![]() Ysom's balance sheet and income statement for 2015 are given as the following. Discount rate is 30%, discount rate for terminal value is 20%. That is, fixed asset is one-third of sales. Interest rate for long term debt is 5%, tax rate is 20%, projected fixed asset turnover ratio is 3. Ysom assumes that its depreciation is 10% of beginning fixed assets. Payout ratio is 20% for 2016, but grows to 45% by 2021. ![]() Sales, general, and other administrative expenses is expected to be 10% of sales next year, but becomes 5% by 2021. As cost of good sold is expected to be 60% of sales next year, but becomes 70% by 2021 as the market is getting competitive. Ysom sales have picked up recently and expected to grow significantly in the near future. ![]() The similar population structure and change are expected in China as well. Ysom expected rapid growth, because of Korean population structure where the number of people over 65 years old increases sharply. Their company manufactured sleep disorder diagnostic instruments. Ysom Incorporation was founded in 2014 by Professor Shin at Yonsei University and Professor Lee at Severance Hospital, which is an affiliated institute of Yonsei University. In this class you're going to review the process of constructing pro forma statement using Ysom example. In addition, using information from pro forma statement and valuation methods, you can do the valuation of a startup. Using pro forma financial statement, you can tell future financial status of a startup as well as cash flows. You can also develop pro forma financial statement using financial ratios. It is like a physical exam for humans and you can tell the fiscal status of a startup using financial ratios. Efficiency ratios measure how efficiently a firm utilizes its assets. Leverage ratios measure how much long-term debt a firm has relative to its assets or equity. Liquidity ratios measure how quickly a firm turns assets into cash to pay-off short-term liability and they include Current Ratio, Quick Ratio, and Cash Ratio. Profitability ratios measure how profitable a firm is by looking at ROS, ROA, and ROE. Using financial ratios such as profitability, liquidity, leverage, efficiency, and growth, you can tell financial health of a startup. In this course, you are going to learn the concepts and usage of financial ratios. However, you have not learned how to estimate cash flows or earnings of startups. In the previous two courses, you have learned how to value startups using the discounted cash flow method and multiple methods.
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