ANSATZPUNKTE DER WERTSCHAFFUNG

In order to interpret the accounts, consider: Profit Capital employed, accruals, cash flow return, NPV, DCF, IRR, ROCE, EBIT, CAPM and CFROI.

The idea behind this model is that the company has earned a profit and additionally invested in the assets of the company which work to increase the value of the firm.

The Gordon Growth Model is used to value a stream of present values which are summed. It is expected that the discount rate ( g ) > ( k ); the firm´s cost of capital.

If the growth rate is changed, the dividend and discount rate should not remain fixed. By growing, it is natural that there are changes that take place to the amount of profit. If a company wants to grow it must reinvest more of its profits. If the company chooses to make dividends, then the trade-off is slower growth.

This trade off is explained by: g = b*R

g = growth

b = proportion of profits reinvested in the Co.

R = return to be made on the new equity.

k = cost of equity

CAPM is used to evaluate the company´s required return on an asset. It is calculated as

Rf + MRP*Beta

Rf = firm´s risk free rate

MRP = Market Return - Firm´s Risk Free Rate

Beta = measure of investment portfolio risk or

covariance with the market

Thinking about the firm´s risk free rate, it is a whole set of numbers applied to a yield curve.

Operative Umsatz Rendite = EBIT

/ UMSATZ

Cash Flow / Umsatz = Cash Flow(vor Steuern)

/ Umsatz

Free Cash Flow / Umsatz = FREE Cash Flow(vor Steuern)

/ Umsatz

Betriebsergebnis ROCE = EBIT

/ AV(Buchwert) + WC (AK/HK)

Kapitalrendite = Betriebsergebnis nach Steuern (NOPAT)

/ Investiertes Kapital

Investiertes Kapital = Buchwert des Anlagevermögens

+ Working Capital

Working Kapital = Umlaufvermögen - Kurzfristige

(Zinslses) Fremdkapital

Kapitalkostensatz = Gewichtete durchschnittliche

Kapitalkosten aus Eigenkapital und

Finanzschulden

M / B Ratio = Investment - Buchwert

/ Unternehmenswert

M/B Ratio = AV(Buchwert) + WC (AK/HK)

/ Unternehmenswert

M/B > 1 Wertschaffend

0 < M/B < 1 Wertvernichtend, trotz evtl. Gewinne

M/B < 0 eindeutiger Verlustbringer | eliminieren

Modells may be made to help glean a picture about revenues, margins, fixed assets and working capital. Minorities and associates still need to be dealt with. In addition, how will assets be financed? Will more debt or equity be needed? What provisions are likely to occur?

Interest received and charged is also an important factor when doing a profit and loss account. But this happens later on after the model has been thoroughly understood.

Provisions -

These may be generally grouped into 3 categories

Pension

Service Cost (Employee Cost = Operating)

Interest (Financial)

Expected Return (Financial)

Deferred Tax

Restructuring

Interest received may be taken as the function of average cash. Interest paid as the function of averyge debt balances for the year. Interest is a function of average debt. Average debt is a function of year-end debt.

Dividends received may be predictable but gains and losses on swaps not. (% of par value, constant payout ratio)

Unleveraged Profit: EBIT + profits from associates + Goodwill impairment (since it is not recoverable against tax)

Business models must take into consideration that provisions booked now may result in negative cash flows at a later point in time.

Business models are made from the B&S and GuV not the Cash Flow Statement. The reason for this is that foreign assets and liabilites are generally translated at closing exchange rates with timing differences going straight to equity as a gain or loss on translation of FX activities. This makes it difficult to fully reconcile historical cash flows with movements in B/S items.

There is a skill to understanding all relationships that apply to particular industries. You can help yourself if you concentrate on some key ratios:

growth rates
margins
capital turns
returns on capital
financial leverage