Financial Analysis and Reporting
FINANCIAL ANALYSIS & REPORTING
Accounting, Law, Finance & Economics Department
EDHEC M1FE
ANNÉE SCOLAIRE / ACADEMIC YEAR 2012-2013
Intervenant/Lecturer: Amandine GERARD
1
Financial Analysis & Reporting Part II : Ratio analysis and valuation methods following
2
Course Outline
I.
1. 2.
Ratios analysis
Profitability analysis Risk analysis
II.
1. 2.
Peers Valuation Method
Firm value multiples Equity multiples
III.
1. 2.
Value creation method
Value based management Measuring value creation : EVA, MVA, CFROI, TSR
3
Ratios analysis Profitability : ROA & ROE
4
Profitability analysis
This lesson will deal with some of the most widely used analytical tools for analyzing the financial performance of a company. These tools are essentially used for assessing profitability and risk. •
Profitability analysis deals with the relative performance of profits to some other measure. Investors are not only interested in aggregate profits but are also interested in profitability measures. They need to use these measures to evaluate the performance of the companies in which they may have a stake. This is more relevant in the case of institutional investors such as mutual funds, banks, etc. From the point of view of institutional investors, two of the most important tools are Return on Assets and Return on Common Equity. These ratios are essentially two variants of the most popular category of ratios, called the Return on Investment or ROI. These ratios help the analyst to evaluate the performance of the individual company on a comparable basis. The institutional investor is interested in getting the optimum returns on his investment. He is not concerned about the size, product line, etc. of companies, but uses them as indicators towards return and risk. Thus, these ratios have their own utility.
•
5
Profitability analysis : ROA (Return on assets)
The return on assets (ROA), or return of investment (ROI), which is
Accounting, Law, Finance & Economics Department
EDHEC M1FE
ANNÉE SCOLAIRE / ACADEMIC YEAR 2012-2013
Intervenant/Lecturer: Amandine GERARD
1
Financial Analysis & Reporting Part II : Ratio analysis and valuation methods following
2
Course Outline
I.
1. 2.
Ratios analysis
Profitability analysis Risk analysis
II.
1. 2.
Peers Valuation Method
Firm value multiples Equity multiples
III.
1. 2.
Value creation method
Value based management Measuring value creation : EVA, MVA, CFROI, TSR
3
Ratios analysis Profitability : ROA & ROE
4
Profitability analysis
This lesson will deal with some of the most widely used analytical tools for analyzing the financial performance of a company. These tools are essentially used for assessing profitability and risk. •
Profitability analysis deals with the relative performance of profits to some other measure. Investors are not only interested in aggregate profits but are also interested in profitability measures. They need to use these measures to evaluate the performance of the companies in which they may have a stake. This is more relevant in the case of institutional investors such as mutual funds, banks, etc. From the point of view of institutional investors, two of the most important tools are Return on Assets and Return on Common Equity. These ratios are essentially two variants of the most popular category of ratios, called the Return on Investment or ROI. These ratios help the analyst to evaluate the performance of the individual company on a comparable basis. The institutional investor is interested in getting the optimum returns on his investment. He is not concerned about the size, product line, etc. of companies, but uses them as indicators towards return and risk. Thus, these ratios have their own utility.
•
5
Profitability analysis : ROA (Return on assets)
The return on assets (ROA), or return of investment (ROI), which is