Introduction ......................................................................................................................... 1
Introduction ......................................................................................................................... 1
Balanced Score Card ........................................................................................................... 2
Assets .............................................................................................................................. 2
Liabilities ........................................................................................................................ 2
Financial Measures ............................................................................................................. 3
ROI.................................................................................................................................. 3
ROA ................................................................................................................................ 3
ROS ................................................................................................................................. 3
RI..................................................................................................................................... 4
WACC............................................................................................................................. 4
EVA ................................................................................................................................ 5
Levers of Financial Performance ........................................................................................ 6
ROE................................................................................................................................. 6
Profit margin ................................................................................................................... 7
Debt-to-asset ratio ........................................................................................................... 8
Debt-to-equity ratio ......................................................................................................... 8
Current ratio .................................................................................................................... 9
Acid test / Quick ratio ..................................................................................................... 9
P/E ................................................................................................................................... 9
Comparison with competitors ........................................................................................... 10
WACC........................................................................................................................... 10
EVA .............................................................................................................................. 10
Comments and Conclusion ............................................................................................... 11
Sources: ............................................................................................................................. 12
Attachment: Fiskars 2004 Income statement and Balance sheet ...................................... 13
Cost Management
Assingment 2
Kristian Ojanperä
BBA-04
Introduction
1
Cost Management
Assingment 2
Kristian Ojanperä
BBA-04
Balanced Score Card
Assets
Liabilities
2
Cost Management
Assingment 2
Kristian Ojanperä
BBA-04
Financial Measures
All calculations in million euros
ROI
Return on investment
Operating profit
Total assets
39
 100 = 6.1 %
635
ROA
A measure of the productivity of assets, defined as Net income divided by total assets. A
superior but less common definition includes interest expense and preferred dividends in
the numerator.
Earnings before taxes
Total assets
56,7
 100 = 8,9 %
635
ROS
A ratio widely used to evaluate a company's operational efficiency. ROS is also known as
a firm's "operating profit margin".
Operating profit
Re venues
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Cost Management
39
621,5 ( 597  3,6  20,9)
Assingment 2
Kristian Ojanperä
BBA-04
= 6,3 %
RI
Residual income. An accounting measure of income minus an euro amount for required
return on an accounting measure of investment
Using 10%
Net income( EBT )  10%  Investment
56,7  0,1  192,2  4,3
56,7  (0,1  196,5)
56,7  19,65
= 37,05 mEur
WACC
Weighted-average cost of capital. A calculation of a firm's cost of capital in which each
category of capital is proportionately weighted.
Using 5 % and 10 %
5% market value of debt  10% market value of equity
market value of debt (liabilitie s)  market value of equity ( shareholde r ' s equity )
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Cost Management
Assingment 2
Kristian Ojanperä
BBA-04
0,05  263,7   0,1  318,8
263,7  318,8
13,185  31,88
582,5
45,065
582,5
= 7,7 %
EVA
Economic Value Added. A measure of a company's financial performance based on the
residual wealth calculated by deducting cost of capital from its operating profit.
Net profit  WACC  Total assets  Current liabilitie s 
44,9  0,077  635  165,5
44,9  (0,077  469,5)
44,9  36,1515
= 8,8 mEur
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Cost Management
Assingment 2
Kristian Ojanperä
BBA-04
Levers of Financial Performance
All calculations in million euros, except P/E ratio which
ROE
Return on Equity. A measure of productivity or efficiency with which shareholder’s
equity is employed, defined as income divided by equity.
Net Income
Shareholde r ' s Equity
=
Net Income Sales
Assets


Sales
Assets Shareholde r ' s Equity
44,9
= 14 %
318,8
How could the company improve it’s ROE to 20%?
Net Income
Shareholde r ' s Equity
=
=
=
All Income(revenues)  All Costs
Shareholde r ' s Equity
597  3,6  20,9  420,3  64,5  60,6  12,6  3,5  3,3  11,8
318,8
621,5  576,6
318,8
Using this formula there is 3 ways to increase the ROE to 20 percent; increasing income,
decreasing costs or decreasing Shareholders equity (or a combination of any of these).
