Executive Summary:
With the help of this project we will able to find the annual statement of the company, perform the ratio analysis of the company and explain financial health and condition of the company.
We will also able to find the capital structure of the company, calculate weighted average cost of capital.
And at last this project helps us to perform annual cash flow of new project of the company and also do capital budgeting of project.
Financial Ratio Analysis:
| Financial Ratio | |||||||||
| Year | Formula | 2019 | 2018 | 2017 | 2016 | 2015 | Industry | Trend | Comments |
| Liquidity Ratio | |||||||||
| Current Ratio | Current Asset/Current Liabilities | 4.13 | 3.27 | 3.87 | 3.29 | 2.77 | 2.00 | Upward | Good for company |
| Quick Ratio | Cash + Receivables/ C L | 3.04 | 2.20 | 2.55 | 2.10 | 1.72 | 1.00 | Upward | Good for company |
| Asset Management Ratio | |||||||||
| Inventory Turnover Ratio | COGS/ Y E Inventory | 2.61 | 2.48 | 2.73 | 2.87 | 3.22 | 2.35 | Downward | Good for company |
| Account Receivable Ratio | Net Sales/ Y E Account Recivables | 13.39 | 13.08 | 11.71 | 10.55 | 11.16 | 10.00 | Upward | Concern for company |
| Account Payable ratio | COGS/ Y E Account Payables | 13.45 | 11.52 | 11.47 | 12.95 | 14.09 | 10.00 | Downward | Good for company |
| Fixed Asset Turn over ratio | Sales / Fixed Assets | 1.55 | 1.75 | 1.68 | 1.49 | 1.21 | 1.50 | Upward | Neutral |
| Total Asset Turnover Ratio | Sales/ Total Assets | 0.80 | 0.92 | 0.85 | 0.81 | 0.80 | 0.70 | Constant | Neutral |
| Debt Management Ratio | |||||||||
| Debt/ Equity Ratio | Total Debt / Equity | 0.65 | 0.56 | 0.39 | 0.34 | 0.41 | 0.55 | Upward | Concern for company |
| Debt/ Total Asset Ratio | Total Debt / Total Assets | 0.32 | 0.28 | 0.23 | 0.21 | 0.22 | 0.33 | Upward | Concern for company |
| Profitability Ratio | |||||||||
| ROE | Net Income / Equity | 56.33% | 62.04% | 35.62% | 34.33% | 30.02% | 32.00% | Upward | Good for company |
| ROA | Net Income / Total Assets | 28.97% | 32.14% | 30.31% | 31.22% | 33.52% | 15.00% | Downward | Concern for company |
| Gross Profit Margin | Gross Profit / Sales | 63.71% | 65.11% | 64.26% | 61.63% | 58.15% | 42.56% | Upward | Good for company |
| Net Profit Margin | Net Income / Sales | 34.88% | 35.35% | 24.61% | 26.89% | 22.97% | 18.14% | Upward | Good for company |
| Market Value Ratio | |||||||||
| EPS | 5.33 | 5.75 | 3.72 | 3.61 | 2.86 | Upward | Good for investors |
| Per the trend ratio analysis of the company , Liquidity ratio states that company is managing their daily cash very well and have enough cash to operate in business |
| Per the Asset Management Ratio company is not able top collect its receivable in time which is quite concern for the company |
