Closing Cash Position $150,000 Details
Comments
Starting Cash Position $100,000 Insert your own comments Insert your own comments Insert your own comments Insert your own comments Insert your own comments Insert your own comments

Double click to access the Excel document and enter your own data

Incoming
Cash sales Collections from accounts receivable Other cash receipts Total Incoming
$100,000 $50,000 $50,000

$200,000

Outgoing Fixed Costs


Administration Marketing Operation Total Outgoing Fixed Costs
$45,000 $50,000 -$20,000

$75,000

Insert your own comments Insert your own comments Insert your own comments Insert your own comments

Outgoing Variable Costs

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Administration Marketing Operation Total Outgoing Variable Costs Change During Year Closing Cash Position

$45,000 $50,000 -$20,000

$75,000 $50,000 $150,000 www.slidebooks.com

Insert your own comments Insert your own comments Insert your own comments Insert your own comments Insert your own comments Insert your own comments

Table of content

Financial Analysis
1

The Profit and Loss Statement (P&L)

The Balance Sheet

The Cash Flow Statement

The Key Financial Ratios

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There are 6 categories of financial ratios that can be used to analyse a companys performance

1.Efficiency ratios

2.Solvency ratios

3.Liquidity ratios

4.Profitabili ty ratios

5.Leverage ratios

6.Return on investment ratios

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1.Efficiency ratios are are typically used to analyze how well a company uses its assets and liabilities internally
Ratio1 Formula2 Definition2 Result

Inventory turnover ratio

COGS / Average inventory

The length of time it takes a company to sell inventory

Insert your own text

Accounts receivable turnover ratio Accounts payable turnover ratio

Sales / Average accounts receivable

The length of time it takes a company to collect accounts receivable

Insert your own text

COGS / Average accounts payable

The length of time it takes a company to pay its creditors

Insert your own text

Asset turnover ratio

Sales / Average net assets

The efficiency of asset usage within a company

Insert your own text

Fixed asset turnover ratio

Sales / Average fixed assets

The efficiency of fixed asset usage within a company

Insert your own text

Working capital turnover ratio


1365 2The

Sales / Average working capital

How effectively is a company using its working capital (= current assets current liabilities) to generate sales

Insert your own text

/ turnover ratio gives you the days outstanding average equals the value at the beginning of the year + the value at the end of the year divided by 2 Click here to download the editable PowerPoint

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2.Solvency ratios are used to analyze the degree of financial risk that a business faces at a certain point in time
Ratio Formula Definition Result

Debt to equity ratio

Total liabilities / shareholders equity

The amount of equity to support creditors in case of financial difficulties. A high debt/equity ratio generally means that a company has been aggressive in financing its growth with debt

Insert your own text

Debt ratio

Total liabilities / Total assets

The amount of equity to support creditors in case of financial difficulties

Insert your own text

Times interest earned (TIE) ratio

EBIT / Interest charges

It indicates how many times a company can cover its interest charges on a pretax basis

Insert your own text

Cash ratio

(Current assets Inventories Receivables) / Current liabilities

The extent to which current liabilities are covered by the current assets that can be converted into cash and used almost instantly

Insert your own text

Quick ratio

(Current assets Inventories) / Current liabilities

The extent to which current liabilities are covered by the current assets that can be converted into cash almost instantly
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Insert your own text

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3.Liquidity ratios are used to analyze a companys ability to meet its credit obligations at a certain point in time

Ratio

Formula

Definition

Result

Current ratio

Current assets / Current liabilities

The extent to which current liabilities are covered by current assets

Insert your own text

Quick ratio

(Current assets Inventories) / Current liabilities

The extent to which current liabilities are covered by the current assets that can be converted into cash almost instantly

Insert your own text

Cash ratio

(Current assets Inventories Receivables) / Current liabilities

The extent to which current liabilities are covered by the current assets that can be converted into cash and used almost instantly

Insert your own text

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4.Profitability ratios are used to analyse a companys ability to generate a profit


Ratio Formula1 Definition Result

Return on sales

Net income / Net sales

The amount of net income earned from each unit of sales. This ratio is also called net profit margin

Insert your own text

Return on equity

(ROE)

Net income / Average shareholders equity

The return stockholders are receiving on their investment in the company

Insert your own text

Return on net assets

Net operating profit after tax (NOPAT) / Total net assets

The amount of net income earned per unit of asset used in the business

Insert your own text

Return on Capital Employed (ROCE) Return on invested capital (ROIC) Return On Funds Employed
1The

Net income / Average working capital

The return a company is realizing from its capital employed, i.e. how efficient is the capital used to generate revenues How well does a company generate cash flow relative to its capital invested. A ratio >1 means that the company is creating value The net operating return the company generates relative to all funds invested. Funds employed = total liabilities

Insert your own text

NOPAT / Average total capital

Insert your own text

NOPAT/ Average funds employed

Insert your own text

average equals the value at the beginning of the year + the value at the end of the year divided by 2
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5.Leverage ratios are used to analyze whether the use of borrowed funds generates increased earnings

Ratio

Formula

Definition

Result

Debt to equity ratio

Total liabilities / shareholders equity

The amount of equity to support creditors in case of financial difficulties. A high debt/equity ratio generally means that a company has been aggressive in financing its growth with debt

Insert your own text

Debt ratio

Total liabilities / Total assets

The amount of equity to support creditors in case of financial difficulties

Insert your own text

Times interest earned (TIE) ratio

EBIT / Interest charges

It indicates how many times a company can cover its interest charges on a pretax basis

Insert your own text

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6.Return on investment ratios are used to analyze how much money shareholders are receiving compared to the money they have invested

Ratio

Formula

Definition

Result

Dividend Yield

Dividends per share / Current market price share Net income Dividends on preferred stocks / average outstanding shares

It shows how much a company pays out in dividends compared to its share price

Insert your own text

Earnings per share (EPS)

The portion of a company's profit allocated to each outstanding share of common stock

Insert your own text

Price / Earnings

Current market price share / EPS

A valuation ratio of a company's current share price compared to its earnings pershare

Insert your own text

Return on Equity (ROE)

Net income / Average shareholders equity

The return stockholders are receiving on their investment in the company

Insert your own text

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Finally, present your results in a graphic way


Example of graphics you can use to present effectively your results

Company X Worst peer 5%


Return on sales (%)

Company Y

Company Z Best peer 8% 9%

2%
Return on equity (%)

4%

8%

X%
Profitability ratios Return on net assets (%)

X%

X%

X%
Return on Capital Employed (%)

X%

X%
Return On Funds Employed (%)
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X%

X%

Value Driver tree Sources of information

Corporate Finance by Pierre Vernimmen

EVA by Stephen F

Competitive Value Management by Hermann J. Stern

Sources of information

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