Midterm Financial Statement Analysis PDF

MIDTERM Indirect Method is calculated by adjus ng net income by adding or subtrac ng differences resul ng from non-cash Analysis to Financial Statement...

MIDTERM Indirect Method is calculated by adjus ng net income by adding or subtrac ng differences resul ng from non-cash Analysis to Financial Statement transac ons. Financial Statement are intended to provide informa on It is a way to present data how much money a company on the resources available to management , how these spent during a certain period of me and what are the resources were financed, and how the firms u lized. sources. Financial statements provide relevant informa on to the Three sec ons of cash flow current period and compara ve figures for the previous year to demonstrate how the financial performance and 1. Cash flow from opera ng expenses posi on of the company have changed. Example: Cash generated from sale of goods It consist of statement of profit or loss, statement of (revenue), cash paid for merchandise (expense), financial posi on (balance sheet), statement of changes payment to suppliers, wages, cash payment on interest in equity, and a statement of cash flow. on loans in banks and bonds, cash receipts from royal es, fees and commissions, cash received form customer. Balance Sheet 1. Cash flow from inves ng ac vi es The balance sheet shows what resources (assets) the 2. Cash flow from financing ac vi es firm controls and how it has financed these assets. Cash flow from opera ng ac vi es It indicates the current and fixed assets available to the firm at the end of the fiscal year. It shows the lists of sources and uses of cash that arise from normal opera ons of a firm. How the firm has financed the acquisi on of these assets is indicated by its mixture of current liabili es (accounts It is calculated as the net income reported on the payable or short-term borrowings), long-term liabili es statement of profit or loss including changes in net (fixed debt and leases) and owners’ equity (preference working capital items (i.e.receivables, inventories and so shares, ordinary shares and retained earnings). on) plus adjustment for non-cash revenues and expenses (such as deprecia on) ABC Group Consolidated Balance Sheet Opera ng Ac vi es: Statement of Profit and Loss The statement of profit or loss contains informa on of the firm during some period of me (a quarter or a year) Statement of Cash Flow 1. Receiving money of from sales Statement of cash flow integrates the effects on the 2. Collec on of accounts receivable firm’s cash flow of income flows (based on the recent 3. Receipt of payment of interest years’ statement of profit or loss) and changes on the balance sheet (based on the two most recent annual 4. Payments for materials and supplies balance sheet). 5. Payments of salaries Analysts use cash flow values to es mate the value of a 6. Payment of principal and interest for opera ng firm and to evaluate the risk return of the firm’s bonds leases and shares. 7. Payment of taxes, fines and license cost Direct Method uses cash inflow and ou low directly taken from company’s opera on. It measures cash as it received or paid rather using the accrual accoun ng method. It focuses on payment received from customers and money paid to suppliers. Cash flow from inves ng ac vi es A firm makes investment both from it’s own non-current and fixed assets and the equity of other firms (which may be subsidiaries or joint ventures of the parent firm; they are listed in the investments account of the balance sheet) Increase and decrease in these non-current accounts are considered investment ac vi es. The cash flow from inves ng ac vi es is the change in gross plant and equipment plus the change in the investment account. They are posi ve if changes are source of funds (sale of plant and equipment) Inves ng ac vi es Ou low: Purchase of PP&E including so ware and website development Ou low: Purchase of marketable securi es Ou low: Acquisi ons, net of cash acquired Inflow: Proceeds from the sale of property plant and equipment Inflow: Proceeds from the sale securi es Cash flow from financing ac vi es Risk Analysis Cash flow are created by increasing notes payable and long term liability and equity accounts, such as bond and 1. Business Risk share issues. It implies the variability in the financial performance The total cash flows from opera ng, inves ng and of a firm caused by uncertainty around revenues. The financing ac vi es are the net increase or decrease in the uncertainty varies according to the type of the firm, firm’s cash. While the firm has strong cash flow from product and typical customer profile. The vola lity of opera on, it experienced a larger cash ou low for opera ng income is due to : 1.) the vola lity of sales investments due to asset acquisi on and an ou low from over me (2) how the firm produces its products in financing caused by payments of long term borrowing terms of its mix of fixed costs and variable costs. A and a pay-down in its dividend firms opera ng income vary over me because of its sales and produc on cost vary. An example, the earnings of a steel firm will probably vary from those of a grocery chain because: (1) over the business cycle steel industry sales is more vola le grocery sales (2) the steel firms has large produc on cost (high opera ng leverage)makes its opera ng earnings vary more than its sales. 