| Per the Debt Management ratio company have a solvency issue and not able to run in long term |
| Profitability ratio and Market Value ratio is looking good for company. |
| However for investor prospective company is able to invest money for short to medium term |
| Income Statement (All Numbers in thousands) | |||||
| Year | 2019 | 2018 | 2017 | 2016 | 2015 |
| Total Revenue | 1 , 43 , 83 , 000 | 1 , 57 , 84 , 000 | 1 , 49 , 61 , 000 | 1 , 33 , 70 , 000 | 1 , 30 , 00 , 000 |
| Cost of Revenue | 52 , 19 , 000 | 55 , 07 , 000 | 53 , 47 , 000 | 51 , 30 , 000 | 54 , 40 , 000 |
| Gross Profit | 91 , 64 , 000 | 1 , 02 , 77 , 000 | 96 , 14 , 000 | 82 , 40 , 000 | 75 , 60 , 000 |
| Operating Expenses | |||||
| Research Development | 15 , 44 , 000 | 15 , 59 , 000 | 15 , 08 , 000 | 13 , 70 , 000 | 12 , 80 , 000 |
| Selling General and Administrative | 16 , 45 , 000 | 16 , 84 , 000 | 16 , 94 , 000 | 17 , 67 , 000 | 17 , 48 , 000 |
| Total Operating Expenses | 31 , 89 , 000 | 32 , 43 , 000 | 30 , 83 , 000 | 31 , 37 , 000 | 30 , 28 , 000 |
| Operating Income or Loss | 59 , 75 , 000 | 70 , 34 , 000 | 65 , 31 , 000 | 51 , 03 , 000 | 4274000 |
| Interest Expense | 1 , 70 , 000 | 1 , 25 , 000 | 78 , 000 | 80 , 000 | -90 , 000 |
| Total Other Income/Expenses Net | -77 , 000 | -2 , 23 , 000 | -3 , 73 , 000 | -1 , 15 , 000 | -32 , 000 |
| Income Before Tax | 57 , 28 , 000 | 66 , 86 , 000 | 60 , 80 , 000 | 49 , 30 , 000 | 42 , 16 , 000 |
| Income Tax Expense | 7 , 11 , 000 | 11 , 06 , 000 | 23 , 98 , 000 | 13 , 35 , 000 | 12 , 30 , 000 |
| Income from Continuing Operations | 50 , 17 , 000 | 55 , 80 , 000 | 36 , 82 , 000 | 35 , 95 , 000 | 29 , 86 , 000 |
| Net Income | 50 , 17 , 000 | 55 , 80 , 000 | 36 , 82 , 000 | 35 , 95 , 000 | 29 , 86 , 000 |
| Net Income available to common shareholders | 50 , 17 , 000 | 55 , 37 , 000 | 36 , 48 , 000 | 35 , 50 , 000 | 29 , 86 , 000 |
| Basic EPS | 5.33 | 5.75 | 3.72 | 3.61 | 3 |
| Diluted EPS | 5.24 | 5.59 | 3.61 | 3.48 | 3 |
| Basic Average Shares | 9 , 36 , 000 | 9 , 70 , 000 | 9 , 91 , 000 | 9 , 95 , 984 | 10 , 30 , 000 |
| Diluted Average Shares | 9 , 52 , 000 | 9 , 90 , 000 | 10 , 12 , 000 | 10 , 21 , 000 | |
| EBITDA | 69 , 48 , 000 | 77 , 65 , 000 | 70 , 62 , 000 | 59 , 65 , 000 |
| BalanceSheet ($ in Thousands) | |||||
| 2019 | 2018 | 2017 | 2016 | 2015 | |
| Assets | |||||
| Current Assets | |||||
| Cash | |||||
| Cash And Cash Equivalents | 24 , 37 , 000 | 24 , 38 , 000 | 16 , 56 , 000 | 11 , 54 , 000 | 10 , 00 , 000 |
| Other Short Term Investments | 29 , 50 , 000 | 17 , 95 , 000 | 28 , 13 , 000 | 23 , 36 , 000 | 22 , 18 , 000 |
| Total Cash | 53 , 87 , 000 | 42 , 33 , 000 | 44 , 69 , 000 | 34 , 90 , 000 | 32 , 18 , 000 |
| Net Receivables | 10 , 74 , 000 | 12 , 07 , 000 | 12 , 78 , 000 | 12 , 67 , 000 | 11 , 65 , 000 |
