Analyse road map

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Osiris and other providers proposed many ratios highly correlated, and with inconstant terminology… mostly around debt, equity, leverage, gearing

So please don’t forget that behind these ratios the questions to answer to are:

What is the financing mix (Equity/// Debt)

Is the company too much indebt?

Is it sustainable??? to be appreciated after Income statement and cash flow statement reviews…

Step 4 : business analysis, Performance and profitability

Revenue analysis by activities & geographical dimension

Sources

Income Statement €

Income statement %

Global KF

KF by activites

Tools & ratios & KPI

Gross margin (rate)

EBITDA (rate)

EBIT (rate)

Op income (Rate)

EBT (rate)

ROS

Added value

Profit par employee

Time interest earned

Provided

Osiris

Y

Y

Y

Y

Y

Y

Y (rarely)

Y

Targets

Gross margin rate highlight the business model

Cost structure /VARIABLE Or FIXED?

Is the performance coming from the business?

What is the impact of depreciation (by difference EBITDA versus EBIT)

What are the most profitable activities?

Highlight the business Model

Ability to pay interest, consequences on

profitability

Don’t forget to detect non recurrent items polluting the today’s performance

Part 5: dynamical approach & synthesis

Sources

All the statements

Including

Cash flow statement

(CFS is not available for the exam)

Tools & ratios & KPI

Visit of the CFS

Purchase of Fixed Assets // OPCF

Financial debt in year of cash flow

Provided by

Osiris

Y (CFS)

Targets

CFS highlight

Capacity to procure operating cash flow (linked to profitability, cost structure, and change in working capital

Investment Policy:

Financing policy including treasury shares

Change in cash position…

Help us to appreciate the debt level and ability to to

To reimburse long term debt

Part 6: what about the financial market ?

Sources

Key figures

Graphs of the share price

Beta calculation

Graphical comparisons

Tools & ratios & KPI

Market to sales

Market to book

PER

Pay out ratio

Dividend yield

Provided by

Osiris

N

N

N

Y

Targets

How is the share appreciated by the market?

Is the share correctly valuated?

Dividend policy and incentives for the

shareholders?

Market risk level of the share?

Comparison one to one or with a market index

Conclusion

Don’t forget to conclude presenting the main strengths & weaknesses of the company and in case of comparison to advise the investor in term of risk and return vision and arbitrage….

Return on capital employed and or Dupont approach could be chosen as a good synthesis of performance management…