2. Financial Risk The process required es mates of: (1) the stream of expected returns (2)the required rate of return on the When a firm sells bonds to raise capital, the interest investment (it’s discount rate) payment on this capital precede the calcula ons of earnings on ordinary shares, and interest payments Valua on is useful when trying to determine the fair are fixed contractual obliga ons. During economic value of a security, this could be determined based on the expansion the net earnings available for ordinary willingness of the buyer to buy and the willingness of the shares a er the fixed interest payments will seller to sell. experience larger percentage increase than When securi es are traded, both sellers and buyers opera ng earnings. In contrast during business determined the market value of stock or bonds decline the earnings available to shareholders will decline by a larger percentage than opera ng The intrinsic value refers to the perceived value of a earnings because of the fixed financial cost (interest security based on future earnings, analysts do the payments). valua on to determine if the financial instrument is overvalued or undervalued by the market. Rela onship between risk and financial risk The fair value is the actual value (nominal) of an asset- a The acceptable level of financial risk depends on its product, stock, or security that is agreed upon by both business risk. It the firm has low business risk (stable seller and the buyer. opera ng risk) investors are willing to accept higher financial risk. For example in food industry typically Investment Decision Process have stable opera ng earnings over me, which implies low business risk, the investors and Investor must es mate the intrinsic value of investment bondra ng firms will allow the firm to have higher at your required rate of return and then compared it to financial risk. If a firm is in a high financial risk, like the prevailing market price. steel, auto and airline companies (high sales vola lity You should not buy investment if its market price exceeds and its high opera ng leverage) investors would not your es mated value because the difference will prevent want these firms to also have high financial risk. you from receiving the expected rate of return. SUMMARY: FINANCIAL STATEMENT ANALYSIS If the es mated intrinsic value is greater than market The overall purpose of financial statement analysis is to price; buy or hold if you own it help investors decides on inves ng in a firm’s bonds or If es mated intrinsic value is less than market price, don’t shares buy or sell it if you own it Financial ra os should be examined rela ve to the Valua on of different types of Investments economy, firms industry, the firms compe tors and the firms past rela ve ra os Valua on of Bonds: Bond promises the following The specific ra os can be divided into four categories 1. Interest payment every six months equal to one- depending on the purpose: liquidity, opera ng half the coupon rate mes the face value of the performance, risk analysis and growth analysis bond Security Valua on 2. The payment f the principal on the bond’s maturity date Security valua on refers to the process of determining the fair or intrinsic value of a financial security, such as As an example: in 2012, a $10,000 due on2027 with stocks, bonds, op ons, or other investment instruments. a 10 percent coupon will pay $500 every six months The purpose of security valua on is to assess whether a for its 15 year life. In addi on the bond issuer security is overvalued, undervalued, or fairly priced in the promises to pay $10,000 principal at maturity in market. 