... 18 Financial Analysis: Toolsand Techniques
production, carefully calibrated against quality standards and relative contribution
from products and services, or cost effectiveness standards ... 9/27/01 10:57 AM Page 2
10 Financial Analysis: Toolsand Techniques
The Practice of Financial/ Economic Analysis
The financial/ economic analysis sponsored and used by the economic manager
can ... differentiate between purely financial
analysis on one hand, and economic analysisand trade-offs on the other. As we
mentioned, the first is largely based on financial statements and accounting data,
while...
... both for the financial/ economic dimensions of systematic
business management and for understanding the nature of financial statements,
data, and processes underlying financialanalysis techniques. ... organizations and empowered
employees. Empowerment begins with knowledge and is expanded by targeted
training, which includes understanding the nature and relevance of financial/ eco-
nomic data, and is ... context, and
its relationship to financial statements and analytical tools as presented in Chap-
ter 2. The coverage of analytical methods begins in Chapter 3 with funds flow
analysis, moves on to financial...
... 2 Financial Analysis: Toolsand Techniques
For many years the purpose and contribution of this book have been to help
make financial/ economic analysis a practical, understandable and usable process
for ... basic
economics andfinancialanalysis have never changed, but only were ignored at
times. Next, the key concept of the business system and all of its relationships to
financial analysisand statements ... context, and
its relationship to financial statements and analytical tools as presented in Chap-
ter 2. The coverage of analytical methods begins in Chapter 3 with funds flow
analysis, moves on to financial...
...
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2 Financial Analysis: Toolsand Techniques
For many years the purpose and contribution of this book have been to help
make financial/ economic analysis a practical, understandable and usable ... both for the financial/ economic dimensions of systematic
business management and for understanding the nature of financial statements,
data, and processes underlying financialanalysis techniques. ... organizations and empowered
employees. Empowerment begins with knowledge and is expanded by targeted
training, which includes understanding the nature and relevance of financial/ eco-
nomic data, and is...
... 2 Financial Analysis: Toolsand Techniques
For many years the purpose and contribution of this book have been to help
make financial/ economic analysis a practical, understandable and usable ... differentiate between purely financial
analysis on one hand, and economic analysisand trade-offs on the other. As we
mentioned, the first is largely based on financial statements and accounting data,
while ... Fi-
nancial Analysis: Toolsand Techniques.
vii
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Copyright 2001 The McGraw-Hill Companies, Inc. Click Here for Terms of Use.
8 Financial Analysis: Toolsand Techniques
the...
... 19
18 Financial Analysis: Toolsand Techniques
production, carefully calibrated against quality standards and relative contribution
from products and services, or cost effectiveness standards ... 9/27/01 10:57 AM Page 9
10 Financial Analysis: Toolsand Techniques
The Practice of Financial/ Economic Analysis
The financial/ economic analysis sponsored and used by the economic manager
can be viewed ... 12 Financial Analysis: Toolsand Techniques
a coherent structure of the proposal, its relevant alternatives, and all of its key
variables and the risks expected. It is here where judgment and...
... differentiate between purely financial
analysis on one hand, and economic analysisand trade-offs on the other. As we
mentioned, the first is largely based on financial statements and accounting data,
while ...
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50 Financial Analysis: Toolsand Techniques
in evaluating the financial, and more importantly, the economic, performance of
the business under review.
The Context of Financial Analysis
Now ...
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44 Financial Analysis: Toolsand Techniques
FIGURE 2–11
TRW INC. AND SUBSIDIARIES
Statements of Earnings
For the Years Ended December 31, 1997 and 1996 ($ millions)
Source:...
... retained
earnings.
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2. Operational funding is affected by both internal and external conditions
and causes, which must be understood ... property, plant, and equipment,
reflecting new capital spending as well as disposals, and the impact of the
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acquisitions, ... 72 Financial Analysis: Toolsand Techniques
Since the required investment in accounts receivable and inventories is nor-
mally much more than twice the credit obtained from current payables and...
... assets
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136 Financial Analysis: Toolsand Techniques
based on cash flows, and if decisions are consistently analyzed and executed in
this manner, positive accounting ... 11:07 AM Page 104
142 Financial Analysis: Toolsand Techniques
In the case of physical assets, the depreciation write-off is shown as a
charge in the income statement, and is accumulated on the ... 116 Financial Analysis: Toolsand Techniques
to this last aspect are discussed in detail in Chapters 10 and 11; therefore we’ll
make only brief reference...
... time,
and not their ebb and flow. A more dynamic intraperiod analysis requires either
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receipts and collections, ... hence and a look at the overall financial condition of the company at that
time, as well as one year later.
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gain ... materials, overhead, and
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loom much larger in a service business, while purchases, inventories, and credit
terms...
... Financial Analysis: Toolsand Techniques
interest as the threshold return, it’s the overall cost of capital that must be met and
exceeded.
Given that higher standard, however, the effect of financial ... taxes.
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In the end, the key test of financialanalysis is the viability of the methods
and results as predictors of future ... secondary role. As we’ll discuss and demonstrate in more detail in
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Chapters 11 and 12, shareholder value creation...
... Besley; and Eugene Brigham. Essentials of Managerial Finance. 11th
ed. Hinsdale, IL: Dryden Press, 1997.
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estimates. ... 228 Financial Analysis: Toolsand Techniques
The use of the continuous flow option introduces a forward shift in timing that
leads to slightly higher present values, both for single sums and ... the uncertainty of estimates
and the need to integrate projects into business strategy.
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useful tool for...
... 276 Financial Analysis: Toolsand Techniques
resources just as definite as an expenditure for buildings and equipment, except
that no depreciation write-off is involved. If all inventories and ...
280 Financial Analysis: Toolsand Techniques
annual benefits of $4.0 million before taxes. For simplicity we’ve assumed level
cash flows and straight-line depreciation over 7 years, and the ... only.
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even when this more stringent test is applied. While one could argue for and
against either method, consistent application...
...
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354 Financial Analysis: Toolsand Techniques
Summary
In this chapter we’ve reviewed both the decisional framework and some of the
techniques used to analyze the different ... an
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In the comparative analysis of the final choice between leasing and owner-
ship we have to weigh such elements ... 340 Financial Analysis: Toolsand Techniques
assumed EPS of zero and deriving an EBIT that just provides for this condition.
The calculation is shown in Figure 10–7 for the original situation and...