Learn how to evaluate and compare the ratios of two companies.
- The DuPont framework is named … after a system of ratio analysis … developed over 100 years ago at DuPont … by F. Donaldson Brown. … This framework provides a systematic approach … to identifying general factors … causing ROE to deviate from normal. … The DuPont system also provides a framework … for computation of financial ratios … to yield a more in-depth analysis … of a company's areas of strengths and weaknesses. … Now the insight behind the DuPont framework … is that ROE can be broken out into three components; … profitability, efficiency and leverage. … For each of the three ROE components, … profitability, efficiency and leverage, … there is one ratio that summarizes … a company's performance in that area. … These ratios are as follows. … First, return on sales, … a measure of a company's profitability … is computed as net income divided by sales … and is interpreted as the number of pennies in profit … generated from each dollar of sales. … Asset turnover, a measure of a company's efficiency, …
Released
3/5/2019- Determine the parts of an income statement.
- Review the different parts of a statement of cash flows.
- Analyze common-size financial statements.
- Define ratio analysis.
- Explain current ratio.
- Distinguish the steps in the operating cycle.
- Examine how to determine the day’s sales in inventory.
- Explore how to calculate the average collection period.
- Identify the fundamentals of analyzing cash flows.
- Explore business valuation while examining the intersection of accounting and finance.
Skill Level Beginner
Duration
Views
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Introduction
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1. Quick Review of Financial Statements
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Review of the balance sheet4m 49s
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2. Analyzing Financial Statements
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3. Ratio Analysis: DuPont Framework
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Ratio analysis3m 27s
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Return on equity2m 26s
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DuPont framework4m 52s
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Current ratio4m 12s
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Debt ratio4m 10s
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Price-earnings ratio3m 39s
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4. Ratio Analysis: The Operating Cycle
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The operating cycle3m 46s
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Days sales in inventory3m 49s
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Average collection period3m 31s
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Days purchases in payable3m 28s
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Real world: Procter & Gamble3m 21s
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5. The Statement of Cash Flows
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Analyzing cash flows2m 22s
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What does it tells us?4m 21s
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Cash flow patterns2m 32s
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One method of analysis4m 37s
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Two methods for presentation4m 14s
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6. Forecasting Financial Statements
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The initial assumptions1m 48s
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Forecasted retained earnings2m 25s
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Forecasted assets2m 42s
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7. Intro to Business Valuation
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8. Valuation: Using Multiples
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The Microsoft IPO3m 46s
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Earnings multiples3m 32s
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Equity multiples3m 38s
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Sales multiples4m 23s
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9. Valuation: Free Cash Flows
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Buying the Hong Kong car?2m 26s
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Risk and interest rates3m 44s
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Forecasting cash flows4m 22s
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10. Valuation: Comparing Models
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Brief McDonald's history2m 53s
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McDonald's: The numbers2m 41s
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Conclusion
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Next steps3m 4s
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Video: DuPont framework