1. FINANCIAL ANALYSIS MOOC WITH MARC BERTONECHE
LIVE SESSION #2
WEDNESDAY MARCH 5TH 2014
INTRODUCTION

2. FINANCIAL ANALYSIS MOOC WITH MARC BERTONECHE
LIVE SESSION #2
WEDNESDAY MARCH 5TH 2014
AGENDA OF THE LIVE SESSION

3. FINANCIAL ANALYSIS MOOC WITH MARC BERTONECHE
LIVE SESSION #2
WEDNESDAY MARCH 5TH 2014
A few statistics on the MOOC
 3 500 participants
 67 different nationalities represented mainly
in France, United-States, North Africa and
 Of which 64% are professionals Asia:
and 36% are students
Countries
26.1 %
United-States
14.2 %
6.4 %
China
6.0 %
Morocco
5.9 %
India
Source: “Get to know you better” quiz
Europe
Tunisia
 50% participation to the « Get
to know you better » quiz
4.2 %

4. FINANCIAL ANALYSIS MOOC WITH MARC BERTONECHE
LIVE SESSION #2
WEDNESDAY MARCH 5TH 2014
Tips on FIRST BUSINESS MOOC platform
 Videos
 PDF Courses
 Quiz
 Badges
 Forums
 Apple vs Samsung application

5. FINANCIAL ANALYSIS MOOC WITH MARC BERTONECHE
LIVE SESSION #2
WEDNESDAY MARCH 5TH 2014
Samsung vs Apple Forum

6. FINANCIAL ANALYSIS MOOC WITH MARC BERTONECHE
LIVE SESSION #2
WEDNESDAY MARCH 5TH 2014

7. FINANCIAL ANALYSIS MOOC WITH MARC BERTONECHE
LIVE SESSION #2
WEDNESDAY MARCH 5TH 2014

8. FINANCIAL ANALYSIS MOOC WITH MARC BERTONECHE
LIVE SESSION #2
WEDNESDAY MARCH 5TH 2014
GREMLIN CASE STUDY

9. FINANCIAL ANALYSIS MOOC WITH MARC BERTONECHE
LIVE SESSION #2
WEDNESDAY MARCH 5TH 2014
REMINDERS ON FIXED ASSETS
Definition
 Any kind of asset that can’t be easily converted into cash (in theory!!)
 Or better assets which are used on several operating cycles
 e.g. factories, office buildings, computer servers
The following questions should guide investment analysis:
 What is the state of the company’s plant and equipment?
 What is the company’s capital expenditure policy?
 What are the cash flows generated by these investments?

10. FINANCIAL ANALYSIS MOOC WITH MARC BERTONECHE
LIVE SESSION #2
WEDNESDAY MARCH 5TH 2014
Fixed Asset Turnover Ratio
Sales x 365
Ratio
Net Fixed Assets
Assets
In thousands of Euros
Intangibles
Income Statement
1 996
1 997
1 998
0
0
193
Net plant and equipment
816
1 738
2 215
Net fixed assets
816
1 738
2 408
Inventories at manufacturing stage
539
2 009
4 283
Finished goods inventories
430
603
852
Total inventories
969
2 612
5 135
Accounts receivable
919
1 306
5 567
50
351
567
1 000
2 000
-
95
50
5
3 849
8 057
13 682
Other receivables
Short-term investments
Cash and equivalents
Total assets
Sales
Net fixed assets
Fixed asset turnover ratio
Source: GREMLIN case
In thousands of Euros
Sales
Cost of goods sold
Gross Margin
Distribution and marketing expenses
Administrative expenses
Operating Income
Financial income
Financial expenses
Income before Exceptional Items
Exceptional income
Income taxes
Net Income
Dividends
Net Income Available to Common
Stockholders
1996
7 545
816
9.25
1997
9 995
1 738
5.75
1996
7 545
3 247
4 298
798
1 627
1 873
39
1
1 911
679
1 232
440
1997
9 995
4 480
5 515
961
2 319
2 235
24
33
2 226
74
712
1 440
496
1998
17 738
9 637
8 101
2 427
2 913
2 761
27
87
2 701
804
1 897
496
792
944
1 401
1998
17 738
2 408
7.37

