Innovation Financing
Words
Words
Profitability Ratios
Profitability is the net result of a number of policies and decisions.
The ratios examined so far provide useful clues about the effectiveness of a firm’s operations, but the profitability ratios go on to show the combined effects of liquidity, asset management, and debt on operating results.
Profit Margins (Ratio)
Net profit margin (PM) gives the profit per dollar of sales.
MIT JEDEM DOLLAR IM SALES MACHT DIE FIRMA DIESEN %-SATZ GEWINN/VERLUST!
Operating profit margin (Ratio)
Operating profit margin (OM) shows performance of operations before impact of interest expenses:
Basic Earning Power (BEP)
Raw earning power of the firm’s assets before the influence of taxes and leverage.
Useful for comparing firms with different tax situations and different degrees of financial leverage.
DAMIT KANN DIE ROHE VERDIENKRAFT EINER UNTERNEHMUNG BESTIMMT WERDEN: DER EINFLUSS VON STEUERN UND ZINSEN IST NICHT INKL, SOMIT KANN MIT FIRMEN VERGLICHEN WERDEN, DIE NICHT DEN SELBEN STEUERSATZ ODER DIE SELBE FINANZIERUNGSART HABEN!
Return on Assets (ROA)
ROA measures the return on total assets after interest and taxes.
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ROA is lowered by debt--interest expense lowers net income, which also lowers ROA.
Return on Equity (ROE)
Stockholders invest to earn a return on their money, ROE tells how well they are doing in an accounting sense.
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However, the use of debt lowers equity, and if equity is lowered more than net income, ROE would increase.
EIGENKAPITALRENDITE, WIRD VON INVESTOREN ANGESCHAUT UM ZU SEHEN WIE DAS INVESTIERTE GELD VERMEHRT WIRD!
Market Value Ratios
Market value ratios incorporate the:
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High current levels of earnings and cash flow increase market value ratios
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High expected growth in earnings and cash flow increases market value ratios
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High risk of expected growth in earnings and cash flow decreases market value ratios
Price/Earnings Ratio
How much investors are willing to pay per dollar of reported profits.
Price/earnings ratios are higher for firms with strong growth prospects, other things held constant, but they are lower for riskier firms.
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P/E: How much investors will pay for $1 of earnings. Higher is better.
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P/E and M/B are high if ROE is high, risk is low.
Price/Cash Flow Ratio
Stock prices depend on a company’s ability to generate cash flows. Consequently, investors often look at the price/cash flow ratio, where cash flow is defined as net income plus depreciation and amortization.
Market/Book Ratio
Indication of how investors regard the company.
Companies with relatively high rates of return on equity generally sell at higher multiples of book value than those with low returns.
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M/B: How much paid for $1 of book value. Higher is better.
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P/E and M/B are high if ROE is high, risk is low.
The Du Pont System
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The Du Pont system focuses on:
- Expense control (PM)
- Asset utilization (TATO)
- Debt utilization (EM) -
It shows how these factors combine to determine the ROE.
Limitations of Ratio Analysis ...
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Comparison with industry averages is difficult if the firm operates many different divisions.
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Seasonal factors can distort ratios.
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Window dressing techniques can make statements and ratios look better.
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Different accounting and operating practices can distort comparisons.
Qualitative Factors
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There is greater risk if:
- revenues tied to a single customer
- revenues tied to a single product
- reliance on a single supplier?
- High percentage of business is generated overseas? -
What is the competitive situation?
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What products are in the pipeline?
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What are the legal and regulatory issues?
attempt
der Versuch
pursued
etwas verfolgen / anstreben
occur
eintreten / auftreten / geschehen
concerned
beunruhigt / betroffen
estimated
geschätzt
receivables
Forderungen (Debitoren)
yield to maturity
YTM is the rate of return earned on a bond held to maturity. Also called “promised yield.”
It assumes the bond will not default.
valuable
wertvoll
quarterly
quartalsweise
scarcity of land
die Knappheit des Bodens
semiannually
halbjährlich
require
benötigen
fewer
weniger
Abschreibung
Inventories
das Lager einer Firma
gross amount
der Gesamtbetrag
assets
Aktivposten der Bilanz
liabilities
Passivseite der Bilanz
accounts payable
Kreditoren (auf Passivseite der Bilanz)
retained earnings
Ergebinsvortrag aus letzter Periode
notes payable
kurzzeiteige Kredite
long-term dept
langfristige Kredite
to suffer
ertragen, leiden
assed swop
Aktiventausch
dept
Schulden
creditworthiness
Bonität, Kreditwürdigkeit
estimate
die Schätzung
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Lernkarten
share
Aktie / Anteil
goods
Güter / Ware
monetary depreciation
Geldentwertung
(=reduction in the value of money)
consumer price index (CPI)
Verbraucherpreisindex
(ob Inflation im Land oder nicht)
quoted
börsennotiert
a quoted rate (= quoted = nominal)
to destinguish
abgrenzen / auseinanderhalten
stated
angegebene
holding the stated I%
note, bond, loan
Anleihe
effective annual rate EAR (EFF%)
jährlicher Effektivzinssatz
to accumulate
akkumulieren / ansammeln
to inherit
erben
securities
Wertpapiere
purchasing power
Kaufkraft
retirement income
Ruhestandsbezüge
arbitrage
arbitrage
Ausnutzung von Preisunterschieden
quantifying
Bewertung
probability
Möglichkeit
balance sheet
Bilanz
income statement
Erfolgsrechnung
statement of cashflow
Finanzrechnung
stock
Aktien
intrinsic (fundamental) value
Eigenwert
value of firm's stock
sales revenues
Umsatzerlöse
depreciation / amortization
Abschreibungen
amortization -> not tangible goods)
Net income
Nettogewinn
tax refund
Steuerrückerstattung
assets
Aktiven
assets
Aktiven
accounts receivable
Debitoren
inventories
Vorräte
total current assets
Umlaufvermögen (kurzfristig)
total current assets
Umlaufvermögen (kurzfristig)
gross fixed assets
Bruttovermögen
net fixed assets
Anlagevermögen
(= net operating working capital)
short-term investments
kurzfristige Anlagen
short-term investments
kurzfristige Anlagen
liabilities and equity
Passiven
liability
Verpflichtung / Schulden
equity
Eigenkapital
accounts payable
Kreditoren
