For this assignment, you will complete the Financial Overview component of your course project. To complete this assignment, use the Financial Analysis Toolkit Excel file, provided in the Resources, to complete a financial analysis of your chosen company (Apple Inc,) over the last two most recent years available in annual reports. Replace the numbers provided in the Excel file with the appropriate numbers for your firm. Then, write a 2-3 page financial analysis of your company, addressing the following elements:
• Identify your company, its industry, and analyze the important segments (percentage of sales or subsidiaries) of your company compared to its industry and its overall business.
• Perform a complete financial analysis of your chosen company's financial statements-horizontal, vertical (Percentage of Sales and Common-Size), and changes in ratios-for the last two years.
• Compare all ratios to industry averages. Evaluate the company's ratios against the industry averages.
• Explain the significance of the company's ratios when compared to industry averages.
• Analyze the company's cash flows.
• Assess the overall financial health of your company based on this financial analysis.
A great way to integrate your completed calculations from your Excel sheet into your written analysis is to paste pieces of the worksheet directly into your Word document. You are also encouraged to create graphs or charts from the data that may illustrate your analyses as well.
Tool Kit for Analysis of Financial Statements
Financial statements are analyzed by calculating certain key ratios and then comparing them with the ratios of other firms and by examining the trends in ratios over time. We can also combine ratios to make the analysis more revealing, those indicated below are exceptionally useful for this type of analysis.
RATIO ANALYSIS (Section 3.1)
*NVIDIA Fiscal Years starts and ends on Jan 31, such that FY13 represents Jan 31,2012 to Jan31, 2013
Input Data:
2013 2012
Year-end common stock price $12.26 $13.86
Year-end shares outstanding (in thousands) 616,756 612,191
Tax rate 15% 12%
After-tax cost of capital
Lease payments (in thousands) $18,998 $21,439
Required sinking fund payments $0 $0
Balance Sheets
(in thousands of dollars)
Assets 2013 2012
Cash and equivalents $906,223 $767,218 * Added to cash and quivalents prepaid expense and deferred income taxes
Short-term investments $2,995,097 $2,461,700 2013 2012
Accounts receivable $454,252 $336,143 69,701 49,411 prepaid expenses and other
Inventories $419,686 $340,297 103,736 49,931 deferred income taxes
Total current assets $4,775,258 $3,905,358
Net plant and equipment $1,636,987 $1,647,570 * In addition to equpment also includes goodwill, intangible assets, and other assets
Total assets $6,412,245 $5,552,928 2013 2012
641,030 641,030 goodwill
Liabilities and equity 312,332 326,136 intangible assets
Accounts payable $356,428 $335,072 107,481 120,332 other assets
Notes payable $0 $0
Accruals $619,795 $594,886
Total current liabilities $976,223 $929,958
Long-term bonds $608,319 $477,246 2013 2012
Total liabilities $1,584,542 $1,407,204 3,193,623 2,900,896 additional paid-in capital
Preferred stock (2,00,000 shares: none issued) $0 $0 -1,622,709 -1,496,904 treasury stock
Common stock (616,756,134 shares oustanding 2013 and 612,191,412 outstanding in 2012 $720 $700 9981 10,614 accumulated other comprehensive income
Retained earnings $3,246,088 $2,730,418
Total common equity $4,827,703 $4,145,724 * Added to Total Common equity additional paid-in capital, treasuary stock, and accumulated other comprehensive income