11. FINANCIAL ANALYSIS MOOC WITH MARC BERTONECHE
LIVE SESSION #2
WEDNESDAY MARCH 5TH 2014
CAPEX to Depreciation Ratio
CAPEX
Ratio
Depreciation
Gremlin Consolidated Cash Flow Statement
1996
Net Profit
1 232
Depreciation
207
Gains or losses on Fixed Asset disposals
Internally Generated Funds (1)
1 439
Change in Inventories
672
Change in Receivables
19
Change in Payables and other Accruals
679
Change in Net Working Capital (2)
12
Cash Flow from Operations (1)–(2) = (3)
1 427
Asset disposals
Capital Investments
397
Cash Flow from Investing Activities (4)
-397
Free Cash Flow before Financing Activities (3)+(4)
1 030
Share issue
Dividends
400
Decrease (Increase) of Net Financial Debt
630
Net Financial debt beginning of the year
-465
Net Financial Debt end of the year
-1 095
In thousands Euros
+
+/=
+
=
+
=
+
=
Capital expenditure
Depreciation
CAPEX to depreciation ratio
Source: GREMLIN case
1996
397
207
1.92
1997
1 440
519
74
2 033
1 643
688
689
1 642
391
113
1 628
-1 515
-1 124
1 975
440
411
-1 095
-1 506
1997
1 515 (1 628 – 113)
519
2.92
1998
1 897
653
2 550
2 523
4 477
1 906
5 094
-2 544
1 323
-1 323
-3 867
49
496
-4 313
-1 506
2 807
1998
1 323
653
2.03

12. FINANCIAL ANALYSIS MOOC WITH MARC BERTONECHE
LIVE SESSION #2
WEDNESDAY MARCH 5TH 2014
REMINDERS ON NET WORKING CAPITAL
The concept
 Difference between the cyclical needs and the cyclical resources
 e.g., when do I pay my suppliers ? When do I get paid by my clients ?
Characteristics of the Net Working Capital





Sensitive to the activity of the company
Liquid and permanent
Often seasonal
Sensitive to the closing period
Function of the company bargaining position vs its customers / suppliers

13. FINANCIAL ANALYSIS MOOC WITH MARC BERTONECHE
LIVE SESSION #2
WEDNESDAY MARCH 5TH 2014
Net Working Capital Ratio
Assets
Liabilities
1996
Intangible fixed assets
Tangible fixed assets
Net fixed assets
Stocks
of
products
manufactured
Stocks of finished goods
Total inventories
Accounts receivable
0
816
816
being
Other receivables
Short-term investments
Cash and equivalents
Total assets
Inventories
+ Accounts Receivable
- Accounts Payable
= Net Working Capital
Source: GREMLIN case
1996
Capital
Share premium
Réserves
539
Retained earnings
430
969
919
Total shareholders’ equity
Accounts payable
Other Payables
Bank debt due within one
year
Long term debt
Leasing
Total debts
Total liabilities and equity
50
1 000
95
3 849
1 000
500
181
832
969
+ 969
- 1 336
602
2 513
557
779
1 336
3 849

14. FINANCIAL ANALYSIS MOOC WITH MARC BERTONECHE
LIVE SESSION #2
WEDNESDAY MARCH 5TH 2014
Net Working Capital Ratios
Assets
Liabilities
1997
1998
1997
1998
0
193
Capital
1 200
1 202
Tangible fixed assets
1 738
2 215
Share premium
2 275
2 322
Net fixed assets
1 738
2 408
Réserves
1 573
2 815
Stocks of products being manufactured
2 009
4 283
Retained earnings
440
600
603
852
5 488
6 939
Total inventories
2 612
5 135
Accounts payable
603
2 327
Accounts receivable
1 306
5 567
Other Payables
1 422
1 604
351
567
Bank debt due within one year
44
2 247
2 000
-
Long term debt
500
500
50
5
Leasing
-
65
8 057
13 682
Total debts
2 569
6 743
Total liabilities and equity
8 057
13 682
Intangible fixed assets
Stocks of finished goods
Other receivables
Short-term investments
Cash and equivalents
Total assets
Inventories
+ Accounts Receivable
- Accounts Payable
= Net Working Capital
Source: GREMLIN case
Total shareholders’ equity
1997
2 612
1 657
- 2 025
2 244
1998
5 135
6 134
- 3 931
7 338

