Managing Financial Resources and Decisions

By
TABLE OF CONTENTS 1

INTRODUCTION 2

1.1 2

1.2 4

1.3 5

2.1 7

2.2 7

2.3 9

2.4 10

3.1 11

3.2 12

3.3 14

4.1 15

4.2 19

4.3 20

Conclusion 25

Reference 25

1
 Introduction

Different sources of financing are needed for every type of business, depending on the
required amount for money for certain period of time, the capability of the company for
paying back and the size of the business or operation. Making of the important financial
decisions about the manufacturing process include strict control of the budget and analysis of
the effectiveness of the production and marketing trends. By receiving appropriate and
specific business information about the marketing and companys conditions and structuring
of financial statement with ratios analysis can show the results from investment, where can be
saved money, what is the exact amount of liabilities and profit, how changes in operations and
marketing effects the income and the success of the company during the time. Because of its
wide spread production and leading management techniques in the cosmetics industry,
LOREAL was chosen to be analyzed also in this project.

LO1: Understand the source of finance available to a business

1.1 Identify the sources of finance available to a business

According to David A. Thompson points in (2004) Sources of Business Financing the

different sources of financing can be classified according to various factors internal and
external, debt and equity, short and long term.
According to Types and Sources of Financing for Start-up Businesses by Don
Hofstrand (2013) internal are the sources of finance that are available within
the organization and an example of them are:
personal savings - suitable for small businesses where the owner has some savings,
available to be used
retained profits - the capital, already made because of the production process and has
been set aside to reinvest in the business for example in case of machinery
amortization or advertising the product on the market
working capital - short-term money that is reserved for day-to-day expenses such as
rent, salaries and bills

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 sale of fixed assets - fixed assets (buildings and machinery) can be sold in case of
quick need of capital. However, these are required for the production processes and it
is necessary to be preserved.
According to Sources of Finance for Companies (2014) by Eric Dontigney
external are the funds that can be invested from outside of the firm and can be
separated as:
ownership (shares) - the money invested in the business by the capital funding
by owners and partnersor or share bought by the shareholders of a company. The main
types of shares are ordinary (shareholders have the right to vote at general meetings of
the company and the privilege of receiving a part of companys profits via dividends
based on the value of shares and the profit made for the year by the company) and
preference shares (an ownership capital source of finance; shareholders dont have the
right to vote at general meetings of the company and they receive a fixed rate of
dividends before the ordinary shareholders are paid). This source is quiet used in big
and established companies like LOREAL.
non-ownership (loans) capital - does not allow the lender to participate in profit-
sharing or to influence how the business is run. The main obligations are to pay back
the borrowed sum of money with a defined interest. Some types of non-ownership
capital are:
Debentures - there are different loans, suitable for many business types with fixed
or variable interest, but banks also require detailed business plan and some
guarantee that you can repay, the lender will take priority over the owners and
shareholders in case of bankruptcy and the cost will have to be repaid even if a
loss is made
Hire-purchase and Lease - enables a firm to receive an asset quickly without
paying the full-price for it, exclusive use of the item for a set period of time and
then have the option to either return it or buy it on lower price, usually the
payments for leasing will be higher than the total price for a product
Grant from local and state economic development organizations and also
governments - although the easier access to this type of financing, the development
groups may agree to take care of a specific part from the operation process and the
assessment for grants can be very competitive, is very individual and not automatic

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 Venture capital - investing in young, not-established private business by
companies or individuals in exchange for an ownership share - most often used in
the early stages of developing a new business. This is a high risk source as the
venture capitalist will be looking for a share in the firms equity and a strong
return on their investment.

The debt capital of LOREAL is shown in the figure:

1.2 Assess the implications of the different sources

According to Sources of Finance for Companies (2014) by Eric Dontigney the implications of
main financial sources can be classified as:

Implications Loans Selling of shares Trade credit Asset lease

Legal confiscation in voting rights on the company can a contract for
case of default elections be sued in case the lease
of not paying agreement is
required

Financial payments for the investors are penalties for the the customer can
amortization not obligatory companies for claim for
can appear repaid not paying on reducing of the
time and taxes,
discount for considering the
early payments lease rentals
Dilution of no yes no no, but in case
control of default some
assets can be
confiscated

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 Bankruptcy should be the stockholders the suppliers the suppliers
repaid before are last to be paid have to sue the have to sue the
other creditors owners for owners for
or owners repaying repaying
receive any
payment

On the following figure it is explained the earnings per share in LOREAL (with dilution
included).