2027. Applying the Valua on Theory which states that the value of any assets is the the present value of its cash flow – the value of a bonds is the present value of its interest payments, the annuity of $500 every six months for 15 years and the present value of $10,000 at the end of 15 years. The present value of the semi annual interest payments is an annuity for 30 periods (15 years every six months) at one-half the required return (5 percent)4 This is the amount that an investor should be willing to pay for s bond, assuming that the required rate of return on a bond of this risk is 10 percent. If the market price of the bond is above this value, the investor should not buy it because the promise yield to maturity at this price will be less than the investor’s required rate of return. Valua on of preference shares The owner of preference shares receives a promise that it will pay a stated dividend for an infinite period. Preference shares are a perpetuity because they have no maturity. They require a higher return than bonds. Because they are perpetuity, the value is simply the stated dividend divided by the required rate of return on preference shares (kp) V = Dividend Two Categories of Valua on Kp Absolute Valuation models determine the intrinsic value or “true” value of an investment that focus only on Consider preference shares with a $100 par value and a dividends, cash flow, and the growth rate of the company dividend of $8 a year. Because of the expected rate of without being affected by the performance of other infla on and the uncertainty of the dividend payment, companies. assume that your required rate of return on these shares is 9 percent. The value of your preference shares is: Relative Valuation Model involves calcula ng mul ples and comparing them to the mul ples of similar companies. For example, if the P/E of a company is lower than the P/E mul ple of a comparable company, the original company might be considered undervalued. You would compare this es mated value with the current Terminal Growth Rate price to decide whether you would want to buy these is the constant rate that a company is expected to grow preference shares. If the current market price is $95 you at forever. It is the value of an asset or business beyond would decide against the purchase, whereas if it is $80 the forecasted period when future cash flows can be you would buy the shares. Assuming a current market es mated. price is $85, the promise yield would be: Why and when to use the discounted cash flow valua on First, dividend technique is the most straigh orward measure because these are cash flow that go directly to the equity of the investor which implies the cost of equity as the discount rate.. However it is difficult to apply to BONDS firms that do not pay dividends during high growth periods. A Bond is a debt instrument that provides a periodic stream of interest payments to investors while repaying Second, the operating free cash flow , it is the cash flow the principal sum on a specified maturity date. A bond’s a er direct cost (cost of goods a er selling, general and terms and condi ons are contained in a legal contract administra ve expenses) and a er allowing for cash between the buyer and seller known as the indenture. flows to support working capital outlays and capital expenditures required for future growth, but before A bond indenture is a legal document or contract payment to the suppliers of capital. between the bond issuer and the bondholder that records the obliga ons of the bond issuer and the benefit Third, Free cash flow to equity, this is similar to opera ng owed to the bondholder. Bond indenture are not issued free cash flow, but a er payment to debt holders which to individual bondholder but issued to a third party means these re cash flows available to equity holders. represen ng the bondholders, the trustee could be a bank or financial ins tu on. Therefore the appropriate discount rate is the firms cost of equity. It is the return that the company requires to If the company (issuer) breaks the agreement set forth, decide if an investment meets capital return the trustee (bank) can sue the company in behalf of the requirements. bondholders. Key Bond Characteris cs includes: a) Face Value The face value (also known as the par value) of a bond is the price at which the bond is sold to investors when first issued; it is also the price at which the bond is redeemed at maturity. b) Coupon Rate The periodic interest payments promised to bondholders are computed as fixed percentage of the bond’s face value. C.) Coupon Bondholders receive their principal (the face value) back, and the bond contract is fulfilled. A bond’s coupon is the dollar value of the periodic interest payment promised to bondholders; this e. Call Provision equals the coupon rate mes the face value of the A call provision, also known as a call op on, is a bond. For example, if a bond issuer promises to pay feature in some bonds that allows the issuer (the an annual coupon rate of 5% to bond holders and the company or en ty that issued the bond) to redeem face value of the bond is $1,000, the bond holders or "call" the bonds before their maturity date. When are being promised a coupon payment of a bond has a call provision, it typically includes details (0.05)($1,000) = $50 per year. about when and under what condi ons the issuer d) Maturity can exercise this op on. The issuer may decide to call the bonds if prevailing market condi ons make it A bond’s maturity is the length of me unit the advantageous for them to do so. Here's