Ppt on cash flow analysis

Principles of Engineering Economic Analysis, 5th edition Chapter 2 Time Value of Money (TVOM)

n) = F(2.30) F occurs at the same time as the last A Uniform Series of Cash Flows Discounted Cash Flow Formulas Principles of Engineering Economic Analysis, 5th edition Example 2. 17 Troy Long deposits a single sum of money in a savings account /),12) i eff = 6.364% Example 2.39 Principles of Engineering Economic Analysis, 5th edition When Compounding and Cash Flow Frequencies Differ When compounding frequency and cash flow frequency differ, the following approach is taken. Let r denote the nominal annual /


Financial Management Analysis of Financial Statements.

(P/E) Ratio Ratio Analysis P/E = $32.25/$2.90 = 11.1 Summarizing All Ratios IAS 7 Cash Flows Users of an entity’s financial statements are interested in how the entity generates and uses cash and cash equivalents Provide information about the historical changes in cash and cash equivalents of an entity by means of a statement of cash flows Classification of cash flows during the period as operating/


Chapter 2 Introduction to Financial Statement Analysis.

Financial analysts often compute a firm’s earnings before interest, taxes, depreciation, and amortization, or EBITDA. Because depreciation and amortization are not cash flows, this subtotal reflects the cash a firm has earned from operations. 46 2.5 Income Statement Analysis Leverage Ratios: Interest Coverage Ratio Also known as times interest earned (TIE). TIE = earnings divided by interest Can define earnings as operating income/


26-1. 26-2 CHAPTER26 Incremental Analysis and Capital Budgeting.

required rate of return of 12% because the net present value is positive. Illustration: Calculate the net present value. Discounted Cash Flow SO 10 Distinguish between the net present value and internal rate of return methods. Unequal Net Annual Cash Flows Illustration 26-27 Analysis of proposal using net present value method 26-60 26-61   IRR method finds the interest yield of the potential/


Using Discounted Cash Flow Analysis to Make Investment Decisions Project Analysis By : Else Fernanda, SE.Ak., M.Sc. ICFI.

Cash Flow Analysis to Make Investment Decisions Project Analysis By : Else Fernanda, SE.Ak., M.Sc. ICFI Topics Covered Identifying Cash Flows – Discount Cash Flows, Not Profits – Discount Incremental Cash Flows – Discount Nominal Cash Flows by the Nominal Cost of Capital – Separate Investment & Financing Decisions Calculating Cash Flows ICFI Applying the Net Present Value Rule to Real World Situations Making Investment Decisions using NPV involves the following steps: 1.Forecast project cash flows/


Corporate and Project Financial Analysis Programme Background on Forecasting, Ratios and Drivers of Value.

Break-even Potential Reductions in EBITDA Probability of Default Loss on Debt 54 Short-term Cash Flow Analysis and Liquidity Seasonality versus trends in cash flows relative to current assets and current liabilities Fixed and Variable Costs: how changes in revenues impact profit Cash Flows and revolving credit facilities – Managing the working capital cycle Business cycles and businesses Stocking Selling Destocking Applying and evaluating the main ratios/


FINANCIAL ANALYSIS ESSENTIALS © © Dr. George S. Vozikis Davis D. Bovaird Endowed Chair for Entrepreneurial Studies University of Tulsa.

Process Bookkeeping Accounting Financial Statements The Balance Sheet The Income Statement The Accumulated Retained Earnings Statement Sources And Uses Of Funds (Cash Flow) Statement Analysis of Changes in Working Capital Financial Analysis Techniques Ratio Analysis Profit Analysis Cash Flow Analysis Breakeven Analysis Conclusion 4 FINANCIAL ANALYSIS FINANCIAL ANALYSIS refers to the systematic study of the current or potential performance of a business enterprise. It provides guidelines for all asset/


Chapter 13 Risk Analysis and Project Evaluation. Copyright ©2014 Pearson Education, Inc. All rights reserved.13-2 Slide Contents Principles Applied In.