1.3 Evaluate appropriate sources of finance for a business project

According to Sources of finance - choosing the right source by Jim Riley (2012) the owners
should carefully analyze the sources of finance based on several factors:

Amount of money required variable amount and flexibility suitable for the type of
business and the need of capital.

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 How quickly the money is needed the cheapest way of receiving of finances
requires longer period of time.

The cheapest option available the terms of the extra money that should be paid to
secure the initial amount ( the trading profits are usually the cheapest option).

The amount of risk that is involved potential sources of finance may not lend
money if the operation leads to higher risk.

The duration of finance the period of time that the company can return the
investment.

The gearing ratio presents the ratio of debt capital to the total capital of the company.
The higher it is, the more difficult it will be for the business to pay the interests of the
creditors and some investors are not willing to give loans.

According to Sources of Business Financing by David A. Thompson (2004) the different

types of business can choose the most suitable type of financing according to its advantages
and disadvantages:

Type of financing Advantages Disadvantages

Debt capital Every necessary amount of The percentage of interest
money (large or small) can and the total amount of
be received quickly in the repaid money by the
determined period of time borrower is always higher
with a suitable flexibility than the borrowed
repaying in short or long investment. Not paying on
term of periods with different time can lead to increasing of
payments or repaid the cash flow the needed
immediately. income which can provide
bankruptcy.
Equity capital Potential for providing high The amount and period of
returns and the potential loss gaining money is undefined
and the legal liability are and the prices of a stock can
limited and are based on the change, the ownership and
amount of initial investment. the control of the company is
spread, stockholders are the

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 last who get paid and dont
have the rights and
information of private
companies owners

For big and wide spread companies as LOREAL which need great amount of money in short
period of time in order to continue the production despite of any changes, the selling of shares
and sources of debt capital appear to be the most appropriate.

LO2: Understand the implications of finance as a source within a business

2.1 Analyze the costs of different sources of finance

According to Keys to Managing Finances in Your Small Business (Googobits.com,

2005) personal savings have low costs because they belong to an owner, partner or
shareholder. By selling assets the production capacity of the firm is decreasing. Analyzing the
costs of ordinary and preference shares refers to the fact that shareholders take dividends from
the companys profit in order to be repaid for their investment. Debentures have to receive a
fixed or floating interest that depends on the type of financing. In case of leasing the
ownership of the asset usually remains with the leasing company even after the business pays
more than 90% of the assets value. Grants are free and have no financial costs. The venture
capitalist will have rights and influence in the company and the business will have to share
profits with the investor.

2.2 Explain the importance of financial planning

Financial planning is a solution which converts the companys goals into action plans and
provides the direction and discipline to achieve them. Financial planning (budgeting) is the
fundamental base to any business and is defined in BusinessDictionary.com as a long-term
profit planning that is directed in achieving greater return on income, lowing the liabilities and
increasing the market interest for a product. Comparing the predicted to actual results
provides important information about the financial health and efficiency of the business. In

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Importance of a Financial Plan for small businesses by Brian Hill (2013) it is written that the
best financial plan consists of:
financial statements

ratio analysis

budgets

break-even analysis

pricing formulas and policies

suitable for the business sources of capital

considerations for increasing the profit in short and long period of time.

There are monthly or seasonal variations in companies revenues. In The Financial

Plan (Agualty Plan O,2014) it is pointed that a strict marketing research, that includes study
of the changes in demand for the product or the price of consumables and resources, can help
for the stability of the firm and give a picture about the cash flow during the time. That
provides the chance of preparation for times when cash shortages occur and taking a fast
advantage of the periods, predicted to be plentiful. The business owner can the structure the
manufacturing and investments depending on the market situation. In Importance of a
Financial Plan for small businesses by Brian Hill (2013) it is written that when a business is
being established, its important for the owner to have an idea about the possible development
in the future necessary investments, calculation of the profits and losses after a determined
period of time. The financial plan, directed in a long range of view, is a start up for a constant
improvement and growth of the company. It is also useful when there is a need of loads or
credits for constructing a clear notion for the amount of necessary financing and the time, in
which the company can pay it off. A good financing plan presents differences in the incomes,
influenced by changes of the firm for example of advertising expenditures led to jump in
sales or if a change in the product makes it more desired by the customers. For this purpose
the new marketing results are compared with the older ones or the prediction for the sales.
Financial planning can categories the priorities of the company and help considering which
expenditures are important and immediate improvements are needed or the investments can
be postponed until cash is more plentiful. That helps saving of resources, when its necessary

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for the stability and security, and investing in new methods and trends, when the capital
allows it.

