Exercise

2014 2013
Operating cash 60 50
Short term investments 550 500
Accounts receivable 940 790
Inventory 910 840
PPE A = 5300 - C5:C8 2,710
D 4,890

Sales 3,726
Cost of Goods sold 2,640
Gross Margin 1,086
Selling and General Expenses 335
Operating Income 751
Interest income 15
Interest expense 98
Income before tax E
Income taxes 200
Net Income 468

Further info:
Marginal tax rate 35%
Short term interest rate 3%
Depreciation is included in SG&A 10

Fill the gaps

2014 2013
Operating cash 60 50
Short term investments 550 500
Accounts receivable 940 790
Inventory 910 840
PPE net 2840 2710
5300 4890

Sales 3726
Cost of Goods sold 2640
Gross Margin 1086
Selling and General Expenses 335
Operating Income 751
Interest income 15
Interest expense 98
Income before tax 668
Income taxes 200
Net Income 468
Marginal tax rate 35%
Short term interest rate 3%

Reformulation: Balance Sheet

2014 2013
Operating cash 60 50
Accounts receivable 940 790
Inventory 910 840

Accounts payable 1200 1040

Accrued liabilities 390 450
NWC 320 190

NLOA (PPE Net) 2840 2710

NOA 3160 2900

Reformulation: Income Statement

Starting point
2014
Sales (Revenue) 3726
Cost of Goods sold 2640
Gross Margin 1086
Selling and General Expenses 335
Operating Income 751
Interest income 15
Interest expense 98
Income before tax 668
Income taxes 200
Net Income 468

Marginal tax rate 35%

Ratio
ROCE (Return on capital employed) 25% NET INCOME / CSE
PMbt (Profit Margin before tax) 20% Operating Income (EBIT) / Sales
ATO (Asset Turnover) 1.18 SALES / NOA
RNOAbt = ROICbt = ROIbt 24% Operating Income (EBIT) / NOA
FLEV (Financial Leverage) 0.69 NFO / CSE
RNOAat = ROICat = ROIat NOPAT / NOA
Cash flow indirect
Operating area:
EBITDA 761
Income taxes -200
NWC -120
CFO 441

Investing area:
PPE -140
FCF 301

Financing area:
Detholders -180
Shareholders -28
Interests -83
D+F -291

Cash beginning 50
Change 10
Cash ending 60

301 FCF
301 d+F

Question 5 Answer : EV/EBITDA and EV/EBIT

Financial structure, it is better, because when we are dealing with income statement,
The key reason is that EV/EBITDA values the entire entity regardless of the capital structure of the business
removes the effect of capital structure and allows an investor (PE or otherwise) to compare businesses in a more accur
 2014 2013
Accounts payable 1,200 1,040
Accrued liabilities 390 450
Long-term debt 1,840 1,970

Common equity B = 5300 - F5:F7 C = 4890 - G5:G7

5,300 4,890

1,870

2014 2013
Accounts payable 1200 1040
Accrued liabilities 390 450
Long-term debt 1840 1970

Common equity 1870 1430

5300 4890
 2014 2013
Long-term debt 1840 1970
Short term investments 550 500
NFO 1290 1470

Common equity 1870 1430

3160 2900

Detailed Reformulation
2014
Sales 3726
Cost of Goods sold 2640
Gross Margin 1086
Selling and General Expenses 325
EBITDA 761
Deprectiation 10
Operating Income (EBIT) 751
Taxes on operating income 229.05
NOPAT 521.95
Interest income 15
Interest expense 98
Net Interest expenses after taxes 53.95
Net Income 468

Net Financial Expenses 83

Taxes on Net Financial Expenses 29.05
of the business. Price to earnings, on the other hand, is only relevant for equity holders of the business.
usinesses in a more accurate way.
Basic Reformulation
2014
Sales (Revenue) 3726
Cost of Goods sold 2640
Gross Margin 1086
Selling and General Expenses 325
EBITDA 761
Deprectiation 10
Operating Income /EBIT 751
Interest income 15
Interest expense 98
EBT 668
Income taxes 200
Extraordinary items
Net Income 468
olders of the business.
 REF BALANCE SHEET
Operating Financing
Operating Assets Financial Liabilities (Debts)
2014 2013
Prepaid expenses Long-term debt
Operating Cash
Intangibles Preferred stocks
Accounts receivable
Inventories Financial Assets
Other short term assets Cash and Cash equivalents
Short term investments

