Financial Statement Analysis

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ANALYSIS AND
INTERPRETATION OF
FINANCIAL STATEMENTS
Himanshu Puri Assistant Professor IILM
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Financial Statement Analysis
What is financial statement analysis?

Tearing apart the financial statements and looking at the relationships It looks at accounting information from users perspective
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Who analyzes financial statements?
Internal users (i.e., management) External users
Examples? Investors, creditors, regulatory agencies & stock market analysts and auditors
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What do internal users use it for?

Planning, evaluating and controlling company operations
What do external users use it for?

Assessing past performance and current financial position and making predictions about the future profitability and solvency of the company as well as evaluating the effectiveness of management
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Information is available from
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Published annual reports

(1) (2) (3) (4) (5) Financial statements Notes to financial statements Letters to stockholders Auditors report (Independent accountants) Managements discussion and analysis
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Information is available from
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Other sources
(1) Newspapers (e.g., Wall Street Journal ) (2) Periodicals (e.g. Forbes, Fortune) (3) Financial information organizations such as: Moodys, Standard & Poors, Dun & Bradstreet, Inc., and Robert Morris Associates (4) Other business publications
Methods of Financial Statement Analysis

Horizontal
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Analysis (Comparative Statements) Analysis
Vertical
(Common-Size Statements)
Trend
Percentages
Ratio
Analysis
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Horizontal Analysis
Using comparative financial statements to calculate dollar or percentage changes in a financial statement item from one period to the next
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Vertical Analysis
For a single financial statement, each item is expressed as a percentage of a significant total, e.g., all income statement items are expressed as a percentage of sales
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Common-Size Statements
Financial statements that show only percentages and no absolute dollar amounts
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Trend Percentages
Show changes over time in given financial statement items (can help evaluate financial information of several years)
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Ratio Analysis
Expression of logical relationships between items in a financial statement of a single period (e.g., percentage relationship between revenue and net income)
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Horizontal Analysis Example

