Financial Statements Analysis

Ana Kozak Eizayaga

Financial Instruments Accounting
Economics & Finance, UAM

January 11, 2022

List of Equations Equation 4: ROA decomposition

1 Net Profit Margin . . . . . . . . . . . . . . . . . . 1 ROA = Net Margin × Asset Turnover =

2 Asset Turnover . . . . . . . . . . . . . . . . . . . 1
3 ROA . . . . . . . . . . . . . . . . . . . . . . . . . 1 Net Income Sales
= · = (4)
4 ROA decomposition . . . . . . . . . . . . . . . . . 1 Sales Avg Assets
5 Operating ROA . . . . . . . . . . . . . . . . . . . 1
6 Operating ROA decomposition . . . . . . . . . . . 1 Net Income
=
7 Current Ratio . . . . . . . . . . . . . . . . . . . . 1 Avg Assets
8 More-liquid Current Ratio . . . . . . . . . . . . . 1
9 Quick Acid Test . . . . . . . . . . . . . . . . . . . 1
10 Receivables Turnover . . . . . . . . . . . . . . . . 2 Equation 5: Operating ROA
11 Inventory Turnover . . . . . . . . . . . . . . . . . 2
12 Payables Turnover . . . . . . . . . . . . . . . . . 2 EBIT
13 Days’ receivables . . . . . . . . . . . . . . . . . . 2 OROA = (5)
Avg Operating Assets
14 Days’ inventory . . . . . . . . . . . . . . . . . . . 2
15 Days’ payables . . . . . . . . . . . . . . . . . . . . 2
16 Long Term Solvency . . . . . . . . . . . . . . . . 2 Equation 6: Operating ROA decomposition
17 Assets to Equity Ratio . . . . . . . . . . . . . . . 2
18 Total Debt to Equity Ratio . . . . . . . . . . . . . 2
19 Total Debt to Liability . . . . . . . . . . . . . . . 2
OROA =
20 Debt to EBITDA . . . . . . . . . . . . . . . . . . . 2 = EBIT Margin × Operating Asset Turnover =
21 Debt to Operating Cashflows . . . . . . . . . . . . 2
22 OCF Ratio . . . . . . . . . . . . . . . . . . . . . . 2 EBIT Sales
23 ROE . . . . . . . . . . . . . . . . . . . . . . . . . 2 = · = (6)
Sales Avg Operating Assets
24 ROE Dupont . . . . . . . . . . . . . . . . . . . . . 2
25 MTB . . . . . . . . . . . . . . . . . . . . . . . . . 2 EBIT
26 EPS . . . . . . . . . . . . . . . . . . . . . . . . . 2 =
Avg Operating Assets
26 PER . . . . . . . . . . . . . . . . . . . . . . . . . 2
28 Dividend Payout . . . . . . . . . . . . . . . . . . 2
Equation 7: Current Ratio
Equation 1: Net Profit Margin
CA
Net Income Current Ratio = (7)
Net Profit Margin = (1) CL
Sales
Equation 8: More-liquid Current Ratio
Equation 2: Asset Turnover

Sales CA- Inventory

Asset Turnover = (2) More-liquid Current Ratio = (8)
Avg Assets CL

Equation 3: ROA Equation 9: Quick Acid Test

Net Income
ROA = (3) Cash+ST Investments
Avg Assets Quick Acid Test = (9)
CL

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 Financial Statements Analysis

Equation 10: Receivables Turnover Equation 20: Debt to EBITDA

Total Debt
Sales Debt to EBITDA = (20)
Receivables Turnover = (10) EBITDA
Avg Receivables

Equation 11: Inventory Turnover Equation 21: Debt to Operating Cashflows

Sales
Inventory Turnover = (11) Total Debt
Avg Inventory Debt to Operating Cashflows = (21)
Op Cashflows

Equation 12: Payables Turnover

COGS Equation 22: OCF Ratio

Payables Turnover = (12)
Avg Payables
Op Cashflows
OCF = (22)
Current Debt
Equation 13: Days’ receivables

365 Equation 23: ROE

Days’ receivables = (13)
Receivables Turnover Net Income
ROE = (23)
Avg Equity
Equation 14: Days’ inventory

365 Equation 24: ROE Dupont

Days’ inventory = (14)
Inventory Turnover
ROE = ROA × Leverage of Total Assets

Equation 15: Days’ payables

Net Income Avg Assets
= · (24)
Avg Assets Avg SE
365
Days’ payables = (15)
Payables Turnover
Equation 25: MTB
Equation 16: Long Term Solvency Market Price per Share
MTB = (25)
Total Assets Book Value Per Share
Long Term Solvency = (16)
Total Liabilities

Equation 26: EPS

Equation 17: Assets to Equity Ratio
Net Income
EPS = (26)
Number of Shares
Total Assets
Assets to Equity Ratio = (17)
Shareholder’s Equity
Equation 27: PER
Equation 18: Total Debt to Equity Ratio Market Price per Share
PER =
EPS
Total Debt Market Price per Share × Number of Shares
Total Debt to Equity Ratio = =
Shareholder’s Equity Net Income
(18) (27)

Equation 19: Total Debt to Liability Equation 28: Dividend Payout

Total Debt Dividends

Total Debt to Liability = (19) Dividend Payout = (28)
Total Liability Net Income

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