Advanced Financial Statement Analysis
We want to know the value of a company in the future, making rational assumptions about
competitors and industry. B2B is recommended. Check 1st and 2nd quarters of ’24 and
compare with same quarters in ’23. Valuation:
DCF
Profit
Cash Flows
We want to value Equity, stock evaluation.
If we deal with e.g. CocaCola we have to check past revenues, management discussion and
analysis (what the company is expecting from the future, CEO assumptions for professional
investors). The company has different lines of product, more revenues (carbonated, snacks,
soft drinks) projections need to take into account different level of complexity.
Account payable turnover it’s a way to finance the company for free.
Operating Cash Flow to Total Liabilities is the capacity to generate cash flow according to the
current liability level, is the core cash of the company.
Equity Asset – Liabilities, two sources:
1) Contribution from Shareholders;
2) Previous non-distributed profit;
The higher the Equity, the less dependency for Debt with Banks and Financial Institutions.
Starbucks is not investing into other businesses so Interests are very low (interest income).
Interest expense is telling us about the leverage and the dependence with other source of
financing.
Net income attributable to non-controlling interest is related to subsidiaries of consolidation
compared to the parent company. Check always the consolidated data.
Annual report, 10k and quarterly.
Edgar SEC, company filings
Notes report revenues by segment and by geographical area or segments.
Compound Growth Rate is comparing how much is the growth.
Cash can be explained through different components:

Operating Cash Flows, we expect positive and growing trends, first signal to check. Life
cycle of the firm is relevant since a young enterprise can struggle compared to one well
established;

Investing: acquisition of PPE, CAPEX after depreciation (that’s why is net).
Controlling other companies. A growing company normally has negative numbers here
because is bloody needing to be financed to grow;

Financing: we can have positive and negative numbers as well, growing activities
required loans or issuing equity to finance itself. Pay back debts is displayed here.
Treasury stocks (buy back own share, very similar to divided, reducing the pieces of
the company’s stock in the market). To know the weight of Dividends is:
dividend/net income (or profit) pay out ratio;
Starting from cash flow from operation, we asked ourselves, what we do with that? So we
check the Investing and for the leftover we check the cash flow from financing. Here we can
summarize the strategy of the company.