Chapter 1 1-1
Company Valuation 1-1
Why use a valuation technique? 1-2
Who uses valuation techniques? 1-4
Wells Fargo “dividend capitalization” model 1-5
Dividend computation for privately-held corporation 1-7
Review questions 1-9
Chapter 2 2-1
Ratio Analysis: The Effect Ratios 2-1
Effect ratios 2-2
Liquidity 2-3
Inventory to working capital 2-6
Accounts receivables to working capital ratio 2-8
Net sales to working capital (working capital turnover) 2-10
Operating cash flow to current liabilities 2-11
Debt ratios 2-12
Current liabilities to net worth 2-14
Times interest earned 2-15
Net profit to net worth (return on equity) 2-16
Effect ratio summary 2-17
Review questions 2-18
Chapter 3 3-1
Analysis of Profitability Using the DuPont Analysis 3-1
DuPont system 3-2
DuPont system 3-4
Total DuPont system 3-6
Group exercise – Part A 3-7
Group exercise – Part B 3-8
EBITDA analysis 3-9
Earnings quality 3-10
Review questions 3-14
Chapter 4 4-1
Analysis of Financial Statements Using Causal Ratios 4-1
Causal ratios 4-2
Fixed assets to net worth 4-3
How fixed assets affect profit 4-5
Ratios that could be changed by the fixed assets to net worth ratio 4-6
Correction procedures 4-7
Collection period 4-8
Collection period: Example 4-9
Ratios that could be changed by the collection period 4-11
Correction procedures 4-12
Net sales to inventory (inventory turnover) 4-14
Net sales to inventory: Example 4-15
Ratios that could be changed by net sales to inventory 4-17
Correction procedures 4-18
Net sales to net worth 4-19
Trading ratio: Example 4-20
Trading ratio: Example 4-22
Ratios that could be changed by the trading ratio 4-23
Overtrading characteristics 4-24
Correction procedures 4-26
The profit margin 4-27
The profit margin: Example 4-28
Correction procedures 4-29
Miscellaneous assets to net worth 4-30
Correction procedures 4-31
Causal ratio summary 4-32
Review questions 4-33
Chapter 5 5-1
How to Conduct a Financial Statement Analysis 5-1
How to conduct an analysis of financial statements 5-2
Industry and time series analysis 5-3
Sources of industry averages 5-4
Problems with using industry data 5-5
An example of computing industry statistics from risk management associates (formerly Robert Morris) data 5-6
An example of computing industry statistics from Dun and Bradstreet data 5-7
Guidelines to use in applying ratio analysis 5-8
Review questions 5-9
Chapter 6 6-1
Case Studies 6-1
Case study 1: Paper products company 6-2
Case study 2: National west airline 6-4
Case study 3: Firm A 6-7
Case study 4: Store container corporation 6-9
Discussion case 1 6-12
Discussion case 2 6-15
Chapter 7 7-1
Users of Financial Statements 7-1
Ratios examined by banks for short-term loans 7-2
Ratios examined by banks for long-term loans 7-3
Most important financial ratios for commercial loan departments 7-4
Commercial loan departments’ ratios appearing most frequently in loan agreements 7-5
Corporate controllers’ most significant ratios 7-6
Ratios most often appearing in corporate objectives and their primary measures 7-7
Review questions 7-8
Chapter 8 8-1
Forecasting Sustainable Growth 8-1
Definitions 8-2
Derivation of the sustainable growth model 8-3
The Alabama door company 8-4
Calculation of Alabama door growth rate 8-5
Improving sustainable growth 8-6
Sustainable growth: Available external equity 8-7
Chapter 9 9-1
Forecasting Bankruptcy 9-1
Altman’s bankruptcy prediction formula 9-2
Bankruptcy prediction example 9-4
Altman’s second model 9-6
Review questions 9-7
Appendix A A-1
Case Problem A-1
Marine Supply Company Balance Sheet A-4
Marine Supply Company Selected Income Figures A-5
Marine Supply Company Selected Financial Ratios A-6
Case Problem Requirements A-7
Glossary Glossary 1
Index Index 1
Solutions Solutions 1
Chapter 1 Solutions 1
Chapter 2 Solutions 4
Chapter 3 Solutions 8
Chapter 4 Solutions 12
Chapter 5 Solutions 20
Chapter 6 Solutions 22
Chapter 7 Solutions 26
Chapter 8 Solutions 27
Chapter 9 Solutions 28