The management of Clover Company provides you with comparative balance sheets of the years ended December 31, 1999 and 1998. Management asks you to prepare a horizontal analysis on the information.
CLOVER CORPORATION Comparative Balance Sheets December 31, 1999 and 1998 1999 Assets Current assets: Cash Accounts receivable, net Inventory Prepaid expenses Total current assets Property and equipment: Land Buildings and equipment, net Total property and equipment Total assets $ 40,000 120,000 160,000 315,000 $ 40,000 85,000 125,000 289,700 $ 12,000 60,000 80,000 3,000 155,000 $ 23,500 40,000 100,000 1,200 164,700 1998
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Incre Amo
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Calculating Change in Dollar Amounts
Dollar Change = Current Year Figure Base Year Figure
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Calculating Change in Dollar Amounts
Dollar Change = Current Year Figure Base Year Figure
Since we are measuring the amount of the change between 1998 and 1999, the dollar amounts for 1998 become the base year figures.
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Calculating Change as a Percentage
Percentage Change = Dollar Change Base Year Figure
100%
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CLOVER CORPORATION Comparative Balance Sheets December 31, 1999 and 1998 1999 Assets Current assets: Cash $ 12,000 $ 23,500 $ (11,500) Accounts receivable, net 60,000 40,000 Inventory 80,000 100,000 Prepaid expenses 3,000 1,200 Total current assets 155,000 164,700 $12,000 $23,500 = $(11,500) Property and equipment: Land 40,000 40,000 Buildings and equipment, net 120,000 85,000 Total property and equipment 160,000 125,000 Total assets $ 315,000 $ 289,700 1998 Increase (Decrease) Amount %
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CLOVER CORPORATION Comparative Balance Sheets December 31, 1999 and 1998 1999 Assets Current assets: Cash $ 12,000 $ 23,500 $ (11,500) (48.9) Accounts receivable, net 60,000 40,000 Inventory 80,000 100,000 Prepaid expenses 3,000 1,200 Total current assets 155,000 164,700 ($11,500 $23,500) 100% = 48.9% Property and equipment: Land 40,000 40,000 Buildings and equipment, net 120,000 85,000 Total property and equipment 160,000 125,000 Total assets $ 315,000 $ 289,700 1998 Increase (Decrease) Amount %
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CLOVER CORPORATION Comparative Balance Sheets December 31, 1999 and 1998 1999 Assets Current assets: Cash Accounts receivable, net Inventory Prepaid expenses Total current assets Property and equipment: Land Buildings and equipment, net Total property and equipment Total assets $ 12,000 $ 60,000 80,000 3,000 155,000 40,000 120,000 160,000 315,000 $ 23,500 $ (11,500) 40,000 20,000 100,000 (20,000) 1,200 1,800 164,700 (9,700) 40,000 85,000 125,000 289,700 $ 35,000 35,000 25,300 (48.9) 50.0 (20.0) 150.0 (5.9) 0.0 41.2 28.0 8.7 1998 Increase (Decrease) Amount %
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Lets apply the same procedures to the liability and stockholders equity sections of the balance sheet.
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CLOVER CORPORATION Comparative Balance Sheets December 31, 1999 and 1998 1999 Liabilities and Stockholders' Equity Current liabilities: Accounts payable Notes payable Total current liabilities Long-term liabilities: Bonds payable, 8% Total liabilities Stockholders' equity: Preferred stock Common stock Additional paid-in capital Total paid-in capital Retained earnings Total stockholders' equity Total liabilities and stockholders' equity 1998 Increase (Decrease) Amount %
67,000 $ 3,000 70,000 75,000 145,000 20,000 60,000 10,000 90,000 80,000 170,000 315,000 $
44,000 $ 6,000 50,000 80,000 130,000 20,000 60,000 10,000 90,000 69,700 159,700 289,700 $
23,000 (3,000) 20,000 (5,000) 15,000 10,300 10,300 25,300
52.3 (50.0) 40.0 (6.3) 11.5 0.0 0.0 0.0 0.0 14.8 6.4 8.7
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Now, lets apply the procedures to the income statement.
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CLOVER CORPORATION Comparative Income Statements For the Years Ended December 31, 1999 and 1998 Increase (Decrease) 1999 1998 Amount % Net sales $ 520,000 $ 480,000 $ 40,000 8.3 Cost of goods sold 360,000 315,000 45,000 14.3 Gross margin 160,000 165,000 (5,000) (3.0) Operating expenses 128,600 126,000 2,600 2.1 Net operating income 31,400 39,000 (7,600) (19.5) Interest expense 6,400 7,000 (600) (8.6) Net income before taxes 25,000 32,000 (7,000) (21.9) Less income taxes (30%) 7,500 9,600 (2,100) (21.9) Net income $ 17,500 $ 22,400 $ (4,900) (21.9)
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CLOVER CORPORATION Comparative Income Statements For the Years Ended December 31, 1999 and 1998 Increase (Decrease) 1999 1998 Amount % Net sales $ 520,000 $ 480,000 $ 40,000 8.3 Cost of goods sold 360,000 315,000 45,000 14.3 Gross margin 160,000 165,000 (5,000) (3.0) Operating expenses 128,600 126,000 2,600 2.1 Net operating income 31,400 39,000 (7,600) (19.5) Interest expense 6,400 7,000 (600) (8.6) Sales increased by 8.3% while net Net income before taxes 25,000 32,000 (7,000) (21.9) income decreased by 21.9%. Less income taxes (30%) 7,500 9,600 (2,100) (21.9) Net income $ 17,500 $ 22,400 $ (4,900) (21.9)
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There were increases in both cost of goods sold (14.3%) and operating expenses (2.1%). These increased costs more than offset the CLOVER CORPORATION Income increase inComparative sales, yielding anStatements overall For the Years Ended decrease in netDecember income. 31, 1999 and 1998
Net sales Cost of goods sold Gross margin Operating expenses Net operating income Interest expense Net income before taxes Less income taxes (30%) Net income 1999 $ 520,000 360,000 160,000 128,600 31,400 6,400 25,000 7,500 $ 17,500 1998 $ 480,000 315,000 165,000 126,000 39,000 7,000 32,000 9,600 $ 22,400 Increase (Decrease) Amount % $ 40,000 8.3 45,000 14.3 (5,000) (3.0) 2,600 2.1 (7,600) (19.5) (600) (8.6) (7,000) (21.9) (2,100) (21.9) $ (4,900) (21.9)
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Vertical Analysis Example

