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    Cases&Exercises - Chapter 1

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    Barbara Araujo
    This document provides information about a course on financial analysis and planning, including the lecturer's name and academic year. It also includes sample exercises and cases for students to work through related to ratio analysis, comparative common-size financial statement analysis, and additional recommended cases from a textbook. The sample case analyzes the financial performance of Riopele, a Portuguese textile company, from 1993-1996 through a comparative common-size balance sheet analysis, noting declines in non-current assets and increases in current liabilities, suggesting financial difficulties for the company during this period.

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    Cases&Exercises - Chapter 1

    Uploaded by

    Barbara Araujo
    187 views5 pages
    This document provides information about a course on financial analysis and planning, including the lecturer's name and academic year. It also includes sample exercises and cases for students to work through related to ratio analysis, comparative common-size financial statement analysis, and additional recommended cases from a textbook. The sample case analyzes the financial performance of Riopele, a Portuguese textile company, from 1993-1996 through a comparative common-size balance sheet analysis, noting declines in non-current assets and increases in current liabilities, suggesting financial difficulties for the company during this period.

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    Cases&Exercises_Chapter 1

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    This document provides information about a course on financial analysis and planning, including the lecturer's name and academic year. It also includes sample exercises and cases for students to work through related to ratio analysis, comparative common-size financial statement analysis, and additional recommended cases from a textbook. The sample case analyzes the financial performance of Riopele, a Portuguese textile company, from 1993-1996 through a comparative common-size balance sheet analysis, noting declines in non-current assets and increases in current liabilities, suggesting financial difficulties for the company during this period.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    187 views5 pages

    Cases&Exercises - Chapter 1

    Uploaded by

    Barbara Araujo
    This document provides information about a course on financial analysis and planning, including the lecturer's name and academic year. It also includes sample exercises and cases for students to work through related to ratio analysis, comparative common-size financial statement analysis, and additional recommended cases from a textbook. The sample case analyzes the financial performance of Riopele, a Portuguese textile company, from 1993-1996 through a comparative common-size balance sheet analysis, noting declines in non-current assets and increases in current liabilities, suggesting financial difficulties for the company during this period.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 5

    Escola de Economia e Gestão

    Departamento de Gestão

    COURSE UNIT:
    FINANCIAL ANALYSIS AND PLANNING

    LECTURER: SÓNIA MILLÁN

    BACHELOR IN MANAGEMENT (3rd YEAR)

    CASES & EXERCISES

    Academic Year 2022/2023 – 1st Semester


    1. Relevance of Financial Analysis
    1.1. Introduction to financial analysis
    1.2. Objectives and different approaches of users of financial statements
    1.3. Relevant information: financial statements and other information (company information and
    its business environment)
    1.4. Main financial statement analysis methods and techniques
    1.5. Relation with finance theory: market efficiency hypothesis, modern portfolio theory and the
    capital asset pricing model

    RATIO ANALYSIS

    1. Taking into account the balance sheet information presented in the table below for Company
    ONE and Company TWO, compute the Current ratio, the Quick ratio and the Cash to current
    liabilities ratio for the two companies and comment the results.

    ONE TWO

    Non current assets (Ativos não correntes) 15000 3000

    Inventories(Inventários) 48000 1000

    Accounts Receivable(Clientes) 12000 900

    Cash and Cash Equivalents (Meios Financeiros Liquidos) 1000 100

    Shareholders' Equity (Capital Próprio) 6000 1000

    Non-current Liabilities(Passivo não corrente) 40000 3000

    Current Liabilities(Passivo corrente) 30000 1000


    Current ratio (Rácio Liquidez Geral)
    Quick ratio(Rácio Liquidez Reduzida)
    Cash to current liabilities ratio(Rácio Liquidez Imediata)

     Céu Cortez / Benilde Oliveira 2


    2. The table below reports Liquidity and Solvency ratios for Company X and Company Y. What
    may you conclude from the analysis of the ratios? Comparing the two companies, what are the main
    differences?

    Company P Company X
    Financial ratios Year N Year N+1 Year N Year N+1
    Current ratio 2.32 2.19 1.4 1.45
    =Current Assets/Current Liabilities
    Quick ratio 1.36 1.17 0.9 0.85
    =(Current Assets-Inventories)/Current Liabilities
    Collection Period (months) 2.30 2.08 2.56 2.3
    = Accounts Receivable/Sales*12
    Days Accounts Payables Outstanding (months) 3.46 2.92 3 3
    = Accounts Payables/Purchases*12)
    Inventory Turnover 3.63 4.13 6 5
    = Cost of sales/Inventories
    Shareholders' equity to total liabilities 3.16 3.00 0.61 0.62
    = Shareholders' Equity/Total Liabilities
    Shareholders' equity to total assets 0.76 0.75 0.38 0.38
    = Shareholders' Equity/Total Assets
    Financial leverage 0.24 0.25 0.62 0.62
    = Total Liabilities/Total Assets
    Non-current financing to non-current assets 1.72 1.65 1.23 1.38
    = (Shareholders' Equity + Non-current Liabilities)/Non-
    current Assets

     Céu Cortez / Benilde Oliveira 3


    COMPARATIVE AND COMMON-SIZE FINANCIAL STATEMENTS ANALYSIS

    Founded in 1927, Riopele is one of the oldest textile companies in Portugal and an international
    reference in the creation and production of fabrics for fashion and clothing collections. The table
    below presents the balance sheet for the period 1993-1996. This was a period of high difficulties for
    the company. Make a brief comment on the financial performance of the company, focusing on its
    main investments and main sources of financing.

