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Performance AnalysisPerformance AnalysisAre you feeling Lost?
Begin your performance analysis by developing a strategy.
What issues are important to you?
Profitability? Solvency? Share Value? Dividends? Asset Utilization? Social Responsibility, Other?
Checklist to beginChecklist to begin
Select an industryPrepare an
overview of the industry
Select a Target Select a
Benchmark
Get Annual Reports on both companies
Summarize stock price history
Collect current news on both companies
Organize your data
1) Profit, Equity, & Share Value
mgt.2) Debt mgt.3) Cash mgt.4) Asset mgt.5) Relationship mgt.6) Positioning
Your Investigation Begins…Your Investigation Begins…Follow the nightly news
Read the Wall Street Journal and other important business newspapers
Read the NY TimesSearch online
This is the Surveillance Stage1. Enter two years of financial data for the target
company2. Review the results & make notes3. Perform the same procedure for the Benchmark4. Compare Target to Benchmark & note results5. Read all Footnotes6. Look for inconsistencies (e.g. increases in profits
and decreases in cash type (liquid) accounts)7. Check current news. Look for qualitative
performance issues such as ethical behavior, good/bad relationships, and positioning for the future
Profit, Equity, and Share Value Profit, Equity, and Share Value managementmanagement
1.01) Income to Revenue
1.02) Margin1.03) Operating
Efficiency1.04) Tax/Pretax
Earnings1.05) ROE
1.06) Paid-in/Total Capital
1.07) Earned/Total Capital
1.08) % Capital in Change
1.09) Basic EPS1.10) Diluted EPS
Profit, Equity, and Share Value Profit, Equity, and Share Value managementmanagement
1.11) Share Price1.12) Price/Earnings1.13) Diluted EPS/Basic1.14) Book Value/Share1.15) Book
Value/Market1.16) Dividends
1.17) Dividend Payout1.18) Dividend Yield 1.19) Invest
Productivity1.20) Time to Payback1.21) Price Potential1.22) Beta
Debt managementDebt managementPart One:
2.23) Current Debt/Total Debt
2.24) Non-Debt/Total Debt
2.25) Total Debt/Total Assets
2.26) Current Assets/Total Assets
2.27) Non-Current Assets/Tot al Assets
Part Two:
2.28) Times Interest Earned
2.29) Current Cash Coverage
2.30) A/P turnover
2.31) Av. Payment Period
2.32) Total Debt / Equity
Cash managementCash management
3.33) Working Capital3.34) Working
Capital/Revenue3.35) Current Ratio3.36) Quick Ratio3.37) Operating Cash
Flow/Sales3.38) Cash Emphasis
Asset managementAsset management(Effective use of company assets)
4.39) Sales/Total Assets4.40) Net Inc/Total
Assets4.41) A/R turnover4.42) Average Collect4.43) Inventory
turnover4.44) Age of Inventory
Relationship/Ethical issuesRelationship/Ethical issues5.29) Employee Relations5.30) Customer Relations5.31) Competitor Relations5.32) Director Relations5.33) Government Relations5.34) Environmental record5.35) Sensitivity: Good/Bad
Citizenship & community sensitivity
5.36) Stockholder Relations5.37) Communication5.38) Public Persona5.39) Vendor Relations