The management of Sample Company asks you to prepare a vertical analysis for the comparative balance sheets of the company.
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Sample Company Balance Sheet (Assets) At December 31, 1999 and 1998 % of Total Assets 1999 1998 1999 1998 Cash $ 82,000 $ 30,000 17% 8% Accts. Rec. 120,000 100,000 25% 26% Inventory 87,000 82,000 18% 21% Land 101,000 90,000 21% 23% Equipment 110,000 100,000 23% 26% Accum. Depr. (17,000) (15,000) -4% -4% Total $ 483,000 $ 387,000 100% 100%
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Sample Company Balance Sheet (Assets) At December 31, 1999 and 1998 % of Total Assets 1999 1998 1999 1998 Cash $ 82,000 $ 30,000 17% 8% Accts. Rec. 120,000 100,000 25% 26% Inventory 87,000 82,000 18% 21% $82,000 $483,000 = 17% rounded Land 101,000 90,000 21% 23% $30,000 $387,000 100,000 = 8% rounded Equipment 110,000 23% 26% Accum. Depr. (17,000) (15,000) -4% -4% Total $ 483,000 $ 387,000 100% 100%
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Sample Company Balance Sheet (Liabilities & Stockholders' Equity) At December 31, 1999 and 1998 % of Total Assets 1999 1998 1999 1998 Acts. Payable $ 76,000 $ 60,000 16% 16% Wages Payable 33,000 17,000 7% 4% Notes Payable 50,000 10% 13% $76,000 $483,000 = 50,000 16% rounded Common Stock 170,000 160,000 35% 41% Retained Earnings 154,000 100,000 32% 26% Total $ 483,000 $ 387,000 100% 100%
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Trend Percentages Example

Wheeler, Inc. provides you with the following operating data and asks that you prepare a trend analysis.
1999 Revenues $ 2,405 Expenses 2,033 Net income $ 372 Wheeler, Inc. Operating Data 1998 1997 $ 2,244 $ 2,112 1,966 1,870 $ 278 $ 242 1996 $ 1,991 1,803 $ 188 1995 $ 1,820 1,701 $ 119
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Wheeler, Inc. provides you with the following operating data and asks that you prepare a trend analysis.
1999 Revenues $ 2,405 Expenses 2,033 Net income $ 372 Wheeler, Inc. Operating Data 1998 1997 $ 2,244 $ 2,112 1,966 1,870 $ 278 $ 242 1996 $ 1,991 1,803 $ 188 1995 $ 1,820 1,701 $ 119
$1,991 - $1,820 = $171
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Using 1995 as the base year, we develop the following percentage relationships.
Wheeler, Inc. Operating Data 1998 1997 123% 116% 116% 110% 234% 203%
Revenues Expenses Net income
1999 132% 120% 313%
1996 109% 106% 158%
1995 100% 100% 100%
$1,991 - $1,820 = $171 $171 $1,820 = 9% rounded
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140 130
% of 100 Base
Trend line for Sales
120 110 100 90
Sales Expenses
1995
1996
1997 Years
1998
1999
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Use of Financial Ratios

A Financial Ratio is an index that relates two accounting numbers and is obtained by dividing one number by the other. Types of Comparisons
Internal Comparisons External Comparisons
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External Comparisons and Sources of Industry Ratios

This involves comparing the ratios of one firm with those of similar firms or with industry averages. Similarity is important as one should compare apples to apples.
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Basket Wonders Balance Sheet (Asset Side)

Basket Wonders Balance Sheet (thousands) Dec. 31, 2007a
Cash $ 90 Acct. Rec.c 394 Inventories 696 Bank 5 STerm Loan 10 Current Assetsd $1,195 Fixed Assets (@Cost)e 1030 Less: Acc. Depr. f (329) Net Fix. Assets $ 701 Investment, LT 50 Other Assets, LT 223 Total Assets b $2,169
a. How the firm stands on a specific date. b. What BW owned. c. Amounts owed by customers. d. Cash/likely convertible to cash within 1 year. e. Original amount paid. f. Acc. deductions for wear and tear.
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Basket Wonders Balance Sheet (Liability Side)

Basket Wonders Balance Sheet (thousands) Dec. 31, 2007
Notes Payable $ 290 Acct. Payablec 94 O/STaxes d 16 Other Accrued Liab. d 100 Current Liab. e $ 500 Long-Term Debt f 530 Shareholders Equity Com. Stock ($1 par) g 200 Add Pd in Capital g 729 Retained Earnings h 210 Total Equity $1,139 Total Liab/Equitya,b $2,169
a. Note, Assets = Liabilities + Equity. b. What BW owed and ownership position. c. Owed to suppliers for goods and services. d. Unpaid wages, salaries, etc. e. Debts payable < 1 year. f. Debts payable > 1 year. g. Original investment. h. Earnings reinvested.
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Basket Wonders Income Statement

