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The Body Shop case

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by

Sonia Navas

on 23 February 2014

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Transcript of The Body Shop case

An overview of
Financial Forecasting:

T-accounts
estimate shareholders equity & fixed assets
how each account will change
how will be the resulting new balances?
Flow of funds
Percent-of-sales forecasting
forecast
Sales
Other financial statement accounts
miss-used by
operational capacity
fractional amounts
SCRUTINIZE the percent-of sales
estimate
Income statements
Current assets
Current liabilities
A pencil-and-paper forecast
Income statement
Preparing a pro forma income statement & balance sheet
debt?
leave it at 0
ESTIMATE
Profit before tax
Tax expense
Profit after tax
Dividends
Earnings retained
Balance sheet
1. Estimate
32% of sales
+ £ 110,600,000
current assets
current liabilities
common equity
2. Debt
Total assets = -

current liabilities
common equity
Estimate external financing needed
Iterate
through two or more statements 5-6 times
estimates
interest expense
using 6% x debt
won't change very much further
STOP WHEN THEY ARE GETTING
too small
2001
Anita Roddic
Patrick Gourmay
CEO
1998
Anita Roddick as CEO
Business culture
Media focused on the revenue
Ratios
Cash Interest Coverage Ratio: 9.9
Measuring liquidity
Net Working capital: 65.9 million Euros in 2001
Current ratio: 2.4
Measuring Leverage:
Long term debt ratio
2002

2003
0.32
0.3
Total debt ratio
2002
47%
Cash Interest Coverage Ratio: 9.9
Times-Interest-Earned Ratio: 8.9
Measuring Efficiency:
Asset Turnover Ratio
2002
1.6
Inventory turnover
3.3
Average collection period:
26 days
Analyzing the Return on Asset:
Profit margin: 5 %
Return on Equity (ROE): 0.16
Return on Assets (ROA): 0.12
Thank you for your attention
Full transcript