The income financial statement of LOREAL where based on the development of the firm,
there is a prediction about future progress.

2.3 Assess the information needs of different decision makers

One of the most common important decisions is related to the price and quality that have
to be bought for the production process, the market cost of the product or investing in
innovations or advertisements. The outcome of the decision can be predicted, but usually it is
uncertain and carries a risk. That requires a strict analysis of the situation and the effects on
the companys capital. Dynamically changing markets and trends and also the continuous
competition requires making quick decisions, providing adaptability of the company in the
new market conditions. That is related to searching for information about launching a new
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product or changes in an old one, possible sales levels and costumer reactions, cost of
production and reaction of competitors. This information provides to ideas for innovation and
changing of the companys strategies. Alistair McKinnon in Decision-Making in
Organizations (2003), different decision makers will want different information about the
company regarding their interests in the business:

manager, choosing from different projects, who needs an information about the
development of the whole production process and development of a project, its
benefits and financial needs, which involves accounting information

employee, managing a situation with the product or a client he is concerned in the

operations of manufacturing or the problems with the clients

client needs information about the quality and price of the products

investor he is interested in the financial changes in the company and development,

which is associated with gaining or loosing of profit the long term lender will insist
to know the gearing ratio while the financer investing in short period of time the
liquidity ratio

owner needs an information about the liabilities and profits in the company the
capability of the firm to pay back the loans and to gain more capital.

2.4 Explain the impact of finance on the financial statements

As explained in Financial Statements (Accounting tools, 2014) the different financial

statements represent the structured collection of cash flows of a company which can show its
condition. Every company is obliged to make regular financial statements for its development
in order not only the owner to control the budget but also for the needs of investors that need
strict information for the progress of the firm. According to the article What are financial
statements (AccountingSimplified.com, 2013) the main types are:
Balance sheet: presents the financial position of an entity for one point of time and it
includes three elements: assets (inventory, machinery, cash), owned and controlled by
the company; liability, that the firm owes to other institutions like banks or other
creditors; equity represents the difference between assets and liabilities, which is the
clear profit of the company.

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 Income statement (or Profit and Loss statement) is the net profit or loss of the
company over a specific period, gained by deducting the expenses (the costs salaries,
depreciations) from the income of the business (sales revenue, dividend income).
Statement of retained earnings: the movement in owners equity in certain period of
time, that consists: net profit or loss, share capital issued or repaid, loan payments,
revaluation surpluses, effects influenced by changes in the accounting policy or
production strategy of the company.
Statement of cash flows: the changes of finance balances over a period of time (both
cash and bank) - how the equity has change over the year and what the equity
contains, providing information about a companys gross receipts and gross payments
for a specified period of time.
Most of time, extensive set of notes are included for discussion and analysis, where every
statement is examined. Notes are an integral part of the financial statements.

LO3: Be able to make financial decisions based on financial information

3.1 Analyze budgets and make appropriate decisions

In Budget for better decision making (2011) John Hanchar examines the budgeting a
future performance that helps you gets the proper answer of the question if the project is
promising enough and if it will be profitable. Budgets can be separated to two types for the
whole process or only a specific operational part. They are considered to evaluate the
financial attractiveness of proposed changes in the business (amount of funds required,
whether the change will be profitable and if funds invested can be repaid), can help inspecting
the future financial performance for planning purposes (managing cash flow shortages and
determining the ability to repay borrowings), to assess how well the dairy is meeting
projections and to identify and correct potential problems, to communicate to others where
your dairy is headed financially. In Budgeting & Decision Making Maintaining A Healthy
Financial Life, (Modestmoney.com 2012), is described that the owner can take the right
decision towards saving money and securing the financial future such as:
Reducing the level of expenditure

Keeping attention for the most attractive price

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 Taking care of the investments after accomplishing the payments

Increasing the profit of the operation through investigations of the current trends and
renovating the old systems and processes

Keeping an eye on new financial offers from more suitable sources

Competing with many of P&G's personal care products, L'Oreal put 18.1% more towards
its advertising budget in 2011, with the largest volume of these dollars going towards its
L'Oreal Paris, Maybelline and Garnier lines. L'Oreal's grand total came in at $1.34 billion
spent on advertising according to Kantar Media's index.