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Cost Management
Assingment 2
Kristian Ojanperä
BBA-04
1. Increase income; can be done by increasing sales or by earning more from shares
in associated companies
X  576,6
 20%  X  (0,2  318,8)  576,6 
318,8
X = 640,36
By increasing income by 18,86 mEuro (~ 3%) to 640,36 the ROE would be 20%
2.
Decreasing costs; could be done by cutting costs like cost of goods sold, sales
and marketing expenses or administration expenses
621,5  X
 20%  X  621,5  (0,2 * 318,8) 
318,8
X = 557,74
By cutting the cost by 18,86 mEuro (~ 3,3%) to 557,74 the ROE would be 20%
3. Decreasing Shareholder’s Equity;
621,5  576,6
44,9
X 

X
20%
X = 224,5
By a decrease in Shareholder’s Equity by 94,3 mEuro (~ 30%) to 224,5 the ROE would
be 20%
Profit margin
A ratio of profitability calculated as net income divided by revenues, or net profits
divided by sales. It measures how much out of every euro of sales a company actually
keeps in earnings.
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Cost Management
Assingment 2
Kristian Ojanperä
BBA-04
Profit margin is very useful when comparing companies in similar industries. A higher
profit margin indicates a more profitable company that has better control over its costs
compared to its competitors.
Net Income
Re venues
44,9
(597  3,6  20,9)
= 7,2 %
Debt-to-asset ratio
Total Liabilitie s
Total Assets
263,7
635
= 41,5 %
Debt-to-equity ratio
A measure of a company's financial leverage calculated by dividing long-term debt
by stockholder equity. It indicates what proportion of equity and debt the company is
using to finance its assets.
Total Liabilitie s
Shareholde r ' s Equity
263,7
318,8
= 82,7 %
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Cost Management
Assingment 2
Kristian Ojanperä
BBA-04
Current ratio
A liquidity ratio that measures a company's ability to pay short-term obligations.
Current Assets
Current Liabilitie s
263,5
165,5
= 1,59.. -> 160 %
Acid test / Quick ratio
A stringent test that indicates whether a firm has enough short-term assets to cover its
immediate liabilities without selling inventory. The acid-test ratio is far more strenuous
than the working capital ratio, primarily because the working capital ratio allows for the
inclusion of inventory assets.
Current Assets  Inventory
Current Liabilitie s
263,5  110,9
165,5
= 92,2 %
P/E
A valuation ratio of a company's current share price compared to its per-share earnings.
Pr ice per share
Earnings per share
7,9
0,58
= 13,6
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Cost Management
Assingment 2
Kristian Ojanperä
BBA-04
Comparison with competitors
Fiskars two biggest competitors are:
Acme United Corporation and Newell Rubbermaid INC
WACC
5% market value of debt  10% market value of equity
market value of debt (liabilitie s)  market value of equity ( shareholde r ' s equity )
EVA
Net profit  WACC  Total assets  Current liabilitie s 
Acme United Corporation
WACC =
(0,05  7,1)  (0,1  11)
7,1  11
= 18,6 %
EVA =
2,6  0,186  (18  5,5)
= 0,275 mEur
Newell Rubbermaid Inc
WACC =
(0,05  3804)  (0,1  1301)
3804  1301
= 6,3 %
EVA=
 92  0,063  (5280  1482)
= -331,3
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Cost Management
Assingment 2
Kristian Ojanperä
BBA-04
Comments and Conclusion
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Cost Management
Assingment 2
Kristian Ojanperä
BBA-04
Sources:
Fiskars Annual report 2004
Acme United Corporation Annual report 2004
Newell Rubbermaid Inc Annual report 2004
Investopedia.com
Slides by Veronica Fellman
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Cost Management
Assingment 2
Kristian Ojanperä
BBA-04
Attachment: Fiskars 2004 Income statement and
Balance sheet
13