Side by Side Common Sizing Analysis – Part 3

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Del curso dictado por Emory University

Finance for Non-Financial Managers

64 calificaciones

Emory University

Finance for Non-Financial Managers

64 calificaciones

Finance is for “Non-financial Managers” who want to understand key financial principles and apply them in a real-world context. Over the course of the program window, you will work your way through a series of nine modules that move from understanding basic financial principles to applying financial analysis and ratios to drive decisions. In addition, each module is capped with an ending self-evaluation to ensure that you have absorbed the following key learning objectives: + Understand the language associated with finance + Know how and when to use financial terms and analysis techniques + Read and assess company performance using financial statements + Recognize the link between organizational strategy and financial objectives + Use "the numbers" to your best advantage to make more informed decisions

De la lección

Financial Statement Manipulation

This module will teach the "How-to"s for common sizing and other techniques for the manipulation of financial documents.

Side by Side Common Sizing Analysis – Part 16:49

Side by Side Common Sizing Analysis – Part 24:43

Side by Side Common Sizing Analysis – Part 35:04

Side by Side Common Sizing Analysis – Part 412:37

Conoce a los instructores

Thomas Smith
Assistant Professor in the Practice of Finance
Goizueta Business School

So this is the sheet after all the calculations have been completed.

So just to double check,

100% of your revenue should be 100% of your revenue, should make sense.

So let's look at from 2008 through 2011 here.

So my cogs are about 79%, almost 80% in 2008,

80.81% in 2009, 80.88% in 2010.

And again about 80% in 2011.

What does this mean?

In terms of its costs, its costs are increasing, right,

from 48 billion to 49 billion.

They decrease in 2010, but they go back up in 2011.

But they're staying relatively consistent with respect

to the percentage of your total sales, they're relatively flat.

So my costs are increasing or

decreasing at pretty much the same percentage that my revenue is increasing.

It's not necessarily a good thing or a bad thing, but it's good to notice.

Here, look at my SG&A, right.

So my SG&A has gone from 12.33% all the way down to 11.8%.

So my SG&A expenses they're decreasing, and

they're decreasing as a percentage of my total sales.

What does this provide me?

This provides me an opportunity to increase my net margins.

Like I drive down one portion of my expenses,

which should drive up my net margins.

Ceteris paribus, all other things being held constant.

So we look at that, my EBITDA has gone from 6% up to 7%.

Given the fact that that EBITDA is only capturing operational efficiency,

if I can drive the relative expenses of SG&A down,

this should drive my EBITDA up in terms of percentages.

And in fact, that's what we see.

My EBITDA percentage is 6.76 in 2008 and it gets driven

all the way back up to 7.16 in 2011.

So operationally, Dell is doing a better job.

That is, they are trying to find areas where they can eliminate expenses and

they're eliminating, they may take on more expenses but

they're driving them down as a share of total sales.

So here, when our operational expenses go down, our EBITDA is going to go up.

And so we can look at a couple other elements here, EBIT.

EBIT has fallen, which means that our interest expenses have probably increased.

And in fact we look at our interest income and interest expenses, and

in fact they have.

When I look at my net income margin, it's gone from 4.8 down to 4,

down to 2.71, back up to 4.28.

So in 2008, $100 worth of sales would generate $4.82 of net profit.

But by 2010, my $100 in sales only generates $2.71 in net profit.

It's not the right direction.

By 2011, it has gone back up to 4.28.

So we can see trends.

We can see where an organization is changing their cost, their cost structure.

Even if your costs go up, if your costs go up at a slower rate than your sales,

the percentage of your costs, those margins, are going to be driven down.

What does this mean?

Does this mean a good thing or a bad thing for your organization?

See if you can't download the income statement for

your group, or a company in your industry.

And then perform a common sized income statement like this.

And then identify the trends in the different margins.

What's the trend in your EBITDA?

What's the trend in your expenses?

What's the trend in your net?

Did it go up, did it go down?

What was contributing to those changes?

Was it a change in operations, taxes,

interest expenses, depreciation?

Understanding the direction of your net income and

understanding what's contributing to that net income will help

you understand how your organization is operating.

And the areas within your organization that you might need to concentrate on, if

you are trying to achieve a certain level of outcome with respect to your profits.

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