Professional Documents
Culture Documents
Statement
Analysis
K R Subramanyam
John J Wild
McGraw-Hill/Irwin
9-2
Prospective Analysis
9
CHAPTER
9-3
Prospective Analysis
Importance
Security Valuation - free cash flow and residual
income models require estimates of future financial
statements.
Management Assessment - forecasts of financial
performance examine the viability of companies
strategic plans.
Assessment of Solvency - useful to creditors to
assess a companys ability to meet debt service
requirements, both short-term and long-term.
9-4
9-5
2005
$46,839
31,445
15,394
10,534
1,259
570
3,031
1,146
2004
$42,025
28,389
13,636
9,379
1,098
556
2,603
984
2003
$37,410
25,498
11,912
8,134
967
584
2,227
851
1,313
$ 3,198
891
190
$ 1,809
912
247
$ 1,623
910
11.455%
32.866
22.49
6.333
5.173
37.809
12.336%
32.447
22.318
5.245
4.982
37.803
9-6
3.
4.
5.
6.
Project sales
Project cost of goods sold and gross profit margins using
historical averages as a percent of sales
Project SG&A expenses using historical averages as a
percent of sales
Project depreciation expense as an historical average
percentage of beginning-of-year depreciable assets
Project interest expense as a percent of beginning-ofyear interest-bearing debt using existing rates if fixed
and projected rates if variable
Project tax expense as an average of historical tax
expense to pre-tax income
9-7
1.
2.
3.
4.
5.
9-8
2006 Estimate
$52,204
35,047
17,157
11,741
1,410
493
3,513
1,328
0
$ 2,185
891
1
1
1
1
1
1
11.455%
32.866
22.49
6.333
5.173
37.809
9-9
4.
5.
9-10
9-11
2004
$ 708
4,621
4,531
3,092
12,952
19,880
4,727
15,153
3,311
$31,416
$ 4,956
863
1,288
1,207
8,314
1,815
10,155
20,284
76
1,530
9,526
11,132
$31,416
2003
$ 758
5,565
4,760
852
11,935
20,936
5,629
15,307
1,361
$28,603
$ 4,684
975
1,545
319
7,523
1,451
10,186
19,160
76
1,256
8,111
9,443
$28,603
Selected Ratios
Accounts receivable turnover rate....................................
9.240
Inventory turnover rate.....................................................
5.840
Accounts payable turnover rate .......................................
5.441
Accrued expenses turnover rate .......................................
28.683
Taxes payable/Tax expense...............................................
26.527%
Dividends per share .........................................................
$ 0.310
Capital expenditures (CAPEX)in millions ......................
3,012
CAPEX/Sales ....................................................................
6.431%
9.094
6.266
5.728
32.628
122.663%
$ 0.260
2,671
6.356%
6.722
5.357
5.444
24.214
37.485%
$ 0.240
3,189
8.524%
9-12
17
9-13
2006
Estimate
$ 1,402
5,650
6,001
1,224
14,277
25,629
6,822
18,807
1,511
$34,595
$ 6,441
751
1,820
352
9,364
2,010
8,283
19,657
74
1,810
13,054
14,938
$34,595
2005
$ 2,245
5,069
5,384
1,224
13,922
22,272
5,412
16,860
1,511
$32,293
$ 5,779
504
1,633
304
8,220
2,010
9,034
19,264
74
1,810
11,145
13,029
$32,293
9.240
5.840
5.441
28.683
26.527%
$ 0.310
3,357
6.431%
9.240
5.840
5.441
28.683
26.527%
$ 0.310
3,012
6.431%
9-14
9-15
9-16
9-17
where BVt is book value at the end of period t, RIt + n is residual income
in period t + n, and k is cost of capital (see Chapter 1). Residual income
at time t is defined as comprehensive net income minus a charge on
beginning book value, that is, RIt = NIt - (k x BVt - 1).
9-18
9-19
9-20
9-21
9-22
9-23