FIN534 Class Web Page, Fall '18

Jacksonville University

Instructor: Maggie Foley

The Syllabus

Term Project (due in week 6)  (references from prior semesters: 1  2  )

 Business Finance Online, an interactive learning tool for the Corporate Finance Student https://www.zenwealth.com/BusinessFinanceOnline/index.htm

 

Weekly SCHEDULE, LINKS, FILES and Questions    

 

Week

Coverage, HW, Supplements

-        Required

 

Miscellaneous

Week1

Marketwatch Stock Trading Game (Pass code: havefun)

(game will start on 10/22/2018 and will end on 12/5/2018)

Use the information and directions below to join the game.

1.     URL for your game: 
http://www.marketwatch.com/game/jufi534-18f

2.     Password for this private game: havefun

3.     Click on the 'Join Now' button to get started.

4.     If you are an existing MarketWatch member, login. If you are a new user, follow the link for a Free account - it's easy!

5.     Follow the instructions and start trading!

 

 

 

Chapter 2 Financial Statements

 

ppt

Topics in Chapter 2:

  • Introduction of Financial Statement
  • Firm’s Intrinsic Value
  • Balance Sheet
  • Income Statement

 

·        Experts explain: Financial Statements  (video)  

(https://www.wsj.com/video/experts-explain-financial-statements/BEF70E1D-5B33-405B-AA48-001E2C311B51.html#%21BEF70E1D-5B33-405B-AA48-001E2C311B51)

·        Finviz.com/screener for ratio analysis (https://finviz.com/screener.ashx) 

 

Chapter 3 Analysis of Financial Statements

 

ppt  

Topics in Chapter 3:

  1. Ratio analysis
  2. DuPont equation
  3. Benchmarking for ratio analysis
  4. Limitations of ratio analysis
  5. Qualitative factors

 

·         Ratio Formulas  

·         Chapter 3 Tool Kit 

·         DuPont identity:  video 

ROE = (net income / sales) * (sales / assets) * (assets / shareholders' equity)

This equation for ROE breaks it into three widely used and studied components:

ROE = (net profit margin) * (asset turnover) * (equity multiplier)

 

Nike Income Statement (values in 000's)

Period Ending:

Trend

5/31/2018

5/31/2017

5/31/2016

5/31/2015

Total Revenue

$36,397,000

$34,350,000

$32,376,000

$30,601,000

Cost of Revenue

$20,441,000

$19,038,000

$17,405,000

$16,534,000

Gross Profit

$15,956,000

$15,312,000

$14,971,000

$14,067,000

Operating Expenses

Research and Development

$0

$0

$0

$0

Sales, General and Admin.

$11,511,000

$10,563,000

$10,469,000

$9,892,000

Non-Recurring Items

$0

$0

$0

$0

Other Operating Items

$0

$0

$0

$0

Operating Income

$4,445,000

$4,749,000

$4,502,000

$4,175,000

Add'l income/expense items

($66,000)

$196,000

$140,000

$58,000

Earnings Before Interest and Tax

$4,325,000

$4,886,000

$4,623,000

$4,205,000

Interest Expense

$0

$0

$0

$0

Earnings Before Tax

$4,325,000

$4,886,000

$4,623,000

$4,205,000

Income Tax

$2,392,000

$646,000

$863,000

$932,000

Minority Interest

$0

$0

$0

$0

Equity Earnings/Loss Unconsolidated Subsidiary

$0

$0

$0

$0

Net Income-Cont. Operations

$1,933,000

$4,240,000

$3,760,000

$3,273,000

Net Income

$1,933,000

$4,240,000

$3,760,000

$3,273,000

 

 

 

Nike Balance Sheet (values in 000's)

Period Ending:

Trend

5/31/2018

5/31/2017

5/31/2016

5/31/2015

Current Assets

Cash and Cash Equivalents

$4,249,000

$3,808,000

$3,138,000

$3,852,000

Short-Term Investments

$996,000

$2,371,000

$2,319,000

$2,072,000

Net Receivables

$3,498,000

$3,677,000

$3,241,000

$3,358,000

Inventory

$5,261,000

$5,055,000

$4,838,000

$4,337,000

Other Current Assets

$1,130,000

$1,150,000

$1,489,000

$1,968,000

Total Current Assets

$15,134,000

$16,061,000

$15,025,000

$15,587,000

Long-Term Assets

Long-Term Investments

$0

$0

$0

$0

Fixed Assets

$4,454,000

$3,989,000

$3,520,000

$3,011,000

Goodwill

$154,000

$139,000

$131,000

$131,000

Intangible Assets

$285,000

$283,000

$281,000

$281,000

Other Assets

$0

$0

$0

$0

Deferred Asset Charges

$2,509,000

$2,787,000

$2,422,000

$2,587,000

Total Assets

$22,536,000

$23,259,000

$21,379,000

$21,597,000

Current Liabilities

Accounts Payable

$5,698,000

$5,143,000

$5,313,000

$6,151,000

Short-Term Debt / Current Portion of Long-Term Debt

$342,000

$331,000

$45,000

$181,000

Other Current Liabilities

$0

$0

$0

$0

Total Current Liabilities

$6,040,000

$5,474,000

$5,358,000

$6,332,000

Long-Term Debt

$3,468,000

$3,471,000

$1,993,000

$1,079,000

Other Liabilities

$0

$0

$0

$0

Deferred Liability Charges

$3,216,000

$1,907,000

$1,770,000

$1,479,000

Misc. Stocks

$0

$0

$0

$0

Minority Interest

$0

$0

$0

$0

Total Liabilities

$12,724,000

$10,852,000

$9,121,000

$8,890,000

Stock Holders Equity

Common Stocks

$3,000

$3,000

$3,000

$3,000

Capital Surplus

$6,384,000

$5,710,000

$7,786,000

$6,773,000

Retained Earnings

$3,517,000

$6,907,000

$4,151,000

$4,685,000

Treasury Stock

$0

$0

$0

$0

Other Equity

($92,000)