Basket Wonders Statement of Earnings (in thousands) for Year Ending December 31, 2007a Net Sales $ 2,211 Cost of Goods Sold b 1,599 Gross Profit $ 612 SG&A Expenses c 402 EBITd $ 210 Interest Expensee 59 EBT f $ 151 Income Taxes 60 EATg $ 91 Cash Dividends 38 Increase in RE $ 53 a. Measures profitability over a time period. b. Received, or receivable, from customers. c. Sales comm., adv., officers salaries, etc. d. Operating income. e. Cost of borrowed funds. f. Taxable income. g. Amount earned for shareholders.
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Liquidity Ratios
Balance Sheet Ratios
Liquidity Ratios
Current
Current Assets Current Liabilities For Basket Wonders December 31, 2007 $1,195 = 2.39 $500
Shows a firms ability to cover its current liabilities with its current assets.
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Liquidity Ratio Comparisons

Current Ratio
Year 2007 2006 2005 BW 2.39 2.26 1.91 Industry 2.15 2.09 2.01
Ratio is stronger than the industry average.
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Liquidity Ratios
Liquidity Ratios
Acid-Test (Quick)
Current Assets - Inv Current Liabilities For Basket Wonders December 31, 2007 $1,195 $696 = 1.00 $500
Shows a firms ability to meet current liabilities with its most liquid assets.
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Liquidity Ratio Comparisons

Acid-Test Ratio
Year 2007 2006 2005 BW 1.00 1.04 1.11 Industry 1.25 1.23 1.25
Ratio is weaker than the industry average.
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Summary of the Liquidity Ratio Comparisons

Ratio Current Acid-Test BW 2.39 1.00 Industry 2.15 1.25
Strong current ratio and weak acid-test ratio indicates a potential problem in the inventories account. Note that this industry has a relatively high level of inventories.
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Current Ratio Trend Analysis Comparison

Trend Analysis of Current Ratio
2.5 Ratio Value 2.3 2.1 1.9 1.7 1.5 2005
BW Industry
2006 Analysis Year
2007
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Acid-Test Ratio Trend Analysis Comparison

Trend Analysis of Acid-Test Ratio
1.5 Ratio Value 1.3 1.0 0.8 0.5 2005 BW Industry
2006 Analysis Year
2007
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Summary of the Liquidity Trend Analyses
The current ratio for BW has been rising at the same time the acid-test ratio has been declining.
The current ratio for the industry has been rising slowly at the same time the acid-test ratio has been relatively stable. This indicates that inventories are a significant problem for BW.
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Financial Leverage Ratios

Debt-to-Equity
Total Debt Shareholders Equity For Basket Wonders December 31, 2007 $1,030 = 0.90 $1,139
Shows the extent to which the firm is financed by debt.
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Financial Leverage Ratio Comparisons

Debt-to-Equity Ratio
Year 2007 2006 2005 BW 0.90 0.88 0.81 Industry 0.90 0.90 0.89
BW has average debt utilization relative to the industry average.
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Debt-to-Total-Assets
Total Debt Total Assets For Basket Wonders December 31, 2007 $1,030 = 0.47 $2,169
Shows the percentage of the firms assets that are supported by debt financing.
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Debt-to-Total-Asset Ratio
Year 2007 2006 2005 BW 0.47 0.47 0.45 Industry 0.47 0.47 0.47
BW has average debt utilization relative to the industry average.
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Financial Leverage Ratios Shows the relative importance of long-term debt to the long-term financing of the firm.
Total Capitalization
(i.e., LT-Debt + Equity)
Total Debt Total Capitalization For Basket Wonders December 31, 2007 $1,030 = 0.62 $1,669
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Total Capitalization Ratio
Year 2007 2006 2005 BW 0.62 0.62 0.67 Industry 0.60 0.61 0.62
BW has average long-term debt utilization relative to the industry average.
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Coverage Ratios
Income Statement Ratios Coverage Ratios
Interest Coverage
EBIT Interest Charges For Basket Wonders December 31, 2007 $210 = 3.56 $59
Indicates a firms ability to cover interest charges.
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Coverage Ratio Comparisons

Interest Coverage Ratio
Year 2007 2006 2005 BW 3.56 4.35 10.30 Industry 5.19 5.02 4.66
BW has below average interest coverage relative to the industry average.
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Coverage Ratio Trend Analysis Comparison

