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Three-period illustrative manufacturer: liquidity, leverage, efficiency and profitability ratios, DuPont, Altman Z, Beneish M and free cash flow

ToolFinancial Ratios and Statement Analysis
SourceU.S. Securities and Exchange Commission (2007). Beginners' Guide to Financial Statements. Office of Investor Education and Advocacy, Washington, DC (ratio definitions); Altman, E. I. (2000). Predicting Financial Distress of Companies: Revisiting the Z-Score and ZETA Models. Stern School of Business, New York University (Z, Z-prime and Z-double-prime coefficients, pp. 13, 25, 27); Beneish, M. D. (1999). "The Detection of Earnings Manipulation." Financial Analysts Journal, Vol. 55, No. 5, pp. 24–36 (M-score coefficients); Higgins, R. C. (1977). "How Much Growth Can a Firm Afford?" Financial Management, Vol. 6, No. 3, pp. 7–16.
LevelUndergraduate

Problem

A manufacturer reports three years of statements (amounts in thousands): revenue 48,000 / 52,500 / 58,200, cost of sales 31,200 / 33,600 / 37,300, operating expenses 9,600 / 10,500 / 11,400, depreciation 1,900 / 2,050 / 2,250, interest 720 / 690 / 760, tax 1,632 / 1,938 / 2,200; current assets 17,000 / 18,800 / 21,100 (cash 2,400 / 2,900 / 3,600, securities 800 / 900 / 1,000, receivables 6,000 / 6,600 / 7,300, inventories 7,200 / 7,700 / 8,400), total assets 34,000 / 36,712 / 40,712, current liabilities 7,400 / 7,800 / 8,600, debt 10,500 / 10,000 / 10,400, total liabilities 18,400 / 18,600 / 19,800, equity 15,600 / 18,112 / 20,912, retained earnings 9,600 / 12,112 / 14,912; cash from operations 6,200 / 7,100 / 8,000, capital expenditures 2,600 / 2,950 / 3,450, dividends 2,900 / 3,300 / 3,800, debt repayments 1,500 / 1,400 / 1,600; 10,000 thousand shares at 9.00 / 10.50 / 12.00. Find the liquidity, leverage, efficiency, profitability, market and growth ratios of each year with average balances, the DuPont decomposition, the common-size statements, the Altman and Beneish scores and the free cash flows for the latest year.

Inputs to Enter

  • Statements pasted with the header FY2023, FY2024, FY2025 (the tool's default); money unit thousands; tax rate 25 %; 365 days; average of opening and closing balances; no benchmarks
Open the Financial Ratios and Statement Analysis tool (loaded with this example)

Answers

  • FY2025 derived lines: gross profit 20,900, EBIT 9,500, EBITDA 11,750, pretax 8,800, net income 6,600; the balance sheet balances and equity rolls forward by net income less dividends
  • Liquidity: current 2.453, quick 1.384, cash 0.535, working capital 12,500.00; leverage: debt to equity 0.497, interest coverage 12.50, DSCR 4.979, net debt 5,800.00
  • Efficiency: asset turnover 1.503, inventory turnover 4.634 (DIO 78.8 days), DSO 43.6, DPO 43.1, cash conversion cycle 79.3 days
  • Profitability: gross margin 35.91 %, operating 16.32 %, net 11.34 %, ROA 17.05 %, ROE 33.83 %, ROIC 23.98 % (NOPAT 7,125.00 on invested capital 29,712); DuPont 11.34 % × 1.503 × 1.984 = 33.83 % (three and five steps identical)
  • Market: EPS 0.66, P/E 18.18, EV 125,800.00, EV/EBITDA 10.71, dividend yield 3.17 %, payout 57.58 %; sustainable growth 15.46 %, internal growth 7.39 %; revenue CAGR 10.11 %
  • Altman Z = 6.717 (safe zone), Z′ = 3.126, Z″ = 5.885; Beneish M = −2.496 (below −1.78); FCFF = 8,000 + 760 × 0.75 − 3,450 = 5,120.00, FCFE = 4,950.00

Notes

The tool's default inputs are this company (illustrative, invented and stated so on the page); press Submit. Every ratio is checked by test_financial_ratios.php against an independent numpy implementation (12,394 values on the default, the Apple FY2021–2023 10-K statements and 20 seeded statements) and by hand from the closed forms; the Apple example reproduces the 10-K's printed diluted EPS 6.13 / 6.11 / 5.61, effective tax rates 14.7 / 16.2 / 13.3 % and gross margins 44.1 / 43.3 / 41.8 %.