an example principal is scheduled to be repaid. of a call provision in bonds: e) Call Provisions It contains a provision that enables the issuer to buy the Maturity bond back from the bondholder. A bond’s maturity is the length of me unit the A bond containing a call provision is said to be callable. principal is scheduled to be repaid. This provision enables issuers to reduce their interest costs if rates fall a er a bond is issued, since exis ng Bond Issuer: XYZ Corpora on bonds can then be replaced with lower yielding bonds. Bond Name: XYZ Corpora on 5% 10-Year Bonds Since a call provision is disadvantageous to the bond Face Value: $1,000 per bond holder, the bond will offer a higher yield than an otherwise iden cal bond with no call provision. Coupon Rate: 5% XYZ Corpora on 5% 10-Year Bonds Issue Date: January 1, 2023 Face Value: $1,000 per bond Maturity Date: January 1, 2033 Coupon Rate: 5% In this example: Maturity Date: August 1, 2030 XYZ Corpora on issued these bonds on January 1, 2023. Call Provision: The face value of each bond is $1,000, which is the The call provision in these bonds states that the amount that the bondholder will receive at maturity. issuer, XYZ Corpora on, has the op on to call the bonds beginning on August 1, 2025, and any me The coupon rate is 5%, indica ng that bondholders therea er un l the maturity date of August 1, 2030. will receive annual interest payments of 5% of the face value, or $50 per year ($1,000 * 0.05). Call Price: The bonds have a maturity date of January 1, 2033, The call provision also specifies the call price, which which is when they will reach their full term. is the amount XYZ Corpora on must pay to bondholders if they decide to call the bonds. On the maturity date, which is January 1, 2033, bondholders will receive the face value of the bond, In this case, the call provision states that the call price which is $1,000, as well as any final interest payment will be $1,050 per bond if the bonds are called on or if it hasn't been paid out already. a er August 1, 2025, but before August 1, 2026. A er the bonds mature, they cease to exist, and the If called on or a er August 1, 2026, and before issuer is no longer obligated to make interest August 1, 2027, the call price will be $1,025 per bond. payments to bondholders.  A er August 1, 2027, the bonds can be called at their Face Value: $1,000 per bond face value of $1,000 per bond. Coupon Rate: 4% Call Schedule: Maturity Date: December 31, 2025 August 1, 2025 - August 1, 2026: $1,050 per bond Put Provision: August 1, 2026 - August 1, 2027: $1,025 per bond The put provision in these bonds states that the A er August 1, 2027: $1,000 per bond bondholder has the op on to put (sell) the bonds back to ABC Corpora on at any me during the Reasons for the Call Provision: period from December 31, 2023, to December 31, XYZ Corpora on may decide to call these bonds if 2024. A er December 31, 2024, the put op on market interest rates have fallen significantly since expires, and the bondholder can no longer exercise the bonds were issued. By calling the bonds and this right. issuing new bonds at lower interest rates, the Put Price: company can reduce its interest expense and lower its overall borrowing costs. The put provision also specifies the put price, which is the amount ABC Corpora on must pay to the bondholder if This can be financially advantageous for the issuer they decide to exercise the put op on. but poten ally less favorable for bondholders, as they may need to reinvest their funds in a lower- In this case, the put price is set at $1,020 per bond. If the yielding environment. bondholder decides to put the bonds back to the issuer, they will receive $1,020 per bond in return. Investors must carefully consider the call provisions when purchasing callable bonds, as they can affect the Reasons for the Put Provision: expected yield and return on the investment. The put provision benefits the bondholder by Understanding the call schedule and the condi ons providing them with an exit strategy. under which the bonds can be called is crucial for making If market interest rates rise significantly a er informed investment decisions. purchasing the bonds, the bondholder can exercise Put Provisions the put op on and sell the bonds back to ABC Corpora on at the predetermined put price of Some bonds contain a provision that enables the $1,020 per bond. buyer to sell the bond back to the issuer at a pre- specified price to maturity. The price is known as the This can be advantageous for the bondholder, as it put price. allows them to avoid holding a bond with a below- market interest rate in a rising rate environment. A bond containing such a provision is said to be putable. This provision enables bond holders to Suppose an investor purchases these ABC Corpora on benefit from rising interest rates since the bond can bonds in 2023 when