live #4 financial analysis mooc
TRANSCRIPT
LIVE SESSION #4 WEDNESDAY MARCH 19TH 2014
FINANCIAL ANALYSIS MOOC WITH MARC BERTONECHE
INTRODUCTION
LIVE SESSION #4 WEDNESDAY MARCH 19TH 2014
FINANCIAL ANALYSIS MOOC WITH MARC BERTONECHE
Attestation of Success to the MOOC Already more than 400 registrants Boston Medical Instruments
business case Synthesis to be performed Correction by peers $30 for students, $70 for
professionals
An average grade of 60% is required to obtain the Attestation of success. The weight is the following: 50% for the Week 1 to 4,
50% for the Week 5 (1 synthesis and 1 quiz)
LIVE SESSION #4 WEDNESDAY MARCH 19TH 2014
FINANCIAL ANALYSIS MOOC WITH MARC BERTONECHE
Boston Medical Instruments (BMI) developed, manufactured and sold scientific medical instruments, needles and catheters which allowed rapid and less invasive access to a number of different organs and vessels.
BMI experienced extraordinary growth, fueled by heavy spending on research and development, necessary to maintain BMI’s competitive advantage and rapid expansion of its sales force.
BMI has reached the maximum level of debt ( Short term debt) which the banker is ready to provide. What should the company do now?
Week 5 - Boston Medical Instruments
LIVE SESSION #4 WEDNESDAY MARCH 19TH 2014
FINANCIAL ANALYSIS MOOC WITH MARC BERTONECHE
What’s a Profitability Ratio?
« A profitability ratio is always computed with some profit over some capital used »
Net profit
Equity
Example :
Operating profit
sales
What is NOT a profitability ratio :
LIVE SESSION #4 WEDNESDAY MARCH 19TH 2014
FINANCIAL ANALYSIS MOOC WITH MARC BERTONECHE
Return On Capital Employed (ROCE)and Return on Equity (ROE)
Economic profitability is the real business profitability. Financial profitability can be manipulated
ROCE: EconomicProfitability
Operating profit x ( 1 – tax rate)
Capital employed
ROE: FinancialProfitability
Net profit
Equity
LIVE SESSION #4 WEDNESDAY MARCH 19TH 2014
FINANCIAL ANALYSIS MOOC WITH MARC BERTONECHE
The Leverage Effect
Leverage effect explains the breakdown of equity profitability: The profitability from business operations and the financial
profitability coming from debt
Financial leverage itself doesn’t create any value
Formula :
Leverage effect
ROE = ROCE + [ ( ROCE - i) x D/E ]
LIVE SESSION #4 WEDNESDAY MARCH 19TH 2014
FINANCIAL ANALYSIS MOOC WITH MARC BERTONECHE
Fixed Assets
816
NWC602
Equity
2 514Net
Financialdebt
(1 095)
Tax rate : 35.5%
Capital employed = 1 419
Compte de résultat
Income Statement- 1996 In thousands of Euros
EBIT 1 873 Financial income 1 Financial expense 39
Income before exceptional items
1 911
Exceptional items - Income taxes 679 Net profit 1 232
=1 873 x (1 - 35.5%)
=1 41985%
=1 232
=2 51449%
ROCE
ROE
LIVE SESSION #4 WEDNESDAY MARCH 19TH 2014
FINANCIAL ANALYSIS MOOC WITH MARC BERTONECHE
Fixedassets
1 738
NWC
2 244
Equity
5 489
NFD
(1 506)
Capital employed = 3 983
Compte de résultat
Income Statement - 1997 In thousands of Euros
EBIT 2 235 Financial income 24 Financial expense 33
Income before exceptional items
2 226
Exceptional items 74 Income taxes 712Net profit 1 440
=2 235 x (1 – 33.1%)
=3 98337.5%
=1 440
=5 48926.2%
Tax rate : 33.1%
ROCE
ROE
LIVE SESSION #4 WEDNESDAY MARCH 19TH 2014
FINANCIAL ANALYSIS MOOC WITH MARC BERTONECHE
Fixed assets
2 408
NWC
7 338
Equity
6 939
NFD
2 807
Capital employed = 9 746
Compte de résultat
Income Statement - 1998 In thousands of Euros
EBIT 2761 Financial income 87 Financial expense 27
Income before exceptional items
2701
Exceptional items - Income taxes 804 Net profit 1897
=2 761 x (1 – 29.8%)
=9 74619.1%
=1 897
=6 939 27.3%
Tax rate : 29.8%
ROCE
ROE
LIVE SESSION #4 WEDNESDAY MARCH 19TH 2014
FINANCIAL ANALYSIS MOOC WITH MARC BERTONECHE
1996 1997 1998
Operating margin after tax (1)X
Turnover (2)=
ROCE+
Leverage effect=
ROE
16.0 %
5.3
85.0 %
-36.0 %
49.0 %
15.0 %
2.5
37.5 %
-11.3 %
26.2 %
11.0 %
1.8
19.9 %
7.4 %
27.3 %
(1) Operating income x (1 – tax rate) Sales(2) Sales Capital employed
LIVE SESSION #4 WEDNESDAY MARCH 19TH 2014
FINANCIAL ANALYSIS MOOC WITH MARC BERTONECHE
Forums Review
LIVE SESSION #4 WEDNESDAY MARCH 19TH 2014
FINANCIAL ANALYSIS MOOC WITH MARC BERTONECHE
QUESTIONS
LIVE SESSION #4 WEDNESDAY MARCH 19TH 2014
FINANCIAL ANALYSIS MOOC WITH MARC BERTONECHE
CONCLUSION