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Executive Paper Balacne Sheet

Dec Dec
2019 2020 diff
Assets

Current Assets
Cash & Securities 75.0 110.0 35.0
Receivables 433.1 440.0 6.9
Inventory 339.9 350.0 10.1
Total 848.0 900.0 52.0

Fixed Assets
P, P, E 929.5 1,000.0 70.5
accum Depr 396.7 450.0 53.3
Net Fixed Assets 532.8 550.0 17.2

Total Assets 1,380.8 1,450.0 69.2

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 Executive Paper Balacne Sheet

Dec Dec
2019 2020 diff
Liabilities and Equity

Current Liabilities
Debt due in 1 year 96.6 100.0 3.4
Payable 349.9 360.0 10.1
Total current liabilities 446.5 460.0 13.5

Long term debt 425.0 450.0 25.0

Shareholders equity 509.3 540.0 30.7

Total liabilities and equity 1,380.8 1,450.0 69.2

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 Executive Paper - Other Data 2019 2020

Market value of equity 598 708

Average number of shares, millions 14.16 14.16

Share price, dollars 42.25 50

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 Executive Paper Income Statement (2020)

$ millions
Revenues 2,200.00
Costs 1,980.00
Depreciation 53.30
EBIT 166.70
Interest 42.50
Tax 49.70
Net income 74.50

Dividend 43.80
Retained earnings 30.70
Earnings per share, dollars 5.26
Dividend per share, dollars 3.09

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 Executive Paper Sources and Uses of Funds (2020)

Sources: $ millions
Net Income 74.60
Depreciation 53.30
Operating cash flow 127.80
Borrowing 25.00
Stock issues -
Total sources 152.80

Uses:
Increase in net working capital 38.50
Investment 70.50
Dividends 43.80
Total uses 152.80

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 Leverage Ratios
lo n g te rm d e b t
L o n g te rm d e b t ra tio =
lo n g te rm d e b t + e q u ity

lo n g te rm d e b t + v a lu e o f le a s e s
D e b t e q u ity r a tio =
e q u ity

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 Leverage Ratios
total liabilities
Total debt ratio =
total assets

EBIT
Times interest earned =
interest payments

EBIT + depreciation
Cash coverage ratio =
interest payments

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 Liquidity Ratios
Net working capital Net working capital
=
to total assets ratio Total assets

current assets
Current ratio =
current liabilities

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 Liquidity Ratios
cash + m arketable securities + receivables
Quick ratio =
current liabilities

cash + m arketable securities

Cash ratio =
current liabilities

cash + m arketable securities + receivables

Interval m easure =
average daily expenditures from operations

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 Efficiency Ratios
Sales
Asset turnover ratio =
Average total assets

sales
NW Cturnover =
average net working capital

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 Efficiency Ratios
cost of goods sold
Inventory turnover ratio =
average inventory

average inventory
Days' sales in inventory =
cost of goods sold / 365

average receivables
Average collection period =
average daily sales

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 Profitability Ratios
EBIT - tax
N et profit m argin =
sales

EBIT - tax
Return on assets =
average total assets

earnings available for com m on stock

Return on equity =
average equity

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 Profitability Ratios
dividends
Payout ratio =
earnings

earnings - dividends
Plowback ratio =
earnings
= 1 - payout ratio

earnings - dividends
G row th in equity from plow back =
earnings

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 Market Value Ratios
stock price
PE Ratio =
earnings per share

P0 Di v 1 1
Forecasted PE ratio = = x
aveEPS 1 EP S 1 r - g

dividend per share

Dividend yield =
stock price

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 Market Value Ratios
Div 1
Price per share = P0 =
r - g

stock price
M arket to book ratio =
book value per share

market value of assets

Tobins Q =
estimated replcement cost

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 The DuPont System
A breakdown of ROE and ROA into component ratios

EBIT - taxes
ROA =
assets

EBIT - tax - interest

ROE =
equity

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 sales EBIT - taxes
ROA = x
assets sales

asset profit
turnover margin

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 assets sales EBIT - taxes EBIT - taxes - interest
ROE = x x x
equity assets sales EBIT - taxes

leverage asset profit debt

ratio turnover margin burden

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 Financial Planning

1. Best case
2. Normal growth
3. Retrenchment

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 Financial Planning Models
Executive Paper - Latest & Proforma Income Statements

2020 2021 2025

Revenue 2,200.0 2,640.0 5,474.0
Costs (90% of revenue) 1,980.0 2,376.0 4,927.0
Depreciation (10% of fixed assets) 53.3 55.0 114.0
EBIT 166.7 209.0 433.4
Interest (10% of LT debt) 42.5 45.0 131.3
Tax (40% of pretax profit) 49.7 65.6 120.8
Operating cash flow 74.5 98.4 181.2
127.8 153.4 295.3

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 Financial Planning Models
Executive Paper - Latest & Proforma Income Statements

2020 2021 2025

Revenue 2,200.0 2,640.0 5,474.0
Costs (90% of revenue) 1,980.0 2,376.0 4,927.0
Depreciation (10% of fixed assets) 53.3 55.0 114.0
EBIT 166.7 209.0 433.4
Interest (10% of LT debt) 42.5 45.0 131.3

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 Financial Planning Models

Executive Paper - Latest & Proforma Statemet of Cash Flows

2020 2021 2025

Net working capital (20% of revenues) 440.0 528.0 1,095.0
Net fixed assets (25% of revenues) 550.0 660.0 1,369.0
Total net assets 990.0 1,188.0 2,463.0
Long-term debt 450.0 608.6 1,651.0
Equity 540.0 579.4 812.0
Total long-term liabilities and equity 990.0 1,188.0 2,463.0

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