3.2 Explain the calculation of unit costs and make pricing decisions using relevant
information

According to Pricing decisions: Factors to consider in an increasingly global market

place by Taoufik Haraketi (2012) in cost accounting, variance is very important to evaluate
the performance of company for increasing its efficiency. In variance analysis, it is compared
actual and standard cost and revenue to know whether it is profitable. Favorable variance ( F
) shows that standard cost is less than actual cost or standard revenue is more than actual
revenue. On other hand unfavorable or adverse (U or A) variance shows that actual cost is
more than standard cost or actual revenue is less than standard revenue. Types of variance are
classified with the following ways:

1) Direct Material Variance

- shows the difference between the actual cost of material of actual units and standard
cost of standard units. It is also the total of material price variance, material quantity
variance. If there is favourable material quantity variance and unfavourable material
price variance, direct material cost may be either favourable or unfavourable because
it is total of material price and material quantity variance.

2) Labor Variance
- shows the variance of labor cost. It is the difference between standard cost of labor
for actual production and the actual cost of labor for actual production.

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 3) Overhead Variance
- shows the variance of all indirect cost. It is the difference between standard cost of
overhead for actual output and actual cost of overhead for actual output.

4) Sales Variance
- that type of variance which shows the difference between actual sales and standard
sales. But in unfavourable sales variance, our standard sale is less than actual sale.
Sales variance is good way to calculate the responsibility of sales department.

As it is explained in Businessdictionary.com unit cost is

expenditure incurred in producing one unit of a good or service, computed usually as average
cost - production cost per unit of output, calculated by dividing the total of fixed
costs and variable costs by the number of total units produced (total output).

(Fixed costs + Variable costs) Total output

In How to Determine the Unit Costs of Production (2014) by Karen Rogers fixed costs
remain unchanged during the time (rent, insurance, equipment etc.) and variable costs (direct
materials and direct labor) are the costs which can change because of the desire for the
production. The unit costs of production, means the breakeven point, or minimum price, each
unit must be sold to make a profit. For breakeven analysis setting price is critical because
without this it is hard to calculate the expected revenue.

According to Pricing decisions: Factors to consider in an increasingly global market

place by Taoufik Haraketi (2012), the final price for a product may be influenced by internal
(for example heavily on the productivity of a manufacturing facility, marketing and
distribution of the product, innovating and effectiveness of the manufacturing, quality of the
equipment and product) and external factors (like the competition or economy that are not
controlled by the company). In this formula to conduct breakeven analysis fixed costs is
divided to the selling price per unit, from which are extracted the variable costs.

Breakeven Point = Fixed Costs/(Unit Selling Price - Variable Costs)

This calculation help to determine the number of product will need to sell to reach breakeven
point. The additional selling increases profit by the amount of the unit contribution margin.

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 3.3 Assess the viability of a project using investment appraisal techniques

The benefit of making an investment can be the the future opportunities that may arise.
According to Wordpress.com (2011) 4 Investment Appraisal Techniques You Should Put In
Effect With Reason deciding where to focus investment is key part of building your business.
Different investment appraisal techniques let the owner assess the effects an investment will
have on the cashflow. Its important to estimate the benefits of the investment in financial
terms wherever possible. Any sunk costs (costs that have already been incurred or would be
spent regardless) must be ignored. These are not part of the specific investment. How the
investment could contribute to your overall strategic objectives must be considered and also
any finance or funding must be ensured and considered to be available. The assessment
should also consist of all the indirect (soft) consequences of an investment. According to
Wordpress.com (2011) 4 Investment Appraisal Techniques You Should Put In Effect
With Reason these might include:

greater flexibility and quality of production

faster time-to-market resulting in a bigger market share
improved company image, better staff morale and job satisfaction, leading to greater
productivity
quicker decisions due to better availability of information
As written in Investment Appraisal (S-cool.co.uk, 2014) the main investment appraisal
techniques include:

The accounting rate of return (ARR) compares the profits that are expected from an
investment to the amount of financing needed. The ARR is normally calculated as the
average annual profit expected over the life of an investment project, compared to the
average amount of capital invested.
Payback period - a simple technique for assessing an investment by the length of time
it would take for repayment. Its usually the default technique for smaller businesses and
focuses on cashflow, not profit.
Discounting cashflow applies a discount rate to work out the present-day equivalent
of a future cashflow. There are two types of discounting methods of appraisal - the net
present value (NPV) and internal rate of return (IRR).
Investment risk and sensitivity analysis a realistic assessment of risks is essential. In
practice, the biggest risk for many investments is the disruption they can cause.

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 LO4: Be able to evaluate the financial performance of a business

4.1 Discuss the main financial statements

Definition: Financial statements are examined in Financial Statements (Accounting tools,

2014) as a collection of reports about an organization's financial results, condition and cash
flows. They are useful for the following reasons:

To determine the ability of a business to generate cash, and the sources and uses of
that cash.
To determine whether a business has the capability to pay back its debts.
To track financial results on a trend line to spot any looming profitability issues.
To derive financial ratios from the statements that can indicate the condition of the
business.
To investigate the details of certain business transactions, as outlined in the disclosures
that accompany the statements.

As written in What are financial statements (AccountingSimplified.com, 2013) the standard

contents of a set of financial statements are:

Balance sheet. Shows the entity's assets, liabilities, and stockholders' equity as of the
report date.

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 Income statement. Shows the results of the entity's operations and financial activities
for the reporting period.

16
Gross profit, at 8,023 million, has come out at 71.8% of sales, compared with 71.7% in the
first half of 2013, representing an improvement of 10 basis points. Research and Development
expenses have increased from 3.2% to 3.3% as a percentage of sales. This increase illustrates
the Groups constant determination to support its Research and Innovation effort. Advertising
and promotion expenses came out at 29.3% of sales, which is 70 basis points below the first-
half 2013 level. Net profit from continuing operations, excluding non-recurring items,
attributable to owners of the company, which amounted to 1,773.5 million, is flat compared
to that of the first half of 2013. Selling, general and administrative expenses, at 21.1% of
sales, have come to a higher level, by 50 basis points, compared to the first half of 2013.
Overall, the operating profit at 2,029 million, has grown by 0.2%, and amounts to 18.2% of
sales. At constant exchange rates, operating profit growth would have been +4.5%. Overall
finance costs amounted to 8.1 million, compared with 12.9 million in the first half of 2013.
This decline reflected the continuing strengthening of our financial structure in the first half.

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 Net profit attributable to owners of the company, amounted to 1,734.8 million, an increase of
1.5%.

Statement of cash flows. Shows changes in the entity's cash flows during the reporting
period.

Income taxes paid amount to 502.0 million, 504.0 million and 970.6 million respectively
for first half 2014 and 2013 and year 2013. Interests paid amount to 13.0 million, 11.2
million and 24.9 million respectively for first half 2014 and 2013 and year 2013. Dividends
received amount to 331.1 million, 327.5 million and 327.5 million respectively for first
half 2014 and 2013 and year 2013, and are included within gross cash flow.

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 Supplementary notes. Includes explanations of various activities, additional detail on
some accounts, and other items as mandated by the applicable accounting framework, such
as GAAP or IFRS.

If a business plans to issue financial statements to outside users (such as investors or

lenders), the financial statements should be formatted in accordance with one of the major
accounting frameworks. These frameworks allow for some leeway in how financial
statements can be structured, so statements issued by different firms even in the same industry
are likely to have different appearances. If financial statements are issued strictly for internal
use, there are no guidelines, other than common usage, for how the statements are to be
presented. The business is expected to issue an income statement and balance sheet to
document its monthly results and ending financial condition. The full set of financial
statements is expected when a business is reporting the results for a full fiscal year, or when a
publicly-held business is reporting the results of its fiscal quarters.