($213,000)

$318,000

$1,246,000

Total Equity

$9,812,000

$12,407,000

$12,258,000

$12,707,000

Total Liabilities & Equity

$22,536,000

$23,259,000

$21,379,000

$21,597,000

 

 

 

Nike Cash Flow Statement  (values in 000's)

Period Ending:

Trend

5/31/2018

5/31/2017

5/31/2016

5/31/2015

Net Income

$1,933,000

$4,240,000

$3,760,000

$3,273,000

Cash Flows-Operating Activities

Depreciation

$774,000

$716,000

$662,000

$649,000

Net Income Adjustments

$766,000

($175,000)

$254,000

$502,000

Changes in Operating Activities

Accounts Receivable

$187,000

($426,000)

$60,000

($216,000)

Changes in Inventories

($255,000)

($231,000)

($590,000)

($621,000)

Other Operating Activities

$35,000

($120,000)

($161,000)

($144,000)

Liabilities

$1,515,000

($158,000)

($586,000)

$1,237,000

Net Cash Flow-Operating

$4,955,000

$3,846,000

$3,399,000

$4,680,000

Cash Flows-Investing Activities

Capital Expenditures

($1,028,000)

($1,105,000)

($1,143,000)

($963,000)

Investments

$1,326,000

$118,000

$93,000

$785,000

Other Investing Activities

($22,000)

($21,000)

$16,000

$3,000

Net Cash Flows-Investing

$276,000

($1,008,000)

($1,034,000)

($175,000)

Cash Flows-Financing Activities

Sale and Purchase of Stock

($3,521,000)

($2,734,000)

($2,731,000)

($2,020,000)

Net Borrowings

($29,000)

$1,421,000

$868,000

($26,000)

Other Financing Activities

($55,000)

($29,000)

($22,000)

$0

Net Cash Flows-Financing

($4,835,000)

($2,148,000)

($2,974,000)

($2,790,000)

Effect of Exchange Rate

$45,000

($20,000)

($105,000)

($83,000)

Net Cash Flow

$441,000

$670,000

($714,000)

$1,632,000

 

  

 

 

 

Nike Stock price chart in the past four years

 image019.jpg

 

 

 

 

 

 

Nike ---  Valuation

P/E Current

70.74

P/E Ratio (w/o extraordinary items)

61.37

Price to Sales Ratio

3.28

Price to Book Ratio

11.72

Price to Cash Flow Ratio

24.04

Enterprise Value to EBITDA

25.71

Enterprise Value to Sales

3.62

Total Debt to Enterprise Value

0.03

Efficiency

Revenue/Employee

497,442.00

Income Per Employee

26,443.00

Receivables Turnover

10.14

Total Asset Turnover

1.59

Liquidity

Current Ratio

2.51

Quick Ratio

1.63

Cash Ratio

0.87

Profitability

Gross Margin

44.03

Operating Margin

12.38

Pretax Margin

11.89

Net Margin

5.32

Return on Assets

8.44

Return on Equity

17.4

Return on Total Capital

30.17

Return on Invested Capital

13.26

Capital Structure

Total Debt to Total Equity

38.83

Total Debt to Total Capital

27.97

Total Debt to Total Assets

16.91

Long-Term Debt to Equity

35.34

Long-Term Debt to Total Capital

25.46

www.marketwatch.com

 

 

For class discussion:

Between Nike and GoPro, which company is worth investing? But are you sure? Is GoPro over-valued? Or under-valued? And what about Nike?

 

 

Homework of Week 1 – No homework assignment

 

  FYI:

Below are Benjamin Graham’s seven time-tested criteria to identify strong value stocks.

https://cabotwealth.com/daily/value-investing/benjamin-grahams-value-stock-criteria/

Value Stock Criteria List:

VALUE CRITERIA #1:

Look for a quality rating that is average or better. You don’t need to find the best quality companiesaverage or better is fine. Benjamin Graham recommended using Standard & Poors rating system and required companies to have an S&P Earnings and Dividend Rating of B or better. The S&P rating system ranges from D to A+. Stick to stocks with ratings of B+ or better, just to be on the safe side.

VALUE CRITERIA #2:

Graham advised buying companies with Total Debt to Current Asset ratios of less than 1.10. In value investing it is important at all times to invest in companies with a low debt load. Total Debt to Current Asset ratios can be found in data supplied by Standard & Poors, Value Line, and many other services.

VALUE CRITERIA #3:

Check the Current Ratio (current assets divided by current liabilities) to find companies with ratios over 1.50. This is a common ratio provided by many investment services.

 

 

 

 

 

 

 

 

 

 

 

Balance Sheet Template  

http://www.jufinance.com/10k/bs

 

Income Statement Template  

http://www.jufinance.com/10k/is

 

 

Cash flow template

http://www.jufinance.com/10k/cf

 

 

Ratio Analysis   (plus balance sheet, income statement)

https://www.jufinance.com/ratio

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GoPro Income Statement (values in 000's)

Period Ending:

Trend

12/31/2017

12/31/2016

12/31/2015

12/31/2014

Total Revenue