Trend Analysis of Interest Coverage Ratio
11.0 9.0
Ratio Value 7.0 5.0 3.0 2005 2006 Analysis Year 2007 BW Industry
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Summary of the Coverage Trend Analysis
The interest coverage ratio for BW has been falling since 2005. It has been below industry averages for the past two years.
This indicates that low earnings (EBIT) may be a potential problem for BW. Note, we know that debt levels are in line with the industry averages.
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Activity Ratios
Income Statement/ Balance Sheet Ratios
Activity Ratios Indicates quality of receivables and how successful the firm is in its collections.
Receivable Turnover
(Assume all sales are credit sales.)
Annual Net Credit Sales Receivables For Basket Wonders December 31, 2007 $2,211 = 5.61 $394
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Activity Ratios
Income Statement/ Balance Sheet Ratios Activity Ratios Average number of days that receivables are outstanding. (or RT in days)
Avg Collection Period

Days in the Year Receivable Turnover For Basket Wonders December 31, 2007 365 5.61
= 65 days
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Activity Ratio Comparisons

Average Collection Period
Year 2007 2006 2005 BW 65.0 71.1 83.6 Industry 65.7 66.3 69.2
BW has improved the average collection period to that of the industry average.
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Activity Ratios
Activity Ratios Indicates the promptness of payment to suppliers by the firm.
Payable Turnover (PT)

(Assume annual credit purchases = $1,551.)
Annual Credit Purchases Accounts Payable For Basket Wonders December 31, 2007 $1551 = 16.5 $94
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Activity Ratios
Activity Ratios Average number of days that payables are outstanding.
PT in Days
Days in the Year Payable Turnover For Basket Wonders December 31, 2007 365 16.5 = 22.1 days
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Payable Turnover in Days
Year 2007 2006 2005 BW 22.1 25.4 43.5
Is this good?
Industry 46.7 51.1 48.5
BW has improved the PT in Days.
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Activity Ratios
Activity Ratios Indicates the effectiveness of the inventory management practices of the firm.
Inventory Turnover
Cost of Goods Sold Inventory For Basket Wonders December 31, 2007 $1,599 = 2.30 $696
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Inventory Turnover Ratio
Year 2007 2006 2005 BW 2.30 2.44 2.64 Industry 3.45 3.76 3.69
BW has a very poor inventory turnover ratio.
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Inventory Turnover Ratio Trend Analysis Comparison

Trend Analysis of Inventory Turnover Ratio
4.0 3.5 3.0 2.5 2.0 2005 BW Industry
Ratio Value
2006 Analysis Year
2007
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Activity Ratios
Activity Ratios Indicates the overall effectiveness of the firm in utilizing its assets to generate sales.
Total Asset Turnover

Net Sales Total Assets For Basket Wonders December 31, 2007 $2,211 = 1.02 $2,169
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Total Asset Turnover Ratio
Year 2007 2006 2005
BW 1.02 1.03 1.01
Industry 1.17 1.14 1.13
BW has a weak total asset turnover ratio.
Why is this ratio considered weak?
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Profitability Ratios
Income Statement/ Balance Sheet Ratios Profitability Ratios Indicates the efficiency of operations and firm pricing policies.
Gross Profit Margin

Gross Profit Net Sales For Basket Wonders December 31, 2007 $612 = 0.277 $2,211
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Profitability Ratio Comparisons

Gross Profit Margin
Year 2007 2006 2005 BW 27.7% 28.7 31.3 Industry 31.1% 30.8 27.6
BW has a weak Gross Profit Margin.
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Gross Profit Margin Trend Analysis Comparison

Trend Analysis of Gross Profit Margin
35.0 Ratio Value (%) 32.5 30.0 27.5 25.0 2005 BW Industry
2006 Analysis Year
2007
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Income Statement/ Balance Sheet Ratios Profitability Ratios Indicates the firms profitability after taking account of all expenses and income taxes.
Net Profit Margin

Net Profit after Taxes Net Sales For Basket Wonders December 31, 2007 $91 = 0.041 $2,211
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Net Profit Margin
Year 2007 2006 2005 BW 4.1% 4.9 9.0 Industry 8.2% 8.1 7.6
BW has a poor Net Profit Margin.
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Net Profit Margin Trend Analysis Comparison