Operating Liabilities
Accounts payable NFO
Accrued expenses liabilities
Deferred taxes Shareholders Equity
Other short term liabilities
Dividends payable
NWC OP AS - OP LIAB Shareholder capital
Retained earnings
PPE
Other tangibles CSE
Goodwill
Other intangibles NFO + CSE = NOA
Long term liabilities

NLOA B22 to B26

NOA NWC + NLOA

REF INCOME STATEMENT

Kalau ada marginal tax rate Kalau gak ada marginal tax rate

Sales 3726 Sales

Cost of Goods sold 2640 Cost of Goods sold
Gross Margin 1086 Gross Margin
Selling and General Expenses 325 Selling and General Expense
EBITDA 761 EBITDA
Deprectiation 10 Deprectiation
Operating Income (EBIT) 751 Operating Income /EBIT
Taxes on operating income #REF! Interest income
NOPAT #REF! Interest expense
Interest income 15 EBT
Interest expense 98 Income taxes
Net Interest expenses after taxe #REF! Extraordinary items
Net Income #REF! Net Income
Net Financial Expenses #REF!
Taxes on Net Financial Expenses #REF!
 Ratios
Financing
ncial Liabilities (Debts)
2014 2013

Financial Assets

FIN LIAB - FIN AS DCF

hareholders Equity

D19 to D21

da marginal tax rate

#REF!
#REF!
#REF!
325
#REF!
10
#REF!
#REF!
#REF!
#REF!
#REF!

#REF!
atios CASH FLOW

DCF
Multiples
ASSETS 31/12/200X 31/12/200X-1
CURRENT ASSETS
Cash and equivalents 6,000 5,000 1,000
Accounts receivable 15,000 14,000
Prepaid expense 750 650
Inventories 8,000 22,000
NON CURRENT ASSETS
Buildings* 26,000 20,000
Machinery and equipment* 22,000 10,000
Land* 8,000 4,000

LIABILITIES & EQUITY 31/12/200X 31/12/200X-1

EQUITY 41,750 32,750
Shareholder's Equity 29,000 21,000
Reserves 5,750 5,100
Reteined earnings 7,000 6,650
LIABILITIES
Loans 14,000 16,000
Other financial liabilities 4,000 4,000
CURRENT LIABILITIES
Accounts payable 5,000 4,000
Bank overdraft 11,000 10,000
Accrued expenses 3,000 2,000
Tax payables 7,000 6,900
TOTAL 85,750 75,650

INCOME STATEMENT'S Reformulated

31/12/200X
ITEMS Income Statement

Sales 213,000 Sales

Gain on disposal 1,000 COGS
Cost of goods sold - 163,500 Gross
Wages and salaries for
administrative staff - 20,000 SG&A
Different current costs - 7,000 EBITDA

Depreciat
Depreciation - 5,000 ion
Operatin
OPERATING INCOME 18,500 g
Interest expenses - 4,500 Gain
PROFIT BEFORE TAXES 14,000 EBIT
Taxes - 7,000 Interest
NET INCOME 7,000 EBT
Taxes
Net
 Cash flow: Indirect Method
Net Income 7,000
Taxes 7,000
Interest 4,500
Gain - 1,000
Depreciation 5,000
EBITDA Adj 22,500

Taxes - 7,000
NWC 15,000
Cash from Operating Activities 30,500

PPE - 27,000
Gain 1,000
Cash from Investing Activities - 26,000

Interest - 4,500
Loans - 2,000
Other financial liabilities -
Bank overdraft 1,000
CSE 2000
Cash from Financing - 3,500

Reformulated
Income Statement
Beginning cash 5,000
213,000 Change 1,000
-163,500 Ending cash 6,000
49,500

- 27,000
22,500

- 5,000

17,500
1,000
18,500
- 4,500
14,000
- 7,000
7,000
 Cash flow: Direct Method
Sales 213,000
Cost of goods sold -163,500
Wages and salaries for administrative staff - 20,000
Different current costs - 7,000
Taxes - 7,000
Accounts receivable - 1,000
Prepaid expense - 100
Inventories 14,000
Accounts payable 1,000
Accrued expenses 1,000
Tax payables 100

