LIVE SESSION #2 WEDNESDAY MARCH 5TH 2014
FINANCIAL ANALYSIS MOOC WITH MARC BERTONECHE
INTRODUCTION
LIVE SESSION #2 WEDNESDAY MARCH 5TH 2014
FINANCIAL ANALYSIS MOOC WITH MARC BERTONECHE
AGENDA OF THE LIVE SESSION
LIVE SESSION #2 WEDNESDAY MARCH 5TH 2014
FINANCIAL ANALYSIS MOOC WITH MARC BERTONECHE
3 500 participants
Of which 64% are professionals and 36% are students
50% participation to the « Get to know you better » quiz
67 different nationalities represented mainly in France, United-States, North Africa and Asia:
CountriesEurope 26.1 %
United-States 14.2 %Tunisia 6.4 %China 6.0 %
Morocco 5.9 %India 4.2 %
A few statistics on the MOOC
Source: “Get to know you better” quiz
LIVE SESSION #2 WEDNESDAY MARCH 5TH 2014
FINANCIAL ANALYSIS MOOC WITH MARC BERTONECHE
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LIVE SESSION #2 WEDNESDAY MARCH 5TH 2014
FINANCIAL ANALYSIS MOOC WITH MARC BERTONECHE
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LIVE SESSION #2 WEDNESDAY MARCH 5TH 2014
FINANCIAL ANALYSIS MOOC WITH MARC BERTONECHE
LIVE SESSION #2 WEDNESDAY MARCH 5TH 2014
FINANCIAL ANALYSIS MOOC WITH MARC BERTONECHE
LIVE SESSION #2 WEDNESDAY MARCH 5TH 2014
FINANCIAL ANALYSIS MOOC WITH MARC BERTONECHE
GREMLIN CASE STUDY
LIVE SESSION #2 WEDNESDAY MARCH 5TH 2014
FINANCIAL ANALYSIS MOOC WITH MARC BERTONECHE
REMINDERS ON FIXED ASSETS
Definition Any kind of asset that can’t be easily converted into cash (in theory!!) Or better assets which are used on several operating cycles e.g. factories, office buildings, computer servers
The following questions should guide investment analysis:
What is the state of the company’s plant and equipment? What is the company’s capital expenditure policy? What are the cash flows generated by these investments?
LIVE SESSION #2 WEDNESDAY MARCH 5TH 2014
FINANCIAL ANALYSIS MOOC WITH MARC BERTONECHE
Fixed Asset Turnover Ratio
In thousands of Euros 1 996 1 997 1 998
Intangibles 0 0 193
Net plant and equipment 816 1 738 2 215
Net fixed assets 816 1 738 2 408
Inventories at manufacturing stage 539 2 009 4 283
Finished goods inventories 430 603 852
Total inventories 969 2 612 5 135
Accounts receivable 919 1 306 5 567
Other receivables 50 351 567
Short-term investments 1 000 2 000 -
Cash and equivalents 95 50 5
Total assets 3 849 8 057 13 682
AssetsIn thousands of Euros 1996 1997 1998Sales 7 545 9 995 17 738Cost of goods sold 3 247 4 480 9 637Gross Margin 4 298 5 515 8 101Distribution and marketing expenses 798 961 2 427Administrative expenses 1 627 2 319 2 913Operating Income 1 873 2 235 2 761Financial income 39 24 27Financial expenses 1 33 87Income before Exceptional Items 1 911 2 226 2 701Exceptional income - 74 -Income taxes 679 712 804Net Income 1 232 1 440 1 897Dividends 440 496 496Net Income Available to CommonStockholders
Income Statement
792 944 1 401
1996 1997 1998Sales 7 545 9 995 17 738Net fixed assets 816 1 738 2 408Fixed asset turnover ratio 9.25 5.75 7.37
Ratio Sales x 365
Net Fixed Assets
Source: GREMLIN case
LIVE SESSION #2 WEDNESDAY MARCH 5TH 2014
FINANCIAL ANALYSIS MOOC WITH MARC BERTONECHE
CAPEX to Depreciation Ratio
1996 1997 1998Capital expenditure 397 1 515 (1 628 – 113) 1 323Depreciation 207 519 653CAPEX to depreciation ratio 1.92 2.92 2.03
Ratio CAPEX
DepreciationGremlin Consolidated Cash Flow Statement
In thousands Euros 1996 1997 1998 Net Profit 1 232 1 440 1 897+ Depreciation 207 519 653
+/- Gains or losses on Fixed Asset disposals - 74 -= Internally Generated Funds (1) 1 439 2 033 2 550 Change in Inventories 672 1 643 2 523+ Change in Receivables 19 688 4 477- Change in Payables and other Accruals 679 689 1 906= Change in Net Working Capital (2) 12 1 642 5 094 Cash Flow from Operations (1)–(2) = (3) 1 427 391 -2 544+ Asset disposals 113 - Capital Investments 397 1 628 1 323= Cash Flow from Investing Activities (4) -397 -1 515 -1 323 Free Cash Flow before Financing Activities (3)+(4) 1 030 -1 124 -3 867+ Share issue - 1 975 49- Dividends 400 440 496= Decrease (Increase) of Net Financial Debt 630 411 -4 313 Net Financial debt beginning of the year -465 -1 095 -1 506 Net Financial Debt end of the year -1 095 -1 506 2 807
Source: GREMLIN case
LIVE SESSION #2 WEDNESDAY MARCH 5TH 2014
FINANCIAL ANALYSIS MOOC WITH MARC BERTONECHE
REMINDERS ON NET WORKING CAPITAL
The concept Difference between the cyclical needs and the cyclical resources e.g., when do I pay my suppliers ? When do I get paid by my clients ?
