C. We can't predict how CFO would change with just this information; we would need to examine the Working Capital items related to Revenue and Expenses, such as Accounts Receivable, Accounts Payable, and Inventory. d. We can't predict how CFO would change with just this information; we would need to examine all the components of Working Capital and their relationship to the Change in Revenue. Financial Statement Drivers: Income Statement Drivers: Beginning Backlog: Units: Historical: FY19 FY20 FY21 FY22 FY23 Projected: FY24 FY25 FY26 (+) Order Intake: CHF M CHF CHF M 13,179 CHF 15,026 CHF 16,105 CHF 17,870 CHF 19,806 CHF 21,827 CHF 23,935 CHF 26,130 5,117 4,331 5,565 5,723 5,973 6,232 6,486 6,748 (-) Revenue Recognised: CHF M (3,201) (3,085) (3,634) (3,787) (3,953) (4,123) (4,292) (4,465) Ending Backlog: CHF M 15,026 16,105 17,870 19,806 21,827 23,935 26,130 28,413 Book-to-Bill Ratio: x 1.6 x 1.4 x 1.5 x 1.5 x 1.5 x 1.5 x 1.5 x 1.5 x Market Size: Growth Rate: CHF M 27,000 27,621 28,256 28,906 29,571 30,251 30,886 % 4.7% 2.3% 2.3% 2.3% 2.3% 2.3% 2.1% 31,535 2.1% Market Share: % 19.0% 15.7% 19.7% 19.8% 20.2% 20.6% 21.0% 21.4% Full-Time Employees (FTES): Revenue per FTE: # People CHF/# 10,918 293,186 12,303 250,752 13,067 278,105 13,288 13,629 13,745 14,072 14,405 285,000 290,000 300,000 305,000 310,000 Suppose that this company's Book-to-Bill Ratio, currently at 1.5x, decreases to 1.2x in the projected period. If the annual Order Intake stays the same, would the company's Cash Flow from Operations (CFO) INCREASE or DECREASE? a. It would INCREASE because the company's Revenue would increase, which means higher Net Income and, therefore, higher CFO. b. It would DECREASE because manufacturing companies like this one typically have high Working Capital requirements; CFO might decrease due to the need to purchase additional Inventory to support the additional product deliveries.
C. We can't predict how CFO would change with just this information; we would need to examine the Working Capital items related to Revenue and Expenses, such as Accounts Receivable, Accounts Payable, and Inventory. d. We can't predict how CFO would change with just this information; we would need to examine all the components of Working Capital and their relationship to the Change in Revenue. Financial Statement Drivers: Income Statement Drivers: Beginning Backlog: Units: Historical: FY19 FY20 FY21 FY22 FY23 Projected: FY24 FY25 FY26 (+) Order Intake: CHF M CHF CHF M 13,179 CHF 15,026 CHF 16,105 CHF 17,870 CHF 19,806 CHF 21,827 CHF 23,935 CHF 26,130 5,117 4,331 5,565 5,723 5,973 6,232 6,486 6,748 (-) Revenue Recognised: CHF M (3,201) (3,085) (3,634) (3,787) (3,953) (4,123) (4,292) (4,465) Ending Backlog: CHF M 15,026 16,105 17,870 19,806 21,827 23,935 26,130 28,413 Book-to-Bill Ratio: x 1.6 x 1.4 x 1.5 x 1.5 x 1.5 x 1.5 x 1.5 x 1.5 x Market Size: Growth Rate: CHF M 27,000 27,621 28,256 28,906 29,571 30,251 30,886 % 4.7% 2.3% 2.3% 2.3% 2.3% 2.3% 2.1% 31,535 2.1% Market Share: % 19.0% 15.7% 19.7% 19.8% 20.2% 20.6% 21.0% 21.4% Full-Time Employees (FTES): Revenue per FTE: # People CHF/# 10,918 293,186 12,303 250,752 13,067 278,105 13,288 13,629 13,745 14,072 14,405 285,000 290,000 300,000 305,000 310,000 Suppose that this company's Book-to-Bill Ratio, currently at 1.5x, decreases to 1.2x in the projected period. If the annual Order Intake stays the same, would the company's Cash Flow from Operations (CFO) INCREASE or DECREASE? a. It would INCREASE because the company's Revenue would increase, which means higher Net Income and, therefore, higher CFO. b. It would DECREASE because manufacturing companies like this one typically have high Working Capital requirements; CFO might decrease due to the need to purchase additional Inventory to support the additional product deliveries.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
You are building a 3-statement projection model for Stadler Rail, a railway rolling stock
manufacturer based in Switzerland. An excerpt of the financial projections showing the
company’s Revenue, Orders, Backlog, and Employees is shown below:
Transcribed Image Text:C. We can't predict how CFO would change with just this information; we would need
to examine the Working Capital items related to Revenue and Expenses, such as
Accounts Receivable, Accounts Payable, and Inventory.
d. We can't predict how CFO would change with just this information; we would need
to examine all the components of Working Capital and their relationship to the
Change in Revenue.
Transcribed Image Text:Financial Statement Drivers:
Income Statement Drivers:
Beginning Backlog:
Units:
Historical:
FY19
FY20
FY21
FY22
FY23
Projected:
FY24
FY25
FY26
(+) Order Intake:
CHF M CHF
CHF M
13,179 CHF 15,026 CHF 16,105 CHF 17,870 CHF 19,806 CHF 21,827
CHF 23,935 CHF 26,130
5,117
4,331
5,565
5,723
5,973
6,232
6,486
6,748
(-) Revenue Recognised:
CHF M
(3,201)
(3,085)
(3,634)
(3,787)
(3,953)
(4,123)
(4,292)
(4,465)
Ending Backlog:
CHF M
15,026
16,105
17,870
19,806
21,827
23,935
26,130
28,413
Book-to-Bill Ratio:
x
1.6 x
1.4 x
1.5 x
1.5 x
1.5 x
1.5 x
1.5 x
1.5 x
Market Size:
Growth Rate:
CHF M
27,000
27,621
28,256
28,906
29,571
30,251
30,886
%
4.7%
2.3%
2.3%
2.3%
2.3%
2.3%
2.1%
31,535
2.1%
Market Share:
%
19.0%
15.7%
19.7%
19.8%
20.2%
20.6%
21.0%
21.4%
Full-Time Employees (FTES):
Revenue per FTE:
# People
CHF/#
10,918
293,186
12,303
250,752
13,067
278,105
13,288
13,629
13,745
14,072
14,405
285,000
290,000
300,000
305,000
310,000
Suppose that this company's Book-to-Bill Ratio, currently at 1.5x, decreases to 1.2x in the
projected period.
If the annual Order Intake stays the same, would the company's Cash Flow from Operations
(CFO) INCREASE or DECREASE?
a. It would INCREASE because the company's Revenue would increase, which means
higher Net Income and, therefore, higher CFO.
b. It would DECREASE because manufacturing companies like this one typically have
high Working Capital requirements; CFO might decrease due to the need to
purchase additional Inventory to support the additional product deliveries.
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