COMMERCE 3MC3 Lecture Notes - Capital Budgeting, Asset Turnover, Valuation Using Multiples

• School: McMaster University
• Department: Commerce
• Course: COMMERCE 3MC3

Document Summary

Knowing the sources & uses of a firm"s cash flows using statement of financial position (balance sheet) Best uses & pitfalls of ratios as a tool for comparative performance analysis. Trisecting the determinants of a firm"s profitability - du pont analysis. Sources of cash or cash inflow - occurs when we sell something: decrease in asset account other than cash. Uses of cash or cash outflow - occurs when we buy something. Increase in asset account: decrease in liability or equity account. Making a common size balance sheet: compute all accounts as a percent of total assets example: cash balance in 2019 in ; total assets in 2019 is ,588 leads to cash balance of. 98/3,588 = 2. 7% in 2019 common size balance sheet. Making a common size income statement: compute all accounts as a percent of sales. Example: cost of goods sold is ,435; sales is ,311 leads to cost of goods sold of 1,435/2,311.