Total liabilities and equity $6,412,245 $5,552,928
Income Statements
(in thousands of dollars)
2013 2012
Net sales $4,280,159.0 $3,997,930.0
Operating costs $3,631,920.0 $3,349,631.0
Earnings before interest, taxes, depr. & amort. (EBITDA) $648,239.0 $648,299.0
Depreciation $0.0 $0.0
Amortization $0.0 $0.0
Depreciation and amortization $0.0 $0.0
Earnings before interest and taxes (EBIT) $648,239.0 $648,299.0
Less interest -$13,800.0 -$15,097.0
Earnings before taxes (EBT) $662,039.0 $663,396.0
Taxes (15.0%, 12.4%) $99,503.0 $82,306.0
Net income before preferred dividends $562,536.0 $581,090.0
Preferred dividends $0.0 $0.0
Net income available to common stockholders $562,536.0 $581,090.0
Common dividends $0.0 $0.0
Addition to retained earnings $562,536.0 $581,090.0
Calculated Data: Operating Performance and Cash Flows
2013 2012
Net operating working capital (NOWC) $803,938.0 $513,700.0
Total operating capital $2,440,925.0 $2,161,270.0
Net Operating Profit After Taxes (NOPAT) $551,003.2 $567,909.9
Net Cash Flow (Net income + Depreciation) $562,536.0 $581,090.0
Operating Cash Flow (OCF) $551,003.2 $567,909.9
Free Cash Flow (FCF) $271,348.2 N/A
Calculated Data: Per-share Information
2013 2012
Earnings per share (EPS) $0.91 $0.95
Dividends per share (DPS) $0.00 $0.00
Book value per share (BVPS) $7.83 $6.77
Cash flow per share (CFPS) $0.91 $0.95
Free cash flow per share (FCFPS) $0.44 N/A
LIQUIDITY RATIOS (Section 3.2) Industry
2013 2012 Average
Liquidity ratios
Current Ratio 4.89 4.20 2.22
Quick Ratio 4.46 3.83 1.3
ASSET MANAGEMENT RATIOS (Section 3.3) Industry
2013 2012 Average
Asset Management ratios
Inventory Turnover 10.20 11.75 4.78
Days Sales Outstanding 38.7 30.69 25.6 *Industry leader
Fixed Asset Turnover 2.61 2.43 1.89 *Industry leader
Total Asset Turnover 0.67 0.72 0.63
DEBT MANAGEMENT RATIOS (Section 3.4) Industry
2013 2012 Average
Debt Management ratios
Debt Ratio 24.71% 25.34% 39.30% *Industry leader
Debt-to-Equity Ratio 0.33 0.34 0.65 *Industry leader
Market Debt Ratio 17.33% 14.23% 24.40 *Industry leader
Times Interest Earned 46.97 42.94 196.79 *Incorrect for 2013 and 2012 as interest combined is income not expense
EBITDA Coverage Ratio 128.36 105.60 N/A
PROFITABILITY RATIOS (Section 3.5) Industry
2013 2012 Average
Profitability ratios
Profit Margin 13.14% 14.53% 19.96%
Basic Earning Power 10.11% 11.67% 17.63% *Industry leader
Return on Assets 8.77% 10.46% 12.56%
Return on Equity 11.65% 14.02% 19.43%
MARKET VALUE RATIOS (Section 3.6) Industry
2013 2012 Average
Market Value ratios
Price-to Earnings Ratio 13.44 14.60 25.77 *NVIDIA doesn't account for depreciation in their 10-K statements Same P/E P/CF Ratio because there is no depreciation
Price-to-Cash Flow Ratio 13.44 14.60 9.66
Price-to-EBITDA 11.66 13.09 5.13 *Industry Leader
Market-to-Book Ratio 1.57 2.05 3.59
TREND ANALYSIS, COMMON SIZE ANALYSIS, AND PERCENT CHANGE ANALYSIS (Section 3.7)
TREND ANALYSIS
Trend analysis allows you to see how a firm's results are changing over time. For instance, a firm's ROE may be slightly below the benchmark, but if it has been steadily rising over the past four years, that should be seen as a good sign.
A trend analysis and graph have been constructed on this data regarding Nvidia's ROE over the past 5 years. (Nvidia and indusry average data for earlier years has been provided.)
ROE
NVIDIA AMD Intel
2009 -1.2% -213.1% 12.93%
2010 -2.7% 107.4% 10.82%
2011 8.7% 56.7% 25.16%
2012 15.9% 37.7% 27.15%
2013 11.7% -111.2% 22.66%
Figure 3-1 Rate of Return on Common Equity
COMMON SIZE ANALYSIS
In common size income statements, all items for a year are divided by the sales for that year.