4.2 Compare appropriate formats of financial statements for different types of

business

In Different Formats of Financial Statements for Different Types of Businesses

(Studymode.com, 2010) there are three basic forms of business organizations:
Sole proprietorship, in which the owner is only one
Partnership, where the owners are two or more individuals
Limited liability company a separated from the owner legal entity
The annual reports of quoted companies (shares of a public limited company are listed) are
obliged to be publicized and are main source of financial information for the company.
Usually the financial statements of the firms are publically available only in limited amounts.
In the balance sheet of a sole proprietorship, in the "total assets" category it is expected to be
seen the information of all the profit like cash, buildings, equipment, products, while the
details for loans and taxes that should be paid are summarized in the part for the debts. The
equity section would consist the owners capital, invested in the business. For a partnership
business the balance sheet will be similar as for the sole trader, but the profit and the liabilities
would be separated for the different owners, usually using many capital accounts for keeping
track of each owners investment.

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 4.3 Interpret financial statements using appropriate rations and comparisons, both
internal and external

According to What Internal & External Risks Do Financial Ratios Show? by Tiffany
C. Wright companies have to make the financial statements in order of obtaining information
about the performance of their production security. Analysis of these statements always
provides detailed information that helps identifying the strong sides and the difficulties that
has the business and should be taken care of. Calculating and comparing of financial ratios to
certain norms or trends is an important analysis method. They can provide a detailed view
into the risks and the proper solutions for them.
1. WORKING CAPITAL RATIO/ CURRENT RATIO:
According to Timothy R. Mayes (2014) in Analysis of Financial Statements relationship
between current assets and current liabilities is defined as current ratio or working capital
ratio.
CURRENT RATIO/ WORKING CAPITAL RATIO = Current assets/ Current liabilities
Usually the ideal current ratio is 2:1. The company is not enjoying the sufficient liquidity, if it
is less than 2.
Quick ratio = (Current Assets Inventory Prepaid Expenses)/ Current Liabilities

Ideal quick ratio is 1.

Debt equity ratio = Outsiders funds/ Shareholders funds

2. PROPRIETARY RATIO:
In Analysis of Financial Statements the ratio between shareholders equity and entire assets is
known as proprietary ratio.
proprietary ratio = Shareholders Equity/ Total Assets

The proprietary ratio better if it is higher.

3. INTEREST COVERAGE RATIO:

The ratio between EBIT and Interest is known as interest coverage ratio.
Interest coverage ratio = EBIT/Interest

Interest coverage ratio is better if it is higher.

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 As it is written in Balance Sheet Financial Ratio Analysis by Meir Liraz (2014)
liquidity Ratios give a strong view about the ability of the company to meet its financial
obligations either in short or mid periods. The less is the sufficient liquidity to pay its bills,
the greater is the likelihood that a company can fail. Liquidity ratios can follow the risks that a
company takes by setting a feasible invoice and collection policy, sales force incentive
structures and procurement policies and managing cash flow. Leverage Ratos refers to the
availability of debt and the current interest rate level are external environmental risk factors
that appear in leverage ratios. A company's internal policies (mix of equity and debt in its
capital structure) on the usage of debt and also a supply restriction that impacts the price of
certain assets are internal risk factors. According to Howard Finch (2014) in Financial Ratios
Profitability Ratios compare various income statement numbers to total sales which helps
identifying issues including inventory problems. Inventory turnover is related to external risk
factors that include market demand or supply and sourcing disruptions. It can point to internal
risk factors including location assessment and marketing effectiveness. These ratios can
identify other risks including regulatory compliance, training needs and rental and
maintenance rates. Rates of Return show how well a company is performing operationally
which is impacted by the capital-raising environment. The easier it is to raise capital from
external investors, the more likely certain companies will pursue that option over debt or
slower growth. Higher required internal rates of return are internal risks - a company's
operating or competitive environment, its internal procedures and management capability.

