Financial Swiss Army Knife

ABOUT THIS CONTENT

This valuable tool can serve as both a translator of complex financial information and an indicator of opportunities for enhancing financial performance. The spreadsheet includes six interconnected worksheets in individual tabs, including:

A: Three-year horizontal and vertical income statement analysis

B: Three-year horizontal and vertical balance sheet analysis

C: Automatic calculation of three years of financial ratios

D: Clear presentation of a free cash flow analysis

E: Three-part DuPont extended return on equity (ROE) calculation for three years

F: Worksheet for generating “what-if” analyses to highlight and measure opportunities for improving ROE and return on assets (ROA)

Worksheets A, B, C, and E are standard tools for gauging which aspects of an entity’s financial performance are improving or deteriorating across recent accounting periods. Worksheet D provides insights into an entity’s ability to generate funds from operations and potentially distribute cash to investors, even if that entity is not generating profits. Worksheet F facilitates what-if analysis for improving ROE and, while the worksheets generally reflect a corporate structure, sheet F’s what-if analysis can be performed on any type of business entity (sole proprietorship, partnership, etc.) by inserting into worksheet B total common equity figures rather than inputting values for individual common equity line items.

This discussion assumes readers are familiar with the basic functions of A, B, C, and E and accordingly concentrates on benefits provided by D and F.

See the original source for a more detailed look at how to use this tool.