15. FINANCIAL ANALYSIS MOOC WITH MARC BERTONECHE
LIVE SESSION #2
WEDNESDAY MARCH 5TH 2014
Working Capital Turnover Ratio
Ratio
Net Working capital x 365
Sales
Net working capital
Sales
Working capital turnover ratio
Source: GREMLIN case
1996
602
7 545
29 days
1997
2 244
9 995
82 days
1998
7 338
17 738
151 days

16. FINANCIAL ANALYSIS MOOC WITH MARC BERTONECHE
LIVE SESSION #2
WEDNESDAY MARCH 5TH 2014
Days of Sales Outstanding (DSO)
Ratio
Account Receivables
Sales
DSO
Source: GREMLIN case
Accounts receivable x 365
Sales
1996
919
7 545
45 days
1997
1 306
9 995
48 days
1998
5 567
17 738
115 days

17. FINANCIAL ANALYSIS MOOC WITH MARC BERTONECHE
LIVE SESSION #2
WEDNESDAY MARCH 5TH 2014
Days’ payables outstanding (DPO)
Ratio
Payables
Cost of sales
DPO
Source: GREMLIN case
Accounts payable x 365
Annual purchases (or cost of sales)
1996
1997
1998
1 336
2 025
3 931
3 247
4 480
9 637
150 days 165 days 140 days

18. FINANCIAL ANALYSIS MOOC WITH MARC BERTONECHE
LIVE SESSION #2
WEDNESDAY MARCH 5TH 2014
Days of Sales in Inventory (DSI)
DSI =
Total Inventory x 365
Annual cost of sales
1996
Total inventories
Cost of sales
DSI
Source: GREMLIN case
1997
1998
969
2 612
5 135
3 247
4 480
9 637
109 days
213 days
194 days

19. FINANCIAL ANALYSIS MOOC WITH MARC BERTONECHE
LIVE SESSION #2
WEDNESDAY MARCH 5TH 2014
Focus on the evolution of the inventory
(In thousand of Euros)
Semi-finished products or WIP
Finished goods
Total Inventory
Source: GREMLIN case
1996
539
430
969
1997
2 009
603
2 612
1998
4 283
852
5 135

20. FINANCIAL ANALYSIS MOOC WITH MARC BERTONECHE
LIVE SESSION #2
WEDNESDAY MARCH 5TH 2014
Recap of the ratios
1996
NWC
Turnover
DSO
DPO
DSI
Working capital
Sales
Receivables
Sales
Payables
Cost of sales
Inventory
Cost of sales
Source: GREMLIN case
1997
1998
X 365 days
29 days
82 days 151 days
X 365 days
45 days
48 days 115 days
X 365 days
150 days 165 days 140 days
X 365 days
109 days 213 days 194 days

21. FINANCIAL ANALYSIS MOOC WITH MARC BERTONECHE
LIVE SESSION #2
WEDNESDAY MARCH 5TH 2014
QUESTIONS ABOUT GREMLIN CASE

22. FINANCIAL ANALYSIS MOOC WITH MARC BERTONECHE
LIVE SESSION #2
WEDNESDAY MARCH 5TH 2014
Week 1 and Week 2
Quiz Review

23. FINANCIAL ANALYSIS MOOC WITH MARC BERTONECHE
LIVE SESSION #2
WEDNESDAY MARCH 5TH 2014
Questions