    Balance Sheets of Riopele, S.A. for the period 1993-1996


    1993 % 1994 % 1995 % 1996 %
    Non-current Assets 9116995 41.1% 7982709 40.2% 7469003 37.9% 7307029 37.3%
    Intangible Assets 32521 0.1% 29108 0.1% 114938 0.6% 184482 0.9%
    Property, Plant and Equipment 25124530 113.3% 25075566 126.1% 25176207 127.7% 25361798 129.6%
    Amortization and Depreciation -16486884 -74.3% -17532916 -88.2% -18230222 -92.5% -18587428 -95.0%
    Financial Investments 471330 2.1% 471330 2.4% 463907 2.4% 404346 2.1%
    Impairments of Financial Investments -24502 -0.1% -60379 -0.3% -55827 -0.3% -56169 -0.3%
    Current Assets 13062853 58.9% 11898470 59.8% 12246397 62.1% 12256929 62.7%
    Inventories 8104062 36.5% 7760753 39.0% 7868922 39.9% 6992342 35.7%
    Raw materials 1118242 5.0% 1004173 5.1% 1102583 5.6% 788776 4.0%
    Work in progress 1890835 8.5% 1879721 9.5% 1932388 9.8% 1895407 9.7%
    Finished Products 5094985 23.0% 4876859 24.5% 4832963 24.5% 4585836 23.4%
    Goods 0 0.0% 0 0.0% 988 0.0% 365 0.0%
    Impairments of Inventories 0 0.0% 0 0.0% 0 0.0% -278042 -1.4%
    Accounts Receivables 4721110 21.3% 4077813 20.5% 3903888 19.8% 4111398 21.0%
    Impairments of Accounts Receivable -387657 -1.7% -360890 -1.8% -299769 -1.5% -293722 -1.5%
    Other current assets 378927 1.7% 211139 1.1% 328604 1.7% 1015066 5.2%
    State and other public entities 0 0.0% 60199 0.3% 14376 0.1% 93743 0.5%
    Cash and Cash Equivalents 246411 1.1% 149456 0.8% 430376 2.2% 338102 1.7%
    Total Assets 22179848 100% 19881179 100% 19715400 100% 19563958 100%
    Shareholders' Equity 10749131 48.5% 10451171 52.6% 10241106 51.9% 10298102 52.6%
    Share Capital 6500000 29.3% 6500000 32.7% 6500000 33.0% 6500000 33.2%
    Reserves 5736846 25.9% 5736846 28.9% 5736846 29.1% 5736846 29.3%
    Retained Earnings 0 0.0% -1823840 -9.2% -1720640 -8.7% -1956021 -10.0%
    Net Income for the period -1487715 -6.7% 38165 0.2% -275100 -1.4% 17277 0.1%
    Total Liabilities 11430717 51.5% 9430008 47.4% 9474294 48.1% 9265856 47.4%
    Non-current Liabilities 4338933 19.6% 2976881 15.0% 3217445 16.3% 3420333 17.5%
    Provisions 0 0.0% 0 0.0% 0 0.0% 81367 0.4%
    Bank Loans 2338933 10.5% 1976881 9.9% 3217445 16.3% 3338966 17.1%
    Bond Loans 2000000 9.0% 1000000 5.0% 0 0.0% 0 0.0%
    Current Liabilities 7091784 32.0% 6453127 32.5% 6256849 31.7% 5845523 29.9%
    Accounts Payable 1812830 8.2% 1430273 7.2% 1677095 8.5% 1271756 6.5%
    State ans other public entities 231317 1.0% 271231 1.4% 173024 0.9% 185077 0.9%
    Bank loans 3693552 16.7% 2663227 13.4% 2275430 11.5% 2619104 13.4%
    Bond loans 0 0.0% 1000000 5.0% 1000000 5.1% 0 0.0%
    Other current liabilities 1354085 6.1% 1088396 5.5% 1131300 5.7% 1769586 9.0%
    Total Shareholders' equity + Total Liabilities 22179848 100% 19881179 100% 19715400 100% 19563958 100%

     Céu Cortez / Benilde Oliveira 4


    RECOMMENDED ADDITIONAL CASES

    Subramanyam (2014) - Chapter 1

    Questions 1-8, 1-9, 1-14, 1-23, 1-25, 1-26 (p.47-48)

    Exercises 1-3, 1-4 (p. 49)

    Problem 1-10 (p. 59)

    Case 1-4 (p. 62)

     Céu Cortez / Benilde Oliveira 5

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