©2014 Pearson Education, Inc. All rights reserved.13-8 Tools for Analyzing the Risk of Project Cash Flows There are many possible cash flow outcomes for any risky project. The analyst uses tools such as Sensitivity analysis, Scenario analysis, and Simulation analysis to better understand the uncertainty of future cash flows. Copyright ©2014 Pearson Education, Inc. All rights reserved.13-9 Key Concepts - Expected Values and Value Drivers Expected/


Introduction To Financial Statement Analysis. Chapter Outline 2.1 Firms’ Disclosure of Financial Information 2.2 The Balance Sheet 2.3 The Income Statement.

financial information through financial statements is critical to investors Understand the function of the balance sheet Understand how the income statement is used Interpret a statement of cash flows Understand the management’s discussion and analysis and the statement of stockholders equity Analyze a firm through its financial statements, including using the DuPont Identity Understand the main purpose and aspects of the Sarbanes/


FINANCIAL ANALYSIS Principles of Corporate Finance Tenth Edition Understanding Financial Statement Financial Statement Analysis Slides by Matthew Will.

be analyzed by those both inside and outside the firm? Marketing – Understand the effects of your decisions on the financial statements, particularly the income statement and the statement of cash flows – How analysis of ratios, especially those involving sales figures will affect the firm’s decisions about levels of inventory, credit policies and pricing decisions. Dr Noryati Ahmad Why this topic matters to/


CMA Part 2 Financial Decision Making Study Unit 9: Decision Analysis and Risk Management  Jim Clemons, CMA.

is always greater than ordinary annuity  See examples on page 310 through 312 89 SU 10.2 – Discounted Cash Flow Analysis – Hurdle rate Goal is for companies discount rate to be as low as possible. WACC or Shareholder’s /Discounted Cash Flow Analysis Cash flows and discounting NPV = Cash flow 0 Cash flow 1 Cash flow 2 (1 + r) 0 (1 + r) 1 (1 + r) 2  Comparing Cash Flow Patterns – Page 315 ++ 93 SU 10.2 – Discounted Cash Flow Analysis NPV vs IRR comparison – Reinvestment rate NPV assumes the cash flow can/


Financial Analysis, Planning and Forecasting Theory and Application By Cheng F. Lee Rutgers University John Lee Center for PBBEF Research, USA Chapter.

statement reveals some important aspects of the firm’s investment, financing, and dividend policies; making it an important tool for financial planning and analysis. 19 Statement of Cash Flows  The cash flow statement shows how the net increase or decrease in cash has been reflected in the changing composition of current assets and current liabilities. It highlights changes in short-term financial policies. It helps answer/


Chapter 10 Project Cash Flows and Risk

and installation ( 500) Increase in net working capital ( 4,000) Initial investment $(14,000) Expansion Project Analysis of the Cash Flows Expansion Project Net Salvage Value Expansion Project Analysis of the Cash Flows Expansion Project Cash Flow Time Line Replacement Project Analysis of the Cash Flows Replacement Project Cash Flow Time Line Incorporating Risk in Capital Budgeting Analysis Stand-Alone Risk: the risk an asset would have if it were a firm’s only/


Guidance on Financial Analysis of Cleaner Production Options

selection of an alternative together with for e.g., life cycle assessment, audits, etc. Thus, CBA is used in financial analysis to estimate the profitability of a potential investment for a cleaner production option. Elements of CBA Next Slide Elements of CBA Cash flow Present value (PV) Measures of Profitability Payback Period Net Present Value (NPV) Internal Rate of Return (IRR) Profitability Index/