| Inventory | 20 , 01 , 000 | 22 , 17 , 000 | 19 , 57 , 000 | 17 , 90 , 000 | 16 , 91 , 000 |
| Other Current Assets | – | 3 , 08 , 000 | – | – | |
| Total Current Assets | 87 , 61 , 000 | 80 , 97 , 000 | 87 , 34 , 000 | 74 , 57 , 000 | 70 , 74 , 000 |
| Non-current assets | |||||
| Property , plant and equipment | |||||
| Gross property , plant and equipment | 57 , 40 , 000 | 54 , 25 , 000 | 47 , 89 , 000 | 49 , 23 , 000 | 54 , 65 , 000 |
| Accumulated Depreciation | -24 , 37 , 000 | -22 , 42 , 000 | -21 , 25 , 000 | -24 , 11 , 000 | 28 , 69 , 000 |
| Net property , plant and equipment | 33 , 03 , 000 | 31 , 83 , 000 | 26 , 64 , 000 | 25 , 12 , 000 | 25 , 96 , 000 |
| Equity and other investments | 3 , 00 , 000 | 2 , 51 , 000 | 2 , 68 , 000 | 2 , 35 , 000 | 2 , 21 , 000 |
| Goodwill | 43 , 62 , 000 | 43 , 62 , 000 | 43 , 62 , 000 | 43 , 62 , 000 | 43 , 62 , 000 |
| Intangible Assets | 4 , 09 , 000 | 7 , 17 , 000 | 10 , 56 , 000 | 13 , 16 , 000 | 15 , 83 , 000 |
| Other long-term assets | 4 , 68 , 000 | 1 , 40 , 000 | 86 , 000 | 79 , 000 | 20 , 10 , 000 |
| Total non-current assets | 92 , 57 , 000 | 90 , 40 , 000 | 89 , 08 , 000 | 89 , 74 , 000 | 1 , 07 , 72 , 000 |
| Total Assets | 1 , 80 , 18 , 000 | 1 , 71 , 37 , 000 | 1 , 76 , 42 , 000 | 1 , 64 , 31 , 000 | 1 , 62 , 30 , 000 |
| Liabilities and stockholders’ equity | |||||
| Liabilities | |||||
| Current Liabilities | |||||
| Current Debt | 5 , 00 , 000 | 7 , 49 , 000 | 5 , 00 , 000 | 6 , 31 , 000 | 10 , 00 , 000 |
| Accounts Payable | 3 , 88 , 000 | 4 , 78 , 000 | 4 , 66 , 000 | 3 , 96 , 000 | 3 , 86 , 000 |
| Taxes payable | 46 , 000 | 1 , 03 , 000 | 1 , 28 , 000 | 83 , 000 | 95 , 000 |
| Accrued liabilities | 4 , 75 , 000 | 4 , 20 , 000 | 4 , 42 , 000 | 4 , 44 , 000 | 1074000 |
| Total Current Liabilities | 21 , 23 , 000 | 24 , 74 , 000 | 22 , 58 , 000 | 22 , 64 , 000 | 25 , 55 , 000 |
| Non-current liabilities | |||||
| Long Term Debt | 53 , 03 , 000 | 43 , 19 , 000 | 35 , 77 , 000 | 29 , 78 , 000 | 31 , 20 , 000 |
| Deferred taxes liabilities | 78 , 000 | 42 , 000 | 78 , 000 | 33 , 000 | |
| Other long-term liabilities | 1 , 48 , 000 | 6 , 84 , 000 | 6 , 68 , 000 | – | |
| Total non-current liabilities | 69 , 88 , 000 | 56 , 69 , 000 | 50 , 47 , 000 | 36 , 94 , 000 | 37 , 29 , 000 |
| Total Liabilities | 91 , 11 , 000 | 81 , 43 , 000 | 73 , 05 , 000 | 59 , 58 , 000 | 62 , 84 , 000 |
| Stockholders’ Equity | |||||
| Common Stock | 17 , 41 , 000 | 17 , 41 , 000 | 17 , 41 , 000 | 17 , 41 , 000 | 17 , 41 , 000 |
| Retained Earnings | 3 , 98 , 98 , 000 | 3 , 79 , 06 , 000 | 3 , 46 , 62 , 000 | 3 , 31 , 07 , 000 | 3 , 11 , 76 , 000 |
| Accumulated other comprehensive income | -3 , 47 , 000 | -4 , 73 , 000 | -3 , 84 , 000 | -5 , 26 , 000 | |