Trend Analysis of Net Profit Margin
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Ratio Value (%)
7
6 5 4 2005
BW Industry
2006 Analysis Year
2007
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Income Statement/ Balance Sheet Ratios Profitability Ratios Indicates the profitability on the assets of the firm (after all expenses and taxes).
Return on Investment
Net Profit after Taxes Total Assets For Basket Wonders December 31, 2007 $91 = 0.042 $2,160
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Return on Investment
Year 2007 2006 2005 BW 4.2% 5.0 9.1 Industry 9.6% 9.1 10.8
BW has a poor Return on Investment.
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Return on Investment Trend Analysis Comparison

Trend Analysis of Return on Investment
12
Ratio Value (%)
10 8 6 4 2005 BW Industry
2006 Analysis Year
2007
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Profitability Ratios Indicates the profitability to the shareholders of the firm (after all expenses and taxes).
Return on Equity
Net Profit after Taxes Shareholders Equity For Basket Wonders December 31, 2007 $91 = 0.08 $1,139
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Return on Equity
Year 2007 2006 2005 BW 8.0% 9.4 16.6 Industry 18.0% 17.2 20.4
BW has a poor Return on Equity.
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Return on Equity Trend Analysis Comparison

Trend Analysis of Return on Equity
21.0 Ratio Value (%) 17.5 14.0 10.5 7.0 2005 BW Industry
2006 Analysis Year
2007
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Return on Investment and the Du Pont Approach

Earning Power = Sales profitability Asset efficiency ROI = Net profit margin Total asset turnover = 0.041 1.02 = 0.042 or 4.2% = 0.082 1.17 = 0.096 or 9.6%
(Note: values are rounded)
ROI2007 ROIIndustry
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Return on Equity and the Du Pont Approach

Return On Equity = Net profit margin X Total asset turnover X Equity Multiplier Total Assets Equity Multiplier = Shareholders Equity
ROE2007 = 0.041 1.02 1.90 = 0.080 ROEIndustry = 0.082 1.17 1.88 = 0.180
(Note: values are rounded)
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Summary of the Profitability Trend Analyses
The profitability ratios for BW have ALL been falling since 2005. Each has been below the industry averages for the past three years. This indicates that COGS and administrative costs may both be too high and a potential problem for BW. Note, this result is consistent with the low interest coverage ratio.
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Summary of Ratio Analyses

Inventories are too high. May be paying off creditors (accounts payable) too soon. COGS may be too high. Selling, general, and administrative costs may be too high.
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Common-Size Analysis
An analysis of percentage financial statements where all balance sheet items are divided by total assets and all income statement items are divided by net sales or revenues.
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Basket Wonders Common Size Balance Sheets

Regular (thousands of $) Assets Cash AR Inv Other CA Tot CA Net FA LT Inv Other LT Tot Assets 2005 148 283 322 10 763 349 0 111 1,223 2006 100 410 616 14 1,140 631 50 223 2,044 2007 90 394 696 15 1,195 701 50 223 2,169 Common-Size (%) 2005 12.10 23.14 26.33 0.82 62.39 28.54 0.00 9.08 100.0 2006 4.89 20.06 30.14 0.68 55.77 30.87 2.45 10.91 100.0 2007 4.15 18.17 32.09 0.69 55.09 32.32 2.31 10.28 100.0
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Basket Wonders CommonSize Balance Sheets

Regular (thousands of $) Liab+Equity Note Pay Acct Pay Accr Tax Other Accr Tot CL LT Debt Equity Tot L+E 2005 290 81 13 15 399 150 674 1,223 2006 295 94 16 100 505 453 1,086 2,044 2007 290 94 16 100 500 530 1,139 2,169 Common-Size (%) 2005 23.71 6.62 1.06 1.23 32.62 12.26 55.11 100.0 2006 14.43 4.60 0.78 4.89 24.71 22.16 53.13 100.0 2007 13.37 4.33 0.74 4.61 23.05 24.44 52.51 100.0
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Basket Wonders CommonSize Income Statements

Regular (thousands of $) 2005 Net Sales COGS Gross Profit Adm. EBIT Int Exp EBT EAT Cash Div 1,235 849 386 180 206 20 186 112 50 2006 2,106 1,501 605 383 222 51 171 103 50 2007 2,211 1,599 612 402 210 59 151 91 50 Common-Size (%) 2005 100.0 68.7 31.3 14.6 16.7 1.6 15.1 9.1 4.0 2006 100.0 71.3 28.7 18.2 10.5 2.4 8.1 4.9 2.4 2007 100.0 72.3 27.7 18.2 9.5 2.7 6.8 4.1 2.3

Financial Statement Analysis

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