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Mastering Cash Flow and Valuation Modelling by Alastair Day

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10

Ratios

Method

Common size analysis

Core ratios

Profitability

Operating efficiency

Financial structure

Cash flow

Debt coverage

Growth

Market ratios

Summary

METHOD

This chapter sets out a workable ratios method for analysing and evaluating the accounting statements. With the accounts in a standardised format, you can then code templates to analyse the figures. The framework in Figure 10.1 shows the process of examining the strategy followed by the management and the results for both financial analysis and valuation purposes. You need to try to understand the factors that can influence the cash flow and assess the potential level of risk or downside. Whilst the absolute ratios will vary by industry and country, you need to assess whether the ...

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