WALL ST
TRAINING
Providing financial training to Wall Street
www.wallst-training.com
®
Accounting and Financial Statements Integration
Notes and Instructions
Instructions:
– Fill in first page of data (selected IS, BS and CF items) from financial statements attached
– Enter in the ending balance of the latest available period
– Round financial information to nearest millions
– Write in correct formulas of ratios underneath the ratio's name on 2nd and 3rd pages
– Calculate ratios using formulas and the data extracted on page 1
– Round ratios to 1 decimal
Notes:
Inputs (page 1)
– Total Net Revenue: Sales and Revenue are generally interchangeable and synonymous. However, in certain
industries, such as the retail sector, Sales is a portion of Revenue; therefore, use Total Revenue instead of Sales
– Gross Profit: Calculate as Revenue less COGS
– Gross Interest Expense: include capital lease interest to reflect full interest liability
– Total Debt: include items such as: Commercial Paper, Short-term borrowings, Long-term debt within one year,
Current portion long-term debt, Long-term debt, Minority interest
Exclude capital leases in debt balance
– Equity: use book value of equity – "Total Shareholders' Equity"
– D&A: Obtain depreciation & amortization from Cash Flow Statement !!
– CapEx: Capital expenditures, payments / expenditures / additions for property and equipment
Ratios (page 2–3)
– Anytime a ratio mixes Income Statement and Balance Sheet items, use average balance for Balance Sheet
accounts! However, for purposes of this illustrative analysis, use ending balances from Inputs – Page 1
– Margin Ratios: Sales and Revenue are generally interchangeable and synonymous. However, in certain
industries, such as the retail sector, Sales is a portion of Revenue; therefore, use Total Revenue instead of Sales
WALL ST
TRAINING
Providing financial training to Wall Street
www.wallst-training.com
®
Accounting and Financial Statements Integration
($ in millions)
WMT
INCOME STATEMENT
Total Net Revenue
COGS
Gross Profit (Revenue – COGS)
EBIT (Operating Income)
EBITDA (EBIT + D&A from below)
Interest Expense (Gross if available)
Net Income (Continuing Operations)
BALANCE SHEET
Cash
A/R
Inventory
Current Assets
Total Assets
A/P
Current Liabilities
Total Debt
Equity
CASH FLOW STATEMENT
D&A
CapEx
Fiscal Year 2005 (ending Jan 2006)
TGT
COST
WALL ST
TRAINING
Providing financial training to Wall Street
www.wallst-training.com
®
Accounting and Financial Statements Integration
($ in millions)
WMT
LIQUIDITY RATIOS
Current Ratio
Current Assets / Current Liabilities
Days Inventory Outstanding
Inventory * 365 / COGS
Days Receivable Outstanding
A/R * 365 / Sales
Days Payable Outstanding (use COGS)
A/P * 365 / COGS
Cash Conversion Cycle
Inventory + A/R - A/P Days Outstanding
Recommendation
PROFITABILITY RATIOS (%age format)
Gross Profit Margin
Gross Profit / Sales
EBITDA Margin
EBITDA / Sales
EBIT Margin
EBIT / Sales
Profit Margin
Net Income / Sales
Recommendation
Fiscal Year 2005 (ending Jan 2006)
TGT
COST
WALL ST
TRAINING
Providing financial training to Wall Street
www.wallst-training.com
®
Accounting and Financial Statements Integration
($ in millions)
WMT
ASSET MANAGEMENT RATIOS
Asset Turnover
Sales / Assets
ROE (%age)
Net Income / Equity
ROA (%age)
Net Income / Assets
ROC (%age)
Net Income / (Equity + Debt)
Recommendation
CREDIT RATIOS
EBITDA Coverage
EBITDA / Interest Expense
Times Interest Earned (TIE)
EBIT / Interest Expense
Debt / EBITDA
Net Debt / EBITDA
Debt / Assets (%age)
Debt / Equity (%age)
Debt / Total Capitalization (%age)
Debt / (Equity + Debt)
Analysis
Fiscal Year 2005 (ending Jan 2006)
TGT
COST