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Index
Cover
Chapter 1: Company Valuation
Why use a valuation technique?
Who uses valuation techniques?
Wells Fargo “dividend capitalization” model
Dividend computation for privately-held corporation
Review questions
Chapter 2: Ratio Analysis: The Effect Ratios
Effect ratios
Liquidity
Inventory to working capital
Accounts receivables to working capital ratio
Net sales to working capital (working capital turnover)
Operating cash flow to current liabilities
Debt ratios
Current liabilities to net worth
Times interest earned
Net profit to net worth (return on equity)
Effect ratio summary
Review questions
Chapter 3: Analysis of Profitability Using the DuPont Analysis
DuPont system
DuPont system
Total DuPont system
Group exercise – Part A
Group exercise – Part B
EBITDA analysis
Earnings quality
Review questions
Chapter 4: Analysis of Financial Statements Using Causal Ratios
Causal ratios
Fixed assets to net worth
How fixed assets affect profit
Ratios that could be changed by the fixed assets to net worth ratio
Correction procedures
Collection period
Collection period: Example
Ratios that could be changed by the collection period
Correction procedures
Net sales to inventory (inventory turnover)
Net sales to inventory: Example
Ratios that could be changed by net sales to inventory
Correction procedures
Net sales to net worth
Trading ratio: Example
Trading ratio: Example
Ratios that could be changed by the trading ratio
Overtrading characteristics
Correction procedures
The profit margin
The profit margin: Example
Correction procedures
Miscellaneous assets to net worth
Correction procedures
Causal ratio summary
Review questions
Chapter 5: How to Conduct a Financial Statement Analysis
How to conduct an analysis of financial statements
Industry and time series analysis
Sources of industry averages
Problems with using industry data
An example of computing industry statistics from risk management associates (formerly Robert Morris) data
An example of computing industry statistics from Dun and Bradstreet data
Guidelines to use in applying ratio analysis
Review questions
Chapter 6: Case Studies
Case study 1: Paper products company
Case study 2: National west airline
Case study 3: Firm A
Case study 4: Store container corporation
Discussion case 1
Discussion case 2
Chapter 7: Users of Financial Statements
Ratios examined by banks for short-term loans
Ratios examined by banks for long-term loans
Most important financial ratios for commercial loan departments
Commercial loan departments’ ratios appearing most frequently in loan agreements
Corporate controllers’ most significant ratios
Ratios most often appearing in corporate objectives and their primary measures
Review questions
Chapter 8: Forecasting Sustainable Growth
Definitions
Derivation of the sustainable growth model
The Alabama door company
Calculation of Alabama door growth rate
Improving sustainable growth
Sustainable growth: Available external equity
Chapter 9: Forecasting Bankruptcy
Altman’s bankruptcy prediction formula
Bankruptcy prediction example
Altman’s second model
Review questions
Appendix A: CASE PROBLEM
Marine supply company balance sheet
Marine supply company selected income figures
Marine supply company selected financial ratios
Case problem requirements
Glossary of Controllership and Financial Management Terms
Index
Solutions
Chapter 1
Chapter 2
Chapter 3
Chapter 4
Chapter 5
Chapter 6
Chapter 7
Chapter 8
Chapter 9
End User License Agreement
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