chapter 08, financial statment analysis
DESCRIPTION
Pengembalian atas Investasi Modal dan Analisis ProfitabilitasTRANSCRIPT
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Copyright 2009 by The McGraw-Hill Companies, Inc. All rights resere!.McGraw-Hill"Irwin
Financial
Statement
Analysis
K R Subramanyam
John J Wild
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8CHAPTER
Return on Invested Capital and
Profitability Analysis
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Return on Invested Capital
Joint analysis is where one measure is
assessed relative to another
Return on invested capital (ROIC) orReturn on Investment (ROI) is an important
joint analysis
Joint analysis is where one measure is
assessed relative to another
Return on invested capital (ROIC) orReturn on Investment (ROI) is an important
joint analysis
Importance of Joint Analysis
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Return on Invested Capital
ROI Relation
ROI relates income, or other performance measure,
to a companys level and source of financin
ROI allows comparisons with alternative investmentopportunities
Ris!ier investments e"pected to yield a hiher ROI
ROI impacts a companys a#ility
to succeed, attract financin,
repay creditors,and reward owners
ROI relates income, or other performance measure,
to a companys level and source of financin
ROI allows comparisons with alternative investmentopportunities
Ris!ier investments e"pected to yield a hiher ROI
ROI impacts a companys a#ility
to succeed, attract financin,
repay creditors,and reward owners
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Return on Invested Capital
Application of ROI
($)measurin
profita#ility
(%)&easure for
plannin and
control
(')measurin
manaerial
effectiveness
($)measurin
rofita#ility
(%)measure for
plannin and
control
ROI is applica#le to
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Return on Invested Capital
&easurin &anaerial *ffectiveness
&anaement isresponsi#le for allcompany activities
ROI is a measure of manaerialeffectiveness in #usiness activities
ROI depends on the s!ill, resourcefulness,
inenuity, and motivation of manaement
&anaement isresponsi#le for allcompany activities
ROI is a measure of manaerialeffectiveness in #usiness activities
ROI depends on the s!ill, resourcefulness,
inenuity, and motivation of manaement
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Return on Invested Capital
&easurin rofita#ility
ROI is an indicator of companyprofita#ility
ROI relates !ey summary
measures profits with financin
ROI conveys return on invested
capital from different financin perspectives
ROI is an indicator of companyprofita#ility
ROI relates !ey summarymeasures profits with financin
ROI conveys return on invested
capital from different financin perspectives
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Return on Invested Capital
&easurin for lannin and Control
ROI assists manaers with
lannin+udetin
Coordinatin activities*valuatin opportunities
Control
ROI assists manaers with
lannin+udetin
Coordinatin activities*valuatin opportunities
Control
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Components of ROI
Return on invested #apital is defined as$
Income
Invested Capital
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Components of ROI
Invested Capital efined
- .o universal measure
of invested capital
- ifferent measures of
invested capital reflect
user/s differentperspectives
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Components of ROI
Alternative &easures of Invested Capital
Common &easures
- .et Operatin Assets
- Stoc!holders/ *0uity
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Components of ROI
erspective is that of the companyas a whole
Called etu n on net ope atingassets (RNOA)
R.OA
measures operatin efficiency1performance reflects return on net operatin
assets (e"cludin financialassets1lia#ilities)
erspective is that of the companyas a whole
Called etu n on net ope atingassets (RNOA)
R.OAmeasures operatin efficiency1
performance reflects return on net operatin
assets (e"cludin financialassets1lia#ilities)
.et Operatin Assets
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Components of ROI
Common *0uity Capital
- erspective is that of common
e0uity holders- Captures the effect of leverae(de#t) capital on e0uity holderreturn
- *"cludes all de#t financin andpreferred e0uity
- erspective is that of commone0uity holders
- Captures the effect of leverae(de#t) capital on e0uity holderreturn
- *"cludes all de#t financin and
preferred e0uity
net in#ome less preferred dividends
avera'e #ommon e(uity
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Components of ROI
Computin Invested Capital
- 2sually computed usin ave agecapital availa#le for the period- 3ypically add #einnin andendin invested capital amountsand divide #y $
- &ore accurate computation is to
averae interim amounts4 0uarterly or monthly
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Components of ROI
Ad5ustments to Invested Capital and Income .um#ers
&any accountin num#ers re0uire
analytical ad5ustment4see prior chapters
Some num#ers not reported in financial
statements need to #e included
Such ad5ustments are necessary for
effective analysis of return on invested
capital
&any accountin num#ers re0uire
analytical ad5ustment4see prior chapters
Some num#ers not reported in financial
statements need to #e included
Such ad5ustments are necessary for
effective analysis of return on investedcapital
8 %
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8-%
Components of ROI
Return on .et Operatin Assets 66 R.OA
.OA3
(+einnin .OA 7 *ndin .OA) 1 $
.OA3
(+einnin .OA 7 *ndin .OA) 1 $
8here
.OA3 9 Operatin income " ('6 ta" rate)
.OA 9 net operatin assets
8 %!