Chapter 10 Making Capital Investment Decisions

is to take an investment if its AAR exceeds a benchmark. Chapter 10 Making Capital Investment Decisions Chapter Organization Incremental Cash Flows Terminology Cash Flows vs. Accounting Income Pro Forma Financial Statements and Project Cash Flows More on Project Cash Flows Alternative Definitions of Operating Cash Flow Some Special Cases of Discounted Cash Flow Analysis Summary and Conclusions Fundamental Principles of Project Evaluation: Project evaluation - the application of one or more capital budgeting/


INCREMENTAL ANALYSIS AND CAPITAL BUDGETING

the net present value and internal rate of return methods. Net Present Value Method Example: Equal Annual Cash Flows - Continued Analysis of proposal using net present values NPV positive for both discount rates Accept proposed capital expenditure at /the net present value and internal rate of return methods. Net Present Value Method Example: Unequal Annual Cash Flows - Continued Analysis of proposal using net present values NPV positive for both discount rates Accept proposed capital expenditure at either/


21 - 1 Capital Budgeting and Cost Analysis Chapter 21.

-project basis. 21 - 38 Learning Objective 7 Identify relevant cash inflows and outflows for capital budgeting decisions. 21 - 39 Relevant Cash Flows Relevant cash flows are expected future cash flows that differ among the alternatives. 21 - 40 Relevant Cash Flows Net initial investment components – cash outflow to purchase investment – working-capital cash outflow – cash inflow from disposal of old asset 21 - 41 Relevant Cash Flow Analysis Example Old equipment: Current book value$50,000 Current/


Risk Analysis: An Extended Look Dr. Nancy Mangold California State University, East Bay.

funds to the firm b Suppliers of raw materials or merchandise inventories may require that the inventories serve as collateral for the delayed payment Credit Risk Analysis b Circumstances leading to need for the loan b Cash Flows b Collateral b Capacity for Debt b Contingencies b Character of Management b Conditions Circumstances leading to need for the loan b The reason that/


Using Cash Flow Budgets to Improve Cash Flow & Liquidity in the Catfish Business Carole R. Engle Aquaculture/Fisheries Center U. of Arkansas at Pine Bluff.

$577,548 Engle, UAPB Cash Flow Analysis: Sructure ItemJanuaryFebruary Beginning cash$578,834$596,150 Total cash outflow$14,940$50,848 Cash available$596,150$577,548 New borrowing00 Ending cash balance$596,150$577,548 Engle, UAPB Cash Flow Analysis: Total Cash Inflow ItemJanuaryFebruary Beginning cash$578,834$596,150 Receipts from catfish sold $32,256 Total cash inflow$611,090$628,406 Engle, UAPB Cash Flow Analysis: Operating cash expenses ItemJanuaryFebruary Feed$2,783/


Rate of Return Analysis

worksheet function cannot be used to solve for ERR. When faced with multiple negative-valued cash flows, we construct a new CF profile that contains the negative-valued cash flows, zeroes, and the future worth of the positive-valued cash flows, with the FW based on the MARR. External Rate of Return Analysis Multiple Alternatives Example 8.11 Recall the 5 equal-lived, mutually exclusive investment alternatives/


Copyright © 2011 Pearson Prentice Hall. All rights reserved. Chapter 11 Cash Flows and Other Topics in Capital Budgeting.

markets 11-34 © 2011 Pearson Prentice Hall. All rights reserved. Option to Abandon  It may be necessary to abandon the project before its estimated life due to inaccurate project analysis models or cash flow forecasts or due to changes in market conditions.  When comparing two projects with similar NPVs, project that is easier to abandon may be more desirable (example, temporary versus permanent/


Chapter 11 Project Analysis and Evaluation

are $54,000. All other variables are unchanged. T11.6 Fairways Driving Range Sensitivity Analysis (concluded) Net Project Scenario Rentals Revenues income cash flow NPV Best case 25,000 $75,000 $19,975 $23,975 $60,364 Base/=(FC+D)/(P-v) Operating Cash Flow, Sales Volume and Break-Even Given our focus on cash flow, the next evolution in break-even analysis is to look at the relationship between operating cash flow and sales volume Cash break-even - the point where operating cash flow (OCF) is zero OCF = /


