Corporate Bridge - Assignment 2 - Guidelines

7/28/2019 Corporate Bridge - Assignment 2 - Guidelines

http://slidepdf.com/reader/full/corporate-bridge-assignment-2-guidelines 1/6

www.educorporatebridge.com

Financial Modeling - Assignment 2Historical Ratio Analysis


http://www.educorporatebridge.com/

http://www.educorporatebridge.com/




Financial Modeling – Historical Ratio

Analysis … 1/4

This includes the understanding of Financial Statement Analysis. The

typical approach to financial analysis includes professional measureslike Vertical Analysis, Horizontal Analysis, Ratio Analysis. However,

before the calculation starts, the key challenge is to get the right data

from various sources. For example for sourcing financial numbers, we

may source it from Annual Reports, NSE / BSE websites etc.

Additionally, ratio analysis done on wrong set of numbers will lead to

results which will mislead the analysis. Hence, as an analyst the

primary challenge is to fetch the right data from all the unstructured

places.

Ratio Analysis

This assignment contains two parts –

1. Calculate the ratios in the provided Excel Template and fully

appreciate its general trends

2. Comments on Interpretation of Historical Ratios to be

provided in the Word Template

3. Your interpretation should include analysis on the following

Income Statement

• Gross Profit, EBITDA, Operating Profit (EBIT), PBT & Net

Income

Horizontal Analysis Write-up (5-6 points)

• Increase and decrease in particular line item with reasons

•

Any unusual activity reported

Foundation Applications

Trainings

Master Excel Excel based Accounting

and calculation of Ratios Introduction to DCF Relative Valuations

Basic Financial Modeling





Analysis … 2/4

Vertical Analysis Write up (5-6 points)

• Increase and decrease in particular ratio with reasons

• Any unusual activity reported

• Effective Tax Rate (if high/low, then what could be the reasons)

• Dividend Payout Ratio (a discussion on dividends payment

policy etc and historical trends)

• Dividend Tax Rate

Balance Sheet Ratios

Horizontal Analysis Write-up (5-6 points)

• Increase and decrease in particular line item with reasons


Vertical Analysis Write-up (5-6 points)

• Increase and decrease in particular ratio with reasons


Debt & Interest Costs

• A comment on Debt movements and the effective interest costs

• Why low/high debt in the company?

Solvency Ratios (comment on each of the following)

• Comment on Current Ratio

• Comment on Quick Ratio

• Comment on Cash Ratio





Analysis …2/4

Turnover Ratio (comment on each of the following)

• Receivables turnover

• Inventory turnover

• Payables turnover

Operating Efficiency (comment on each of the following)

• Total asset turnover

• Net fixed asset turnover

Equity turnover

Operating Profitability (Comment on Each of the following)

• Return on total capital & Return on total equity

• ROE DuPont Analysis

• Profit Margin, Asset Turnover & Financial Leverage

Financial Risk Ratios

• Debt to equity ratio

• Debt ratio

• Interest coverage ratio

Cash Flow Ratios

(Comment on the trends and other important parameters like

Depreciation, capital expenditures, acquisitions, debt issues, funding

through IPOs etc)• Cash Flow from Operations

• Cash Flow from Investments

• Cash Flow from Financing

Also include any Industry Specific Ratios that you have considered apart

from above.





Analysis …3/4

Ratio Analysis Report Guidelines

• Calculate the ratios in the provided Excel Template and

understand its general trends

• Interpretation of Historical Ratios to be provided in the Word

Template.

• Maximum of 5 pages write up on Interpretation of Historical

Ratio Analysis

• Try to cover all / most of the points illustrated above

References

• Please refer to the sample report provided attached.

• Basic Information on Stock Price etc should be taken from

NSE/BSE website

• Download the Annual Reports for past five years from

company’s website

• Other Research House Reports• Data Source – Free research reports are available on various

website. One such website is deadpresident.blogspot.com

• Please note that you should NOT take historical figures from any

data sources like PROWESS, CAPITAL-LINE, BLOOMBERG

etc. No research analysts rely on such data sources because their

terminologies and nomenclatures may be different from the

actual and in addition, populating the historical mechanically

provides an in-depth understanding of the flow of numbers and

its associated footnotes.

Corporate

Bridge





Analysis …4/4

Online Library References

Key Learning Outcomes

• Learn structure and layout of financial reports and filings, annual

report, etc.

• Learn to analyze and interpret financial statements, footnotes,

and metrics like an analyst.

QueriesBefore you drop your queries, please go through the

Assignment Guidelines and understand its full structure and

implications

For any technical queries, [email protected]

For non-technical queries, [email protected]

Module Notes

Accounting for Equity Analysts

Focus area in this module are Understanding

the Financial Statements, Ratio Analysis and

Navigating through Annual Reports.

Comprehensive Financial Modeling for

Analysts

For Historical Analysis you need to go

through Historical Ratio Analysis-Video in

Advanced Financial Modeling Foundation

Videos

Financial Modeling on Paint Sector -Asian

Paints

For example the focus should be on a)Asian

Paints - Gearing for the Financial Model

b)Asian Paints - Ratio Analysis

mailto:[email protected]







Documents

Corporate Bridge - Assignment 2 - Guidelines