Valuation Ratios

P/E Ratio TTM 30.87 30.05

Price to Sales TTM 3.72 3.56
Price to Cash Flow MRQ 64.31 61.87
Price to Free Cash Flow TTM 68.57 65.92
Price to Book MRQ 3.84 3.68
Price to Tangible Book MRQ 5.91 5.68
Profitability

Gross margin TTM 71.23% 70.79%

Gross Margin 5YA 70.88% 70.55%
Operating margin TTM 16.47% 16.27%
Operating margin 5YA 15.31% 15.28%
Pretax margin TTM 17.85% 17.62%
Pretax margin 5YA 16.58% 16.51%

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 Net Profit margin TTM 13.14% 12.96%
Net Profit margin 5YA 12% 11.93%
Per Share Data

Revenue/Share TTM 36.12 36.65

Basic EPS 4.82 4.79
Diluted EPS 4.73 4.71
Book Value/Share MRQ 38.1 38.07
Tangible Book Value/Share MRQ 22.96 23.13
Cash/Share MRQ 6.89 7.01
Cash Flow/Share TTM 6.15 6.15
Management Effectiveness

Return on Equity TTM 12.88% 12.76%

Return on Equity 5YA 14.53% 14.52%
Return on Assets TTM 8.94% 8.84%
Return on Assets 5YA 9.36% 9.35%
Return on Investment TTM 11.83% 11.7%
Return on Investment 5YA 12.44% 12.45%
Growth

EPS(MRQ) vs Qtr. 1 Yr. Ago -0.04% 0.22%

EPS(TTM) vs TTM 1 Yr. Ago -2.1% -1.99%
5 Year EPS Growth 7.5% 7.36%
Sales (MRQ) vs Qtr. 1 Yr. Ago -1.48% -1.74%
Sales (TTM) vs TTM 1 Yr. Ago -2.81% -3.1%
5 Year Sales Growth 4.75% 4.74%
5 Year Capital Spending Growth 6.43% 6.1%
Financial Strength

Quick Ratio MRQ 1.07 1.11

Current Ratio MRQ 1.31 1.36
LT Debt to Equity MRQ 0.37% 0.69%
Total Debt to Equity MRQ 14.06% 14.42%
Efficiency

Asset Turnover TTM 0.68 0.68

Inventory Turnover TTM 2.9 2.89
Revenue/Employee TTM - 700.68K
Net Income/Employee TTM - 33.37K
Receivable Turnover TTM 6.22 6.18
Dividend

Dividend Yield 1.71% 1.76%

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 Dividend Yield 5 Year Avg. 2.13% 2.13%
Dividend Growth Rate 11.57% 11.37%
Payout Ratio 52.95 52.48

Profitability - L'oreal (OR)

Return on Assets Return on Equity

Industry Comparison Industry Comparison

7.47% 13.24%

Return on Capital
Industry Comparison

9.97%

Margin Analysis - L'oreal (OR)

Gross Margin Levered Free Cash Flow Margin

Industry Comparison Industry Comparison

71.33% 6.36%

EBITDA Margin SG&A Margin

Industry Comparison Industry Comparison

20.52% 50.55%

Asset Turnover - L'oreal (OR)

Total Assets Turnover Accounts Receivables Turnover

Industry Comparison Industry Comparison

0.7x 6.3x

Fixed Assets Turnover Inventory Turnover

Industry Comparison Industry Comparison

7.6x 2.9x

Credit Ratios - L'oreal (OR)

Current Ratio Quick Ratio

Industry Comparison Industry Comparison

23
 1.3x 0.8x

Long-Term Solvency - L'oreal (OR)

Total Debt/Equity Total Liabilities/Total Assets

Industry Comparison Industry Comparison

14.06% 32.76%

Growth Over Prior Year - L'oreal (OR)

Total Revenue Tangible Book Value

Industry Comparison Industry Comparison

0.96% 9.30%

EBITDA Gross Profit

Industry Comparison Industry Comparison

2.43% 1.43%

Receivables Inventory
Industry Comparison Industry Comparison

-2.78% -0.34%

Diluted EPS Before Extra Capital Expenditures

Industry Comparison Industry Comparison

0.57% 6.95%

Levered Free Cash Flow

Cash From Ops. Industry Comparison
Industry Comparison
-32.50%
1.59%

24
 Conclusions
In the given project were discussed the main financial sources both external and
internal, with their benefits and disadvantages and suitability of the various types of business.
There was cleared the costs and implications of the basic investments methods and also the
importance of financial planning was discussed. The interests and information needs of the
decision makers in the business were pointed, for which the financial statements and ratios are
from important value. The appropriate construction of the budgets and statements are essential
for the development of the firm and helps for the improvement and understanding the
financial processes in the production. Curtain data from the financial strategies, statements
and ratios in LOREAL were shown as examples, the development during the years and also
the results in the sales from investment scenarios.

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27