Project Analysis and Evaluation

effect of operating leverage. A small change in sales yields a much bigger change in OCF. Chapter Outline Evaluating NPV Estimates “Scenario” and other “What-if” Analyses Break-Even Analysis Operating Cash Flow, Sales Volume, and Break-Even Operating Leverage Capital Rationing Capital Rationing Capital rationing occurs when a firm or division has limited resources Soft rationing – the limited resources are temporary, often/


8-2 Capital Budgeting Analysis of potential projects Long-term decisions Large expenditures Difficult/impossible to reverse Determines firm’s strategic.

9-66 Evaluating NPV Estimates NPV estimates are only estimates Forecasting risk: –Sensitivity of NPV to changes in cash flow estimates The more sensitive, the greater the forecasting risk Sources of value Be able to articulate why this project creates value 9-67 Scenario Analysis Examines several possible situations: –Worst case –Base case or most likely case –Best case Provides a range of/


Scandals and Manipulation

net income; if not, the reasons need to be investigated CFO composition & trends over time may signal possible earnings management Taxes paid & stock options require additional analysis Non-recurring items & special charges are subject to different cash flow reporting & require additional evaluation Additional Earnings Management Concerns Composition of CFI, normally negative, associated with acquisition of PPE; consider composition issues & possible impact on income/


GROUP 4 PRESENTATION. CORPORATE FINANCIAL REPORTING AND ANALYSIS  DANIEL KIPRUTO D63/60179/2013  MASIEBI BARASA GEORGE D63/60080/2013  RUTH W. KARIUKID63/60485/2013.

under certain conditions.  Sale of assets or operations that have historically not produced operating cash flows sufficient to fund future debt service and dividend expectations. Analysis Implications of Revenue Recognition (cont’d) Even when a company receives cash proceeds, any guarantees or other agreements requiring the company to infuse cash into the purchasing entity impacts the validity of revenue recognition. Revenue should not be recognized/


Andrew Graham Queens University School of Policy Studies

an organizations financial condition, make decisions about the organization, and compare an organizations financial performance to its peers. From Cash Flow to Cash Forecasting: Financial Statements Analysis of just financial statements rarely gives a final answer Rather, it indicates where further analysis is needed From Cash Flow to Cash Forecasting: Financial Statements Good organization management, regardless of the size of the organization, demands that the organization regularly review/


Making Capital Investment Decisions Chapter 9 1. Topics 1.Relevant Cash Flows For A Project 2.Cash Flows From Accounting Numbers 3.MACRS Tax Law for Depreciation.

+ Depreciation – Taxes – (Change in CA) + (Change in CL) – Capital Spending OCF = EBIT + Depreciation – Taxes – (End CA – Beg CA) + (End CL – Beg CL) – Capital Spending 24 Depreciation & Cash Flow Analysis Because Depreciation is a non-cash expense that has cash flow implications, we must use the IRS rules for depreciation, Not GAAP Rules. Modified Accelerated Cost Recovery System (MACRS). – We will look at somewhat simplified MACRS tables/


7-1 Chapter 7 Fund Analysis, Cash- Flow Analysis, and Financial Planning © 2001 Prentice-Hall, Inc. Fundamentals of Financial Management, 11/e Created.

-2 Fund Analysis, Cash-Flow Analysis, and Financial Planning u Flow of Funds (Sources and Uses) Statement u Accounting Statement of Cash Flows u Cash-Flow Forecasting u Range of Cash-Flow Estimates u Forecasting Financial Statements u Flow of Funds (Sources and Uses) Statement u Accounting Statement of Cash Flows u Cash-Flow Forecasting u Range of Cash-Flow Estimates u Forecasting Financial Statements 7-3 Flow of Funds Statement cash flow statement Has been replaced by the cash flow statement (1989/


21 - 1 ©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster Capital Budgeting and Cost Analysis Chapter 21.