market interest rates are 4%. In be sold and the proceeds reinvested at a higher yield 2024, market interest rates rise to 5%. than the original bond. At this point, the bondholder can choose to exercise the It is a feature in some bonds that allows the bondholder put op on and sell the bonds back to ABC Corpora on (the investor who holds the bond) to sell the bond back for $1,020 per bond, realizing a gain and avoiding the to the issuer or a third party at a specified price before lower interest rate associated with the bond. the bond's maturity date. This provides the bondholder with the flexibility to sell the bond if certain condi ons are met. ABC Corpora on 4% 5-Year Bonds  Dollar-denominated bonds issued in the U.S. by foreign en es are known as Yankee Bonds. Foreign bonds are mainly used to provide corporate or sovereign issuers with access to another capital market outside their domes c market to raise capital. How to calculate Bond Value? Bond is a debt instrument that pays a fixed amount of interest un l maturity, and the principal amount upon Boracay- Aklan Provincial Bonds maturity. Assume for example, that IBM issues a $1,000,000 6% bond due in 10 years. They pays interest semi-annually. $1,000,000 is the face amount or the principal amount of the bond. That is the amount that must be repaid by the issuer (IBM) at maturity. IBM (the issuer) must repay the $1,000,000 to the investors at the end of 10 years The bond pays interest of ($1,000,000 mul plied by 6%), Puerto Princesa Green Bonds or 60,000 per year. Since the bond pays interest semiannually, the issuer must take two payments of Corporate Bonds 30,000 semi-annually. Corpora ons use bonds as an alterna ve to stocks in Valua on of Stocks raising capital. Examples of companies in the Philippines regularly issuing corporate bonds include Ayala Corpora on, Globe Telecom, JG Summit Corpora on, Filinvest Land Corporate bonds offer a higher coupon rate than Treasuries, but expose investors to default risk. Default risk is a risk that a lender takes in the chance that the borrower failed the required obliga on. Treasury bills- the maturity is one year or less; the currently available maturi es are 4 weeks, 13 weeks, 26 Valua on of stocks is the process of determining the weeks and 52 weeks. Treasury bills are sold at a discount intrinsic value of a share of common stock of a company. from their face value and redeemed at face value Intrinsic Value measure of what an asset is worth that is Treasury notes – the maturity ranges between 1 and 10 arrived at by means of calcula on or complex financial years; currently available maturi es are 2,3,5,7 and 10 model, rather than using the currently trading market years. Treasury notes and bonds are sold and redeemed price of that asset. at face value and pay semi-annual coupons to investors How to calculate intrinsic value? (Discounted Cash Flow) Treasury bonds – the maturity ranges between 20 and 30 DCF analysis, cash flow are es mated based on how a years; the currently available maturity is 30 years. business may perform in the future. Those cash flow are Foreign bonds are issued by foreign governments and discounted to today’s value to obtain the intrinsic value. corpora ons and are denominated in dollars. The discount rate used is o en a risk free rate of return Finally, combine the first ten years of discounted cash of 30 year Treasury bonds. value with the terminal cash flow for the intrinsic value. DCF Formula : $2439.51 + $4262.21 = $6703.72 Compared to ABC Co. current share price of $3,000, the intrinsic value of $6701.72 indicate the stock is undervalued and is worth considering as an investment. Discounted Cashflow The DCF method calculates the intrinsic value of a stock is calculated by discoun ng the company’s free cash flows to its present value. DCF is a valua on method used to es mate the value of an investment based on its expected future cash flow. The earnings available to investors from ABC company as cash-flow is $200 (a er deduc ng deprecia on and DCF Analysis atempts to figure out value of an subtrac ng capital expenditures) for that latest year. For investment today, based on projec ons of how much that hypothe cal P/E mul ple for the S&P 500 is 15, money it will generate in the future. Acme per share market value is $3,000 (15 x $200). Use Stocks: Defini on and Concept that figure for the comparison to intrinsic value. A stock (also known as equity) is a security that Using an es mated growth rate of 7%, the es mated cash represents the ownership of a frac on of a corpora on. flow for each of 10 years is: This en tles the owner of the stock to a propor on of the corpora on’s assets and profits equal to how much stock they own. Ownership of a small piece of company is called share and en tled to the earnings (dividends) and ownership Next we discount these cash flow using a theore cal 30 of