Model and forecast earnings

Ratios analysis used in preparing pro forma financial statements: Provide estimates of financial statement items for one or more future period Based on certain ratios’s

Business segment

Portion of a larger company that Account for more than 10% of the company revenues or assets Be distinguishable from company’s other lines of business

Profitability ratios calculation

Profitability ratios (51): How well the company generates operating profits/net profit from sales. Net profit margin (52): how much of each dollar in revenue collected

Solvency ratios calculation

Solvency ratios (44): Give the analyst information on firm’s financial leverage and ability to meet long term obligations Debt ratios (45): based on balance sheet

Liquidity ratios calculation

Liquidity ratios (38): Ability to pay short-term obligations Current ratio(39): best known measure of liquidity Higher → more likely to pay short-term bill Less than

Activity ratios calculation

Activity ratios (28): Give indication of how well a firm utilizes various asset  Asset utilization Turnover ratios  Receivables turnover (29) (measure of accounts receivable turnover)