21 - 43 ©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster Relevant Cash Flow Analysis Example What is the after-tax cash flow from current disposal of old equipment? Current disposal price$ 3,000 Tax savings on loss 18,800/$21,800 21 - 44 ©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster Relevant Cash Flow Analysis Example New equipment: Current book value$225,000 Current disposal price is irrelevant Terminal disposal price (5 years) 0/


Securities Analysis, Section II Security Valuation & EIC Analysis (Part 1)

rights reserved The Price-Cash Flow Ratio Companies can manipulate earnings Cash-flow is less prone to manipulation Cash-flow is important for fundamental valuation and in credit analysis Copyright © 2000 by Harcourt, Inc. All rights reserved The Price-Cash Flow Ratio Companies can manipulate earnings Cash-flow is less prone to manipulation Cash-flow is important for fundamental valuation and in credit analysis Where: P/CF j = the price/cash flow ratio for firm j/


Aswath Damodaran1 Corporate Finance in a Day An Analysis of Grace Kennedy Aswath Damodaran Home Page: www.stern.nyu.edu/~adamodar www.stern.nyu.edu/~adamodar/New_Home_Page/cfshdesc.html.

default-free government rate (even on a coupon bond) as the riskfree rate on all of the cash flows in a long term analysis will yield a close approximation of the true value. Aswath Damodaran15 Estimating Riskfree Rates in Jamaican $ / projects that the firm may have. The benefits that may not be captured in the traditional capital budgeting analysis include project synergies (where cash flow benefits may accrue to other projects) and options embedded in projects (including the options to delay, expand or/


Business Requirements Analysis ITEC-630 Fall 2010

to model: Future extensions to the system (it is a good development practice to include all known future extensions in the analysis model) Extended versions of the system (e.g., “Premium”, “Professional”) Possible extensions, which can be added or /) Customer Description Customer logs in, selects withdraw funds, enters amount, customer has fund, ATM has no cash Pre-conditions Welcome screen is on Flow of Events A1. Customer slides card in and out S1. Machine prompts customer for password A2. Customer enters/


Aswath Damodaran1 The Tools of Corporate Finance Present Value Financial Statement Analysis Fundamentals of Valuation.

amount as the after-tax operating income. Aswath Damodaran56 The Statement of Cash Flows Aswath Damodaran57 The Financial perspective on cash flows In financial analysis, we are much more concerned about Cash flows to the firm or operating cash flows, which are before cash flows to debt and equity) Cash flows to equity, which are after cash flows to debt but prior to cash flows to equity Aswath Damodaran58 Fundamentals of Valuation Aswath Damodaran59 Discounted Cashflow Valuation/


Capital Budgeting Continued Overview: (1) Estimating cash flows (2) CB examples (3) Dealing with uncertainty of cash flows Chapter 7: 1,5,6,7,34,38 Chapter.

in the other working capital components. The discount rate is 8%. What is the NPV of the project? Capital Budgeting & Uncertainty Uncertainty in cash flows adjust cash flows adjust discount rate (risk premia) Cash flow analysis (sensitivity analysis, scenario analysis, simulations) Decision trees Break even analysis Cash Flow Analysis Sensitivity Analysis Sensitivity analysis examines the sensitivity of the decision rule (NPV, IRR, etc.) to changes in the assumptions underlying a project. Sensitivity/


Calculating Cash Flow After Tax “Cash flow before tax times (1 - the marginal tax rate), plus depreciation for tax purposes times the marginal tax rate.”