| Total stockholders’ equity | 89 , 07 , 000 | 89 , 94 , 000 | 1 , 03 , 37 , 000 | 1 , 04 , 73 , 000 | 99 , 46 , 000 |
| Total liabilities and stockholders’ equity | 1 , 80 , 18 , 000 | 1 , 71 , 37 , 000 | 1 , 76 , 42 , 000 | 1 , 64 , 31 , 000 | 1 , 62 , 30 , 000 |
Capital Structure of TXN:
| Debt | 58 , 03 , 000 |
| Common Stock | 89 , 07 , 000 |
Calculation of Weighted Average Cost of Capital:
| 2019 | 2018 | 2017 | 2016 | 2015 | ||
| Cost of Debt | 30.06% | 16.46% | 30.92% | 80.52% | 42.79% | |
| Tax Rate | 24.93% | 12.41% | 16.54% | 39.44% | 27.08% | 29.17% |
| After tax Cost of Debt | 22.56% | |||||
| Long term average bond yield | 5.02% | |||||
| Risk Premium | 1.50% | |||||
| Cost of Equity | 6.52% | |||||
| We | 0.61 | |||||
| Wd | 0.39 | |||||
| WACC | Weight of Equity * Cost of Equity + Weight of Debt * After tax Cost of Debt | |||||
| 12.85% |
Cash Flow Estimation:
| Year | Depreciation % | Depreciation | Depreciation in Million |
| 1 | 14.29% | 46.42 | 46417493 |
| 2 | 24.49% | 79.55 | 79549643 |
| 3 | 17.49% | 56.81 | 56811893 |
| 4 | 12.49% | 40.57 | 40570643 |
| 5 | 8.93% | 29.01 | 29006873 |
| 6 | 8.92% | 28.97 | 28974390 |
| 7 | 8.93% | 29.01 | 29006873 |
| 8 | 4.46% | 14.49 | 14487195 |
| Year | 0 | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 |
| Initial Investment | -330000000 | ||||||||
| Shipping and Installation charge | -25000000 | ||||||||
| Salvage Value | 30.175 | ||||||||
| Unit Sold in first year | 1350000 | 1417500 | 1488375 | 1562793.75 | 1640933.438 | 1722980.109 | 1809129.115 | 1899585.571 | |
| Annual Growth (5%) | |||||||||
| Sales Price (250 Per Unit) with 2 % inflation | 250 | 255 | 260 | 265 | 271 | 276 | 282 | 287 | |
| Sales Price | 337500000 | 354375000 | 372093750 | 390698438 | 410233359 | 430745027 | 452282279 | 474896393 | |
| COGS ( 182/ Unit) with 2% inflation | 182 | 186 | 189 | 193 | 197 | 201 | 205 | 209 | |
| COGS | 245700000 | 263144700 | 281827974 | 301837760 | 323268241 | 346220286 | 370801926 | 397128863 | |
| Depreciation | 46417492.5 | 79549642.5 | 56811892.5 | 40570642.5 | 29006872.5 | 28974390 | 29006872.5 | 14487195 | |
| NOWC | 25312500 | 26578125 | 27907031 | 29302383 | 30767502 | 32305877 | 33921171 | 35617229 | |
| Annual Cash Flow | -355000000 | 112904993 | 144201818 | 119170638 | 100128937 | 85204489 | 81193254 | 76566054 | 56637495 |
| WACC | 12.85% | ||||||||
| Present Value of Cash flow | -355000000 | 100049504 | 113233340 | 82922930 | 61740021 | 46555547 | 39312503 | 32851016 | 21533686 |
| Net Present Value | 143198547 | ||||||||
| IRR | 11% |
References:
Texas Instrument, 2019, 2018, 2017, 2016, 2015, “Annual Report”
CFI, 2019, “What is WACC”
CFI, 2019, “Capital Budgeting techniques”
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