assets of the company, also they are responsible for year T-Bond rate of 3.3%. Use the discounted cash flow the risk involve in the investment. formula for each year. The first year is C/F +r. The discounted cash flow for each ten year is: Types of Stocks 1. COMMON STOCKS Preemptive Right allows stockholders to subscribe to any new issue of stock so that they can maintain their previous frac on of the total number of authorized and issued shares. The total discounted cash flow is $2439.51 Common Stocks ownership grants the stockholders the right to sell the stock in the secondary market, either The common way to es mate the terminal value is to through a public exchange (PSE) or in a private mul ply the earnings in the final year of the projec on transac on. period by a mul ple of 15. Example: Mr. Forde owns 52% of the outstanding shares That’s $393.43 x 15 = $5897.10. The amount discounted of the Forde Corpora on and is Chairman of the Board. is $4262.21 If the Forde Corpora on sells a new stock issue that (5897.10/1.03310) doubles the number of shares outstanding, Mr. Forde’s share of ownership and control of the new larger number of outstanding shares diminishes to what percent if he however, the existence of preemp ve rights depends on does not exercise a preemp ve right that allows him to the law of the state where the corpora ons is chartered buy 52 percent of the new issue? and on the provisions of the company’s ar cles of corpora on. Solu on: Assume that the company has 100 shares outstanding. If the number of shares double, then, 200 Cash dividends from Preferred Stocks – Preferred will exist. Mr. Forde owns 52 percent of the original Stockholders is en tled to a dividend whether or not the shares or 52 shares. This is 26% of the total shares a er firm earns called as cumula ve cash dividend clause. the number of shares doubled (52/200 =.26 or 26%) If corpora ons misses a part of a preferred dividend it Cash Dividends - Common stockholders have the right to must be paid in the preceding year before common par cipate in the profits of the company through stockholders dividends can be paid. dividends payment. Rapidly growing corpora ons pay Example: The Baker Corpora on was unable to meet its litle or no cash dividends in order to retain as much $6 per share preferred dividend one year because of cash capital as possible to finance internal growth. shortages. Voting Rights They have the right to vote at the annual As a result, The Baker Corpora on’s cumula ve company’s mee ng, they also have the power to vote preferred stocks in arrears for $6 per share. against major issues (such as mergers and expansion to a new product line). In case that they cannot atend for the At the end of its next year the Baker Corpora on has $8 annual mee ng they can send a proxy to vote the proxy of earnings per share that it can disperse as cash signer and they have the right to the company’s dividends, and all $8 must go to the preferred stock remaining assets if the company goes out of bankruptcy. (rather than $5 to preferred and $3 to common) A er this $8 payment, how much will the firm s ll be in arrears to The residual claim of the common stockholders that all its cumula ve preferred stockholders? bills (such as employees’ wages, suppliers bills, and bondholders’ interest) are paid first before the common Solu on: The Baker Corpora on must pay the $6 stockholders can claim of whatever assets remain from preferred dividend in arrears plus the current dividend of the bankrupt opera on. $6 for a total of $12. Therefore, a er the $8 to preferred stockholders, it is s ll $4 in arrears. 2. PREFERRED STOCKS How are stocks traded in the Secondary Market Preferred stocks has characteris cs of bond and common stocks; it some mes referred to as Hybrid Security, they Stocks are first issued in a “Primary Market” receive preferen al treatment over common through the Ini al Public Offering. stockholders (but not over bondholders in certain aspects) Once issued they are traded in a Secondary Market. These include organized exchange such as Preferred stockholders receive two primary advantages Philippine Stocks Exchange and Over the Counter (OTC) over common stockholders (1) a er-tax earnings in the market. form of dividends cannot be paid to common stockholders unless the preferred cash dividends have Market are organized to provide: liquidity (the already been paid. ability to trade without delay at rela vely low cost and in rela vely high quan es), transparency (availability of Preferred stockholders receive a prior claim on the mely and accurate market and trade informa on), corpora ons assets in the event of a bankruptcy. assurance of completion(trades setle without problem Preferred stockholders receive a greater rate of return in any market condi on, trade settlement( involves the than bondholder as they assume a higher risk. buyer’s