FINANCIAL ANALYSISIntroductory level
Radim Vyhnáneksenior credit risk analyst
Citibank Europe plc.
24th February 2011
Agenda
I. What is Financial analysis good for? (16:20 – 16:40)
II.Terminology used in Financial Analysis (16:40 – 17:30)
III.Case study #1 “Vodo-topo Kohoutek a syn s.r.o.” (17:40 – 18:40)
CREDIT ANALYSIS FRAMEWORKČEČETKOVA CIBULE
I. What is Financial analysis good for?
Macroeconomics(Global Economy, Industry Outlook, Local Economy)
Ownership, Senior Management
Business Structure Strategy Operations KSFs
Risk/Mitigants
Deal Structure/Security
Ways Out
Rationale & ReturnsCredit Recommendation
Financial PerformanceHistoricalForecastsRatio Analysis
II. Terminology used in Financial Analysis
We will jointly skim through key items in the following sheets:Profit & Loss Statement / Income StatementBalance SheetCash FlowCommonly used Financial Ratios
You are expected to ask questions and become familiar with the terminology by the end of this section.
II. Terminology used in Financial Analysis
1. Profit & Loss Statement / Income Statement
Revenues, Costs
Gross Profit (/Value Added), EBITDA, EBIT, EBT, EAT/NI
Depreciations, Reserves & Provisions
II. Terminology used in Financial Analysis
2. Balance Sheet
ASSETS (USES)
LT Assets
Intangibles
Tangibles
Financial Investments
LT Receivables
ST Assets
Inventory
ST Receivables
Cash
LIABILITIES (SOURCES)
EQUITY
Common Equity
Retained Profit / Loss
LT Liabilities
LT Payables
LT Bank Debts
ST Liabilities
ST Payables
ST Bank Debts
II. Terminology used in Financial Analysis
3. Cash Flow statement
+ CF from Operations
+ CF from Investments
= Free CF
+ CF from Financial Operations
= Net Operating CF
(Cash BOP + Net Operating CF = Cash EOP)
EBITDA-/+ Change in W/C- Interest Expense paid- TAX- CAPEX
II. Terminology used in Financial Analysis
4. Ratios
Revenue
Profitability
Indebtedness
Liquidity
Activity
II. Terminology used in Financial Analysis
It is important to read all ratios not just the most favourite one.
Would you fill in the gaps identically if you were presented the sentences in isolated way?
1.This story is about _______________ .
2.He lived in New York during the summer and usually moved to __________ for the winter season.
3.He used to go shopping to _________________.
4.He did not enjoy it. He would rather _____________________.
5.One day he met _____________________.
6.And they got married and had ______________________________________.
II. Terminology used in Financial Analysis
4. Ratios
Revenue: Revenue, Revenue trend
Profitability:
Indebtedness:
Liquidity:
Activity:
II. Terminology used in Financial Analysis
4. Ratios
Revenue:
Profitability: GPM, EBITDA, Debt Service Coverage, Personal Costs/GP
Indebtedness:
Liquidity:
Activity:
II. Terminology used in Financial Analysis
4. Ratios
Revenue:
Profitability:
Indebtedness: Leverage (Balance Sheet, Debt/EBITDA)
Liquidity:
Activity:
II. Terminology used in Financial Analysis
4. Ratios
Revenue:
Profitability:
Indebtedness:
Liquidity: Current Ratio, Available credits / Total Revenue
Activity:
II. Terminology used in Financial Analysis
4. Ratios
Revenue:
Profitability:
Indebtedness:
Liquidity:
Activity: Days Receivables, Days Payables, Days Inventory
II. Terminology used in Financial Analysis
4. Ratios
Revenue: Revenue, Revenue trend
Profitability: GPM, EBITDA, Debt Service Coverage, Personal Costs/GP
Indebtedness: Leverage (Balance Sheet, Debt/EBITDA)
Liquidity: Current Ratio, Available credits / Total Revenue
Activity: Days Receivables, Days Payables, Days Inventory
Snowball Fight
Instructions:
Stand-up
Take two paper snowballs
Fight for 30 seconds by throwing snowballs on people around you.
Pick the two nearest snowballs and unpack.
Choose one term and explain it to other participants in your own words.