Financial analysis. Coefficient analysis
“Don't even bother reading this section without your company reports and a calculator”
Paul McCoen and Leo Goh, finance for non-financial managers
Ratio analysis is aimed at reflecting the picture of the company's financial condition using certain standard ratios. This section of standard business plan analysis is called financial or “ratio” analysis.
However, before you perform the calculation, you need to set up a table of normative values.
In performing the coefficient analysis, structured (for example, liquidity) data of the balance sheet and profit report are used. Below is the structure of the balance in Budget-Plan Express:
Budget-Plan Express is a software product for preparing business plans and presentations in Word and Excel format - for small businesses and studies (students, MBI students, etc.) More ...
Balance sheet structure
ASSETS:
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CURRENT ASSETS = Cash and cash equivalents + Prepaid expenses + Receivables + Inventories
LONG-TERM ASSETS + Fixed assets + Goodwill + Intangible assets + Investments in associates + Other assets
TOTAL ASSETS = CURRENT ASSETS + LONG-TERM ASSETS
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CURRENT LIABILITIES = Short-term loans + Accounts payable + Taxes payable + Reserves + Other current liabilities
LONG-TERM LIABILITIES = Long-term loans + Deferred taxes + Other liabilities
CAPITAL = Authorized capital + Reserve capital + Additional capital + Accumulated profit (loss)
Minority interest - minority interest indicated
TOTAL CAPITAL AND LIABILITIES = CURRENT LIABILITIES + LONG-TERM COMMITMENTS + CAPITAL
For detailed information about the settings, see «General settings. Financial analysis».
Analysis based on financial ratios (coefficient analysis) allows you to examine the financial condition, performance and investment potential of the organization, and includes the following groups of indicators:
Liquidity indicators (Liquidity Ratios):Absolute liquidity ratio (Cash ratio);
Coefficient of urgent liquidity (QR);
Coefficient of current liquidity (CR);
Net working capital (NWC).
Debt Management Indicators (Debt ratios):
The coefficient of financial leverage (TD / EQ), sometimes (Leveraged);
Coefficient of interest coverage (TIE);
Ratio of debt to EBITDA.
Profitability indicators (Profitability ratios):
Profitability of sales (ROS),%;
Return on equity (ROE),%;
Return on assets (ROA),%;
Profitability of invested capital (ROIC),%.
Efficiency indicators (Asset management ratios):
Inventory turnover (IT), days;
Turnover of receivables (RT), days;
Turnover of accounts payable (PT), days;
Asset Turnover (AT), times.
Indicators of market activity (Market value ratios):
Earnings per share (EPS);
Earnings per share (EPS);
The ratio of the value of the stock to the profit (P / E).
DuPont factor model
DuPont's analysis breaks down ROE into its constituent components to determine which of these factors are most responsible for the change in ROE. For more details, see the help section "DuPont model"
See also - calculations of investment performance indicators in Budget-Plan Express:
- payback period - РВ, months;
- discounted payback period - DPB, months;
- net discounted income - NPV;
- profitability index - PI;
- internal rate of return - IRR, %;
- average rate of return - ARR, %;
- modified internal rate of return - MIRR, %;
- other indicators based on the data calculated in the program.
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