payment for the asset purchased and the transfer of ownership). Preemp ve Right Common laws gives both common and preferred shareholders has the right to subscribe addi onal shares to maintain their propor onate share of ownership, Ways of Organized Trading: 2. Order – driven markets -member of the public trade with one another without the intermedia on of dealers. Quote Driven (or dealer) markets – members of the public trade with dealers. More compe on of orders because a trader does not have to transact with a dealer. Prices can be established through dealers at which securi es can be bought and sold. A dealer (also There might also be a delay in execu ng the order or referred to as market maker) is a business en ty that failure of execu on because the dealer who has the is ready to buy an asset from inventory to provide the inventory of securi es is not present. other side of an order to buy or sell the asset. A bid price is the price at which a buyer will buy a specified quan ty of a security. Ask price is the price at which a seller will sell a specified quan ty of a security Bid-ask-price (the ask price minus the bid price). Bid size is the quan ty associated with the bid price. Ask size is the quan ty associated with the ask price In execu ng an order to buy a security from a dealer, a lower ask from the dealer is favorable to the buyer. A higher bid price is favorable to the seller. Example of Historical Prices of Jollibee Food Corporation (16) These are limit orders because the prices are specified at which the dealers are trade. Limit order is an instruc on to trade the shares of stocks at the best price available but only if the price is at least as good as the limit price specified in the order. The market bid is the highest and best bid is 145.85 from dealer A, market ask is the lowest ask from dealer C is 150.49. Therefore the market quote is 145.85 bid, ask 150.49. The market bid is :(ask price 150.49-145.85 = 4.64 which is lower than any individual dealer’s spread). The mid-quote (halfway between the market bid and ask price) is (150.49 + 145.85)/2 = 148.17 ABC Consolidated Statement of Profit and Loss significant items 2015 2014 2013 Discon nued Con nuing opera ons: opera ons before Profit (Loss) (161.50) -------- 1.80 significant from items discounted opera ons Sales 58812.00 60772.80 58516.40 Group net 2445.50 2458.40 2360.90 Cost of Sales (42596.60 (44295.20 (42754.90 profit a er tax ) ) ) before Gross Profit 16215.40 16477.60 15761.50 significant items Selling, (9316.20) (9807.40) (9378.60) general and Significant (308.10) ---------- (96.30) administra v items before e expenses tax (excluding Group net 2137.40 2458.40 2264.60 rent, profit/(loss) deprecia on a er tax and Non- 8.60 (6.70) (5.20) amor za on) controlling Rent ( (1951.30) (1898.70) (1764.20) interest including fit Profit/(loss) 2146.00 2451.70 2259.40 out rent) atributable EBITDA 4947.90 4771.50 4618.70 to equity holders of the Deprecia on (974.80) (996.30) (965.50) parent en ty and a er amor za on EBIT 3973.10 3775.20 3653.20 Net Financing (212.90) (218.90) (251.10) Cost ABC note (40.40) (4120) (46.40) interest Profit before 3719.80 3515.10 3355.70 tax Income tax (1112.80) (1056.70) (996.60) expenses Profit a er tax 2607.00 2458.40 2359.10 and before ABC Group of Consolidated Balance Sheet($) millions. Income Tax 100.40 158.90 193.20 payable Year ended 30 June 2013 - 2015 Other financial 161.20 168.20 145.90 Current Assets 2015 2014 2013 liabili es and Cash and cash 1333.40 922.60 849.20 provisions equivalents Provisions 967.20 Trade and other 885.20 857.00 968.60 1079.90 1005.30 receivables Assets held for - - - Inventories 4872.20 4693.20 4,205.40 sale Other financial 188.50 12.70 54.20 Total Current 6866.00 assets liabili es 9168.60 7489.50 Assets held for 381.60 620.60 148.70 Non-current sale liabili es Total Current 7106.10 6226.10 Borrowings 4282.50 Assets 7660.90 3079.30 4136.00 Non-current Other financial 992.60 assets: liabili es 1075.10 1155.20 Trade and other 116.70 16.60 Provisions 599.40 549.20 receivables 108.20 567.40 Other Financial 497.60 358.70 Other non- 282.40 259.40 assets 304.70 current 263.00 liabili es Property, plant 9600.70 9246.10 and equipment 10062.10 Total non- current 5036.20 6121.60 6083.70 liabili es Intangible 6335.00 5784.30 Total liabili es assets 6244.50 14204.30 13611.10 12949.70 Deferred tax 755.00 681.80 618.40 Net assets assets 11132.00 10525.40 9300.50 Total non- 17030.40 16024.00 Equity current assets 17675.90 Contributed Total Assets 24136.50 22250.20 Equity 4909.00 4631.20 4342.20 25336.80 Reserves Current 95.10 198.20 25.10 Liabili es: Retained Trade and other 5937.60 5390.30 Earnings 5830.10 5423.10 4661.10 payables 6181.10 Shareholders’ Borrowings 219.50 169.40 Equity 10834.20 10252.50 9028.40 1645.40 Non-controlling 297.80 interests 272.90 272.10 Total Equity 11132.00 10525.40 9300.50