Figure 3-2 Common Size Income Statements
Industry Composite Nvidia
2013 2013 2012
Net sales 100.0% 100.0% 100.0%
Operating costs 72.1% 84.9% 83.8%
Earnings before interest, taxes, depr. & amort. (EBITDA) 27.9% 15.1% 16.2%
Depreciation and amortization 0.0% 0.0% 0.0%
Earnings before interest and taxes (EBIT) 27.9% 15.1% 16.2%
Less interest 0.0% -0.3% -0.4%
Earnings before taxes (EBT) 27.9% 15.5% 16.6%
Taxes (15.0%, 12.4%) 7.3% 2.3% 2.1%
Net income before preferred dividends 20.6% 13.1% 14.5%
Preferred dividends 0.0% 0.0% 0.0%
Net income available to common stockholders (profit margin) 20.6% 13.1% 14.5%
In common sheets, all items for a year are divided by the total assets for that year.
Figure 3-3 Common Size Balance Sheets
Industry Composite Nvidia
2013 2013 2012
Assets
Cash and equivalents 13.0% 14.1% 13.8%
Short-term investments 11.5% 46.7% 44.3%
Accounts receivable 7.1% 7.1% 6.1%
Inventories 5.6% 6.5% 6.1%
Total current assets 37.2% 74.5% 70.3%
Net plant and equipment 62.8% 25.5% 29.7%
Total assets 100.0% 100.0% 100.0%
Liabilities and equity
Accounts payable 12.6% 5.6% 6.0%
Notes payable 0.4% 0.0% 0.0%
Accruals 2.3% 9.7% 10.7%
Total current liabilities 15.3% 15.2% 16.7%
Long-term bonds 61.1% 9.5% 8.6%
Total liabilities 76.4% 24.7% 25.3%
Preferred stock 0.0% 0.0% 0.0%
Total common equity 23.6% 75.3% 74.7%
Total liabilities and equity 100.0% 100.0% 100.0%
PERCENT CHANGE ANALYSIS
In percent change analysis, all items are divided by the that item's value in the beginning, or base, year.
Figure 3-4 Income Statement Percent Change Analysis
Base year = 2012 Percent Change in
2013
Net sales 7.1%
Operating costs 8.4%
Earnings before interest, taxes, depr. & amort. (EBITDA) (0.0%)
Depreciation and amortization 0.0%
Earnings before interest and taxes (EBIT) (0.0%)
Less interest (8.6%)
Earnings before taxes (EBT) (0.2%)
Taxes (15.0%, 12.4%) 20.9%
Net income before preferred dividends (3.2%)
Preferred dividends 0.0%
Net income available to common stockholders (3.2%)
Balance Sheet Percent Change Analysis (not in textbook)
Base year = 2012 Percent Change in
2013
Assets
Cash and equivalents 18.1%
Short-term investments 21.7%
Accounts receivable 35.1%
Inventories 23.3%
Total current assets 22.3%
Net plant and equipment -0.6%
Total assets 15.5%
Liabilities and equity
Accounts payable 6.4%
Notes payable 0.0%
Accruals 4.2%
Total current liabilities 5.0%
Long-term bonds 27.5%
Total liabilities 12.6%
Preferred stock (2,00,000 shares: none issued) 0.0%
Common stock (616,756,134 shares oustanding 2013 and 612,191,412 outstanding in 2012 2.9%
Retained earnings 18.9%
Total common equity 16.5%
Total liabilities and equity 15.5%
DU PONT ANALYSIS (Section 3.8)
ROE = (Profit margin) (TA turnover) (Equity Multiplier)
Nvidia 2013 11.65% 13.14% 0.67 1.33
Nvidia 2012 14.02% 14.53% 0.72 1.34
Industry Average 20.72% 19.96% 0.63 1.65
Attachment:- Financial Assignment.rar