Characteristics of the Net Working Capital
Sensitive to the activity of the company Liquid and permanent Often seasonal Sensitive to the closing period Function of the company bargaining position vs its customers / suppliers
LIVE SESSION #2 WEDNESDAY MARCH 5TH 2014
FINANCIAL ANALYSIS MOOC WITH MARC BERTONECHE
Assets Liabilities 1996 1996
Intangible fixed assets 0 Capital 1 000Tangible fixed assets 816 Share premium 500Net fixed assets 816 Réserves 181Stocks of products being manufactured 539 Retained earnings 832
Stocks of finished goods 430 Total shareholders’ equity 2 513Total inventories 969 Accounts payable 557Accounts receivable 919 Other Payables 779
Other receivables 50 Bank debt due within one year -
Short-term investments 1 000 Long term debt -Cash and equivalents 95 Leasing -Total assets 3 849 Total debts 1 336 Total liabilities and equity 3 849
Inventories 969+ Accounts Receivable + 969 - Accounts Payable - 1 336= Net Working Capital 602
Net Working Capital Ratio
Source: GREMLIN case
LIVE SESSION #2 WEDNESDAY MARCH 5TH 2014
FINANCIAL ANALYSIS MOOC WITH MARC BERTONECHE
Assets Liabilities
1997 1998 1997 1998
Intangible fixed assets 0 193 Capital 1 200 1 202
Tangible fixed assets 1 738 2 215 Share premium 2 275 2 322
Net fixed assets 1 738 2 408 Réserves 1 573 2 815
Stocks of products being manufactured 2 009 4 283 Retained earnings 440 600
Stocks of finished goods 603 852 Total shareholders’ equity 5 488 6 939
Total inventories 2 612 5 135 Accounts payable 603 2 327
Accounts receivable 1 306 5 567 Other Payables 1 422 1 604
Other receivables 351 567 Bank debt due within one year 44 2 247
Short-term investments 2 000 - Long term debt 500 500
Cash and equivalents 50 5 Leasing - 65
Total assets 8 057 13 682 Total debts 2 569 6 743
Total liabilities and equity 8 057 13 682
1997 1998Inventories 2 612 5 135+ Accounts Receivable 1 657 6 134 - Accounts Payable - 2 025 - 3 931= Net Working Capital 2 244 7 338
Net Working Capital Ratios
Source: GREMLIN case
LIVE SESSION #2 WEDNESDAY MARCH 5TH 2014
FINANCIAL ANALYSIS MOOC WITH MARC BERTONECHE
Working Capital Turnover Ratio
1996 1997 1998 Net working capital 602 2 244 7 338 Sales 7 545 9 995 17 738 Working capital turnover ratio 29 days 82 days 151 days
RatioNet Working capital x 365
Sales
Source: GREMLIN case
LIVE SESSION #2 WEDNESDAY MARCH 5TH 2014
FINANCIAL ANALYSIS MOOC WITH MARC BERTONECHE
RatioAccounts receivable x 365
Sales
Days of Sales Outstanding (DSO)
1996 1997 1998Account Receivables 919 1 306 5 567Sales 7 545 9 995 17 738DSO 45 days 48 days 115 days
Source: GREMLIN case
LIVE SESSION #2 WEDNESDAY MARCH 5TH 2014
FINANCIAL ANALYSIS MOOC WITH MARC BERTONECHE
Accounts payable x 365Annual purchases (or cost of sales)
Ratio
Days’ payables outstanding (DPO)
1996 1997 1998Payables 1 336 2 025 3 931Cost of sales 3 247 4 480 9 637DPO 150 days 165 days 140 days
Source: GREMLIN case
LIVE SESSION #2 WEDNESDAY MARCH 5TH 2014
FINANCIAL ANALYSIS MOOC WITH MARC BERTONECHE
Total Inventory x 365Annual cost of salesDSI =
Days of Sales in Inventory (DSI)
1996 1997 1998
Total inventories 969 2 612 5 135
Cost of sales 3 247 4 480 9 637
DSI 109 days 213 days 194 days
Source: GREMLIN case
LIVE SESSION #2 WEDNESDAY MARCH 5TH 2014
FINANCIAL ANALYSIS MOOC WITH MARC BERTONECHE
(In thousand of Euros) 1996 1997 1998Semi-finished products or WIP 539 2 009 4 283Finished goods 430 603 852Total Inventory 969 2 612 5 135
Focus on the evolution of the inventory
Source: GREMLIN case
LIVE SESSION #2 WEDNESDAY MARCH 5TH 2014
FINANCIAL ANALYSIS MOOC WITH MARC BERTONECHE
Recap of the ratios
1996 1997 1998
Working capitalX 365 days 29 days 82 days 151 days
Sales Receivables
X 365 days 45 days 48 days 115 days Sales Payables
X 365 days 150 days 165 days 140 days
Cost of sales
Inventory
X 365 days 109 days 213 days 194 days
Cost of sales
Source: GREMLIN case
DSO
DSI
DPO
NWCTurnover
LIVE SESSION #2 WEDNESDAY MARCH 5TH 2014
FINANCIAL ANALYSIS MOOC WITH MARC BERTONECHE
QUESTIONS ABOUT GREMLIN CASE
LIVE SESSION #2 WEDNESDAY MARCH 5TH 2014
FINANCIAL ANALYSIS MOOC WITH MARC BERTONECHE
Week 1 and Week 2Quiz Review
LIVE SESSION #2 WEDNESDAY MARCH 5TH 2014
FINANCIAL ANALYSIS MOOC WITH MARC BERTONECHE
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