[PVA.30,2 ] + $2,111,000[PV.30,3 ] = $16,476Decision: Accept. Risk and Capital Budgeting “Various Methods to Handle Projects with Different Risk: Sensitivity Analysis and Break-Even Analysis” Lecture 7 - Cash Flows and Net Present Value SENSITIVITY ANALYSIS Vary some assumptions about the economy or industry (say oil prices) and find the effects on CFs and NPVs This is a way to force/


1 Equity Instruments: Part I Discounted Cash Flow Valuation B40.3331 Aswath Damodaran.

the next earnings report –While many analysts forecast expected growth in earnings per share over the next 5 years, the analysis and information (generally) that goes into this estimate is far more limited. Analyst forecasts of earnings per share and/ traded firm potentially has an infinite life. The value is therefore the present value of cash flows forever. Since we cannot estimate cash flows forever, we estimate cash flows for a “growth period” and then estimate a terminal value, to capture the value at/


© The McGraw-Hill Companies, Inc., 2005 McGraw-Hill/Irwin 16-1 Reporting the Statement of Cash Flows Chapter 16.

-Hill Companies, Inc., 2005 McGraw-Hill/Irwin 16-1 Reporting the Statement of Cash Flows Chapter 16 © The McGraw-Hill Companies, Inc., 2005 McGraw-Hill/Irwin 16-2 Learning objectives 1.Basics of Cash flow reporting 2.Cash flow from operating 3.Cash flow from investing 4.Cash flow from financing 5.Interpretation of Statement of Cash flow 6.Decision analysis: Cash flow on total assets © The McGraw-Hill Companies, Inc., 2005 McGraw-Hill/Irwin/


Securities Analysis, Part IV Security Valuation. Version 1.2 Copyright © 2000 by Harcourt, Inc. All rights reserved. Requests for permission to make copies.

rights reserved The Price-Cash Flow Ratio Companies can manipulate earnings Cash-flow is less prone to manipulation Cash-flow is important for fundamental valuation and in credit analysis Copyright © 2000 by Harcourt, Inc. All rights reserved The Price-Cash Flow Ratio Companies can manipulate earnings Cash-flow is less prone to manipulation Cash-flow is important for fundamental valuation and in credit analysis Where: P/CF j = the price/cash flow ratio for firm j/


Making capital investment decisions

David E. Allen and Abhay K. Singh Relevant cash flows The cash flows that should be included in a capital budgeting analysis are those that will occur only if the project is accepted. These cash flows are called incremental cash flows. The stand-alone principle allows us to analyse each/ 2e by Ross et al. Slides prepared by David E. Allen and Abhay K. Singh Scenario analysis What happens to the NPV under different cash flow scenarios? At the very least, look at: Best case—revenues are high and costs are low /


Business Model Analysis Professor Glenn A. Okun NYU Stern School of Business

–Marketing Cost drivers –Fixed, variable or semi-variable –Scale of fixed cost base –Anticipated changes to cost drivers Investment Analysis Maximum financing need Timing of cash flow breakeven Timing to positive cash flow Success Factor Analysis Identify the business factors with the greatest impact on the cash flows –An anticipatory business scorecard Building a Financial Plan Sales forecast –Two to three years –Detailed assumptions Sales per customer Number/


Securities Analysis, Part III An Introduction to Fundamental Analysis and Security Valuation.

rights reserved The Price-Cash Flow Ratio Companies can manipulate earnings Cash-flow is less prone to manipulation Cash-flow is important for fundamental valuation and in credit analysis Copyright © 2000 by Harcourt, Inc. All rights reserved The Price-Cash Flow Ratio Companies can manipulate earnings Cash-flow is less prone to manipulation Cash-flow is important for fundamental valuation and in credit analysis Where: P/CF j = the price/cash flow ratio for firm j/


Chapter 15 COMPANY ANALYSIS AND STOCK VALUATION. Chapter 15 Questions Why is it important to differentiate between company analysis and stock analysis?

used in relation to stock price. Some drawbacks, in that sales do not necessarily produce profit and positive cash flows Advantage is that sales are also less susceptible to manipulation The steps are similar to using the P/E ratio V =S 1 x(P/S) Company Analysis: Examining Influences Company analysis is the final step in the top- down approach to investing Macroeconomic/