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Components of ROI
+A:A.C* S;**3
)peratin' assets ********************* )A+ess operatin' liabilities ******** ,)+
.et operatin' assets**************
.)A
/inan#ial liabilities ****************** /++ess finan#ial assets ************* ,/A
.et finan#ial obli'ations********* ./)
0to#1olders e(uity**************** 0
.et finan#in' **************** ./) 0
Operatin and nonoperatin activities 6 istinction
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Components of ROI
Return on Common *0uity 66 ROC*
.et income 6 referred dividends
(+einnin e0uity 7 *ndin e0uity) 1 $
.et income 6 referred dividends
(+einnin e0uity 7 *ndin e0uity) 1 $
8here
*0uity is stoc!holder/s e0uity less preferred
stoc!
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Analy6in' Return on Assets-R)A
isareatin R.OA
Return on operatin assets 9
Operatin rofit marin " Operatin Asset turnover
NOAAvg.
Sales
Sales
NOPAT
NOAAvg.
NOPAT=
Operatin rofit marin measures operatin' profitability
relative to sales
Operatin Asset turnover (utili
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ffe#t of )peratin' +evera'e on R.)A
OA 9 operatin assets
O::*= 9 operatin lia#ilities leverae ratio
(operatin lia#ilities 1 .OA)
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8 2%
Profit 7ar'in and Asset urnover
rofit marin and asset turnover are
interdependent
9 Profit mar'in is a fun#tion of sales and operatin'
e:penses ,sellin' pri#e : units sold
9 urnover is also a fun#tion of sales
,sales;assets
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Profit 7ar'in and Asset urnover
Relation #etween .OA3 &arin, .OA 3urnover, and
Return on .et Operatin Assets
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Profit 7ar'in and Asset urnover
.et operatin' Asset urnover v;s
.et operatin' Profit 7ar'in for 0ele#ted Industries
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Analy6in' Return on Assets-R)A
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Analy6in' Return on Assets-R)A
isareatin rofit &arin
)peratin' profit mar'in ,)P7 < .)PA0ales
Preta: P7 < Preta: sales P7 Preta: oter P7
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Analy6in' Return on Assets-R)A
=ross Profit 7ar'in$ Refle#ts te 'ross profit as
a per#ent of sales9 Refle#ts #ompanys ability to in#rease or maintainsellin' pri#e
9 >e#linin' mar'ins may indi#ate tat #ompetition asin#reased or tat te #ompanys produ#ts ave
be#ome less #ompetitive? or bot
0ellin' :penses
=eneral and Administrative :penses
isareatin rofit &arin
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Analy6in' Return on Assets-R)A
isareation of Asset 3urnover
Asset turnover measures theintensity with which companies utili
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Analy6in' Return on Assets-R)A
Accounts Receiva#le turnover$ Refle#ts o@ manytimes re#eivables are #olle#ted on avera'e*
9 A##ompanyin' ratio$ Avera'e #olle#tion period Inventories turnover$ Refle#ts o@ many times
inventories are #olle#ted on avera'e9 A##ompanyin' ratio$ Avera'e inventory days outstandin'
:on6term Operatin Asset turnover$ Refle#ts te
produ#tivity of lon'-term operatin' assets Accounts aya#le turnover$ Refle#ts o@ (ui#1ly
a##ounts payable are paid? on avera'e9 A##ompanyin' ratio$ Avera'e payable days outstandin'
isareation of Asset 3urnover
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Analy6in' Return on Assets-R)A
isareation of Asset 3urnover
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Analy6in' Return on Common (uity-R)C
where ROC* is e0ual to net income availa#le to common shareholders
(afte preferred dividends) divided #y the #einnin6of6period common
e0uity
3his can #e restated in terms of futu eROC*
Role in *0uity =aluation
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Analy6in' Return on Common (uity-R)C
isareatin ROC*
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Analy6in' Return on Common (uity-R)C
:everaerefers to te e:tent of invested #apitalfrom oter tan #ommon sareolders
If suppliers of #apital ,oter tan #ommonsareolders re#eive less tan R)A? ten
#ommon sareolders benefit te reverseo##urs @en suppliers of #apital re#eive more
tan R)A e lar'er te differen#e in returns bet@een
#ommon e(uity and oter #apital suppliers? te
more su##essful ,or unsu##essful is te tradin'
on te e(uity
:everaerefers to te e:tent of invested #apitalfrom oter tan #ommon sareolders
If suppliers of #apital ,oter tan #ommonsareolders re#eive less tan R)A? ten
#ommon sareolders benefit te reverseo##urs @en suppliers of #apital re#eive moretan R)A
e lar'er te differen#e in returns bet@een
#ommon e(uity and oter #apital suppliers? te
more su##essful ,or unsu##essful is te tradin'
on te e(uity
:everae and ROC*
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Analy6in' Return on Common (uity-R)C
Alternate =iew of ROC* isareation
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Analy6in' Return on Common (uity-R)C
e0uityrs/stoc!holdecommonAveraepayoutividenddividendsreferredincome.et9raterowth*0uity
Assessin *0uity >rowth
Assumes earnins retention
anda constant dividend
payout
Assesses common e0uity
rowth rate throuh
earninsretention
Assumes earnins retention
anda constant dividend
payout
Assesses common e0uity
rowth rate throuh
earninsretention
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Analy6in' Return on Common (uity-R)C
Assessin *0uity >rowth
Assumes internal rowth
depends on bothearnins
retention and return earned on
the earnins retained
Assumes internal rowth
depends on bothearnins
retention and return earned on
the earnins retained
rate)Payout(1ROCE=rategrowthequtyeSusta!a"l