Cash from Operating Activities 30,500

PPE - 27,000
Gain 1,000
Cash from Investing Activities - 26,000
0
Interest - 4,500
Loans - 2,000
Other financial liabilities -
Bank overdraft 1,000
CSE 2000
Cash from Financing - 3,500

Beginning cash 5,000

Change 1,000
Ending cash 6,000
 Exercise 1
Reformulate
Balance Sheet and
Income Statement
and prepare the
Cash Flow
Statement t t+1 t t+1
BALANCE SHEET
Assets Liabilities and Equities
Prepaid expenses 23 35 Account payable 1,245 1,733
Cash and Cash equivalents 435 635 Accrued expenses 1,549 1,633
Accounts receivable 1,827 1,728 Deferred tax liability* 712 535
Inventory 2,876 1,982
equipment 3,567 3,653 Long term debt 3,678 2,450
Shareholder capital 432 432
Retained earnings 1,112 1,250
Total assets 8,728 8,033 Liabilities and equity 8,728 8,033

INCOME STATEMENT * all short term

Revenues 7,493
COGS 5,722
SG&A Expenses 453
Loss on disposal of PPE 121
Amortization 353
Net interests expense 221
Income before tax 623
Income tax 295
Net income 328

Reformulated Income Statement Reformulated Balance Sheet

Revenues 7,493 t+1 t
COGS 5,722 Prepaid expenses 35 23

Gross Profit 1,771 Accounts receivable 1,728 1,827

SG&A Expenses 453 Inventory 1,982 2,876
EBITDA 1,318 Account payable 1,733 1,245
Amortization 353 Accrued expenses 1,633 1,549
Operating Profit 965 Deferred tax liability* 535 712
Loss on disposal of PPE 121 NWC -156 1,220
EBIT 844
 Property plant and
Net interests expense 221 equipment 3,653 3,567
EBT 623
Taxes 295 NOA 3,497 4,787
Net income 328

Cash Flow (Indirect) Cash Flow (Direct)

Net income 328 Revenues 7,493
Taxes 295 COGS -5,722
Net interests expense 221 SG&A Expenses -453

Loss on disposal of PPE 121 Taxes -295

Amortization 353 Prepaid expenses -12
EBITDA 1,318 Accounts receivable 99
Inventory 894

Account payable 488

Taxes -295 Accrued expenses 84
NWC 1,376 Deferred tax liability* -177
Cash flow from
Cash flow from Opearting 2,399 Opearting 2,399

PPE -439 PPE -439

Loss on disposal of PPE -121 NWC -121
Cash flow from
Cash flow from Investing -560 Investing -560

Property plant and

Net interests expense -221 equipment -221
Long term debt -1,228 Long term debt -1,228
Debtholder flow -1,449 Debtholder flow -1,449

Dividends -190 Dividends -190

Shareholder flow -190 Shareholder flow -190
Cash flow from
Cash flow from Financing -1,639 Financing -1,639

Beginning cash 435 Beginning cash 435

Change in cash 200 Change in cash 200
Ending cash 635 Ending cash 635

FCF (C-I) 1,839

d + F 1,839
ormulated Balance Sheet
t+1 t
Long term debt 2,450 3,678
Cash and Cash
equivalents 635 435 Change 200
NFO 1,815 3,243

Shareholder capital 432 432

Retained earnings 1,250 1,112
CSE 1,682 1,544
CSE + NFO 3,497 4,787

Cash Flow (Indirect) according

USGAAP
Net income 328
Taxes 295
Net interests expense 221
Loss on disposal of
PPE 121
Amortization 353
EBITDA 1,318
Net interests expense -221
Loss on disposal of
PPE -121
Taxes -295
NWC 1,376
Cash flow from
Opearting 2,057

PPE -439

Cash flow from

Investing -439

Long term debt -1,228

Debtholder flow -1,228

Dividends -190
Shareholder flow -190
Cash flow from
Financing -1,418

Beginning cash 435

Change in cash 200
Ending cash 635