Cash Flow Estimation.

plan that does not always imply final approval of a project. Final approval is often contingent upon a more detailed cash flow analysis in the appropriation request. Capital Budgets and Spending Not all large investments are part of the capital budget Information Technology/estimate Example problem Using the same data as before, assume that the firm decided to calculate a scenario analysis. Both cost of capital and cash flows will vary by 10%. The best case has a 25% probability, the base a 50% probability /


Risk Analysis and Project Evaluation Campbell R. Harvey Duke University and National Bureau of Economic Research Project Appraisal and Risk Management.

to get a measurement of country risk in the discount rate. –Use the country risk adjustment in the cash flows (and adjust discount rate down accordingly). –Use Monte Carlo methods on cash flows rather than cash flows and discount rate. Risk Analysis and Project Evaluation Risk Analysis and Project Evaluation 1. Cash Flow vs. Discount Rate Many different approaches: 1.Identical Cost of Capital (all locations) 2.World CAPM or/


Semih Yildirim ADMS 3530 8 - 1 Chapter 8 Using Discounted Cash Flow Analysis Chapter Outline  Discount Cash Flows, Not Profits  Discount Incremental.

Semih Yildirim ADMS 3530 8 - 1 Chapter 8 Using Discounted Cash Flow Analysis Chapter Outline  Discount Cash Flows, Not Profits  Discount Incremental Cash Flows  Discount Nominal Cash Flows by the Nominal Cost of Capital  Separate Investment and Financing Decisions  Calculating Cash Flow  Business Taxes in Canada and the Capital Budgeting Decision  Example: Blooper Industries Semih Yildirim ADMS 3530 8 - 2 Discount Cash Flows not Profits  In Chapter 6 you learned to evaluate a project/


Review of Accounting Chapter 4.

Financial Statements Statement of Cash Flows Cash Inflow - Cash Outflow = Change in Cash From Investing: Sale of Fixed Assets + Purchase of fixed assets - Purchase of other firms - Cash Inflow - Cash Outflow = Change in Cash Statement of Cash Flows Cash Inflow - Cash Outflow = Change in Cash From Financing: Sale of/ = Margin Net Income Sales $162 $1,450 Net Profit Margin = = 11.2% Ratio Analysis Profitability Ratios Net Income Return on Assets = Total Assets How effectively is the firm generating net income/


Valuation: Part I Discounted Cash Flow Valuation

the next earnings report While many analysts forecast expected growth in earnings per share over the next 5 years, the analysis and information (generally) that goes into this estimate is far more limited. Analyst forecasts of earnings per share /publicly traded firm potentially has an infinite life. The value is therefore the present value of cash flows forever. Since we cannot estimate cash flows forever, we estimate cash flows for a “growth period” and then estimate a terminal value, to capture the value /


Capital Budgeting Chapter 13. Capital Budgeting uThe process of planning investments in assets whose cash flows are expected to extend beyond one year.

and the Evaluation Process uExpansion projects F initial investment outlays required F estimate the cash flows once production begins F terminal cash flow Cash Flow Estimation and the Evaluation Process uReplacement analysis F must consider cash flow from old asset and new asset in decision F cash flows from the new asset take the place of cash flows from the old asset Capital Budgeting Evaluation Techniques u1. Payback u2. Net present value (NPV/


Reporting the Statement of Cash Flows Chapter 12 PowerPoint Editor: Beth Kane, MBA, CPA Copyright © 2016 McGraw-Hill Education. All rights reserved. No.

, and financing depending on the sources of that tax. 49 12-A1: Cash Flow Analysis 50 Analyzing Cash Sources and Uses A1 Most managers stress the importance of understanding and predicting cash flows for business decisions. 51 Used, along with income-based ratios, to assess company performance. Cash flow on total assets = Operating cash flows Average total assets Cash Flow on Total Assets A1 52 12-P4: Spreadsheet Preparation of the Statement/


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