A2.

1 - ROE

Distribuidora Internacional de Alimentación, S.A. (DIA) is a Spanish international hard-discount superm

chain founded in 1979 which as of 2012 operates 6,914 stores internationally, making it Europe's third la

P&L 2014

SALES 8,010,967
Other revenues 105,520
YOY Total Revenues growth
Total Revenues 8,116,487
COGS - 6,350,221
Gross Profit 1,766,266
Gross margin 21.76%
Payroll - 660,282
Overhead - 580,120
EBITDA 525,864
Ebitda margin 6.48%
Depreciation expense - 184,604
Impairments - 5,525
Results from divestments - 11,558
Operating Profit (EBIT) 324,177
Operating margin 3.99%
Financial results: - 40,709
Financial revenues 16,447
Interest expense - 57,259
Other financial results 103
Earnings before taxes (EBT) 283,468
Income taxes - 74,556
Net income 208,912
Recurrent Net Margin 2.57%
Extraordinary results 120,582

Net income 329,494

Net margin 4.06%

BALANCE SHEET (000 euros) 2014

ASSETS:
Inventory 553,119
Accounts receivable 351,532
Financial investments 18,506
Other current assets 7,836
Cash and equivalents 199,004
Total Current Assets 1,129,997

L-T Operating investments 1,915,465

Net plant and equipment 1,270,366
Tax receivable 147,890
Goodwill & Other intangible assets 497,209
L-T Financial investments 81,525
Total Fixed Assets 1,996,990
TOTAL ASSETS 3,126,987

LIABILITIES & O'S EQUITY:

S-T financial debt 336,101
Accounts payable 1,784,300
Total Current Liabilities 2,120,401

L-T financial debt 540,167

Provisions 86,100
Tax payable and other 2,749
Total Non- Current Liabilities 629,016
 Common stock 65,107
Retained earnings and reserves 312,509
Minority equity - 46
Total Owner's Equity 377,570
TOTAL LIABILITIES & EQUITY 3,126,987

OPERATIONS MANAGEMENT ANALYSIS 2014

= ROIC: NOPAT / Invested Capital in the operations 23.3%

+ Operating profit / sales (Operating margin) 3.99%
x Capital invested turnover 7.78
x Fiscal policy: (1-tax rate) 75.00%
By estimating ROIC we can see the capability of the company to generate returns from its operations.

ROIC tree 2014

YoY Growth 0.0%

Gross margin 21.8%
Ebitda margin 6.5%
Operating margin 4.0%
Receivables / total revenues 4.3%
Inventories / total revenues 6.8%
Other current assets / total revenues 0.1%
Payables / total revenues 22.0%
L-T Operating assets / total revenues 23.6%
Fiscal policy: (1-tax rate) 75.0%
By relating each of the IC's components to net sales, we can track performance and have a clear idea of wh

Maturity matching analysis 2014

Operating working capital:

+ Inventory 553,119
Inventory/ total revenues 6.81%
+ Accounts receivable 351,532
Accounts receivable / total revenues 4.33%
+ Other assets 7,836
Other assets / total revenues 0.10%
- Accounts payable 1,784,300
Accounts payable / total revenues 21.98%
= OWC - 871,813
OWC / total revenues -10.741%

Working capital:
+ Equity 377,570
+ L-T Liabilities 629,016
- Total fixed assets 1,996,990
= WC - 990,404
WC / total revenues -12.202%

Net Liquid Resources: WC - OWC - 118,591

Maturity Matching DIA

OWC WC / total revenues
-
2014 2015 2016
-200,000

-400,000

-600,000

-800,000

-1,000,000

-1,200,000

FINANCIAL MANAGEMENT ANALYSIS 2014

= ROA (recurrent): 6.68%

+ Net margin 2.57%
x Assets turnover 2.60
Bear in mind ROA uses total assets, and then, if there is cash in excess, the results will be missleading, as
= ROE (recurrent): 55%
+ ROA 6.68%
x Leverage ( total assets / equity) 8.28

Return on equity thefore comes from the ROA and the capital structure. Since liabilities are cheaper than e

DEBT POSITION 2014

Net debt (financial debt - cash) 677,264

Net debt / Total Assets free of cash 23.13%
Ebitda / Interest expense 9.18
Net debt / ebitda 1.29

Please fill in the yellow shaded cells.

The goal is to assess both companies' ROE and debt position. It is not only relevant to get ROEs figures, b
Based on this idea you are asked to break down ROA and ROE in their levers. You get 2014 Dia example,
Please check if any of the two companies has cash in excess. If so, try to adjust ROE and reach a cash free
Once you have ROE's calculations, focus on understanding the type of debt that each company has for its l
1. Operating liabilities are free of financial cost, and are dependant on sales. It does not introduce financ
2. Short-term financial debt should only be used for seasonal needs of funds.
3. L-T financial debt is part of the capital of the company.
Also, don't forget to measure the relationship between Ebitda and Net Debt, and between Ebitda and the in
try to assess the financial risk introduced by debt.
Maturity Matching analysis, also helps to understand the solvency situation of a company.
Please support your findings with some short comments.
 HiOp - Financial Decision Making for Managers

A2.1 - ROE
MERCADONA is a Spanish family-owned
supermarket chain. Leader in the country with
anish international hard-discount supermarket presence in 46 provinces of 17 autonomous
ernationally, making it Europe's third largest. communities.

2015 2016 2014 2015 2016

8,925,454 8,867,621 18,441,861 19,059,157 19,802,382

96,215 110,976 17,106 18,324 21,133
11.15% -0.48% 3.4% 3.9%
9,021,669 8,978,597 18,458,967 19,077,481 19,823,515
- 7,018,881 - 6,942,007 - 13,907,913 - 14,376,994 - 15,028,974
2,002,788 2,036,590 4,551,054 4,700,487 4,794,541
22.20% 22.68% 24.65% 24.64% 24.19%
- 847,233 - 846,103 - 2,329,392 - 2,391,368 - 2,502,267
- 644,034 - 653,549 - 1,216,019 - 1,171,680 - 1,199,962
511,521 536,938 1,005,643 1,137,439 1,092,312
5.67% 5.98% 5.45% 5.96% 5.51%
- 214,026 - 232,953 - 330,375 - 372,076 - 312,977
- 11,013 - 13,262 - 11,053 - 2,594
- 12,340 4,336 982
274,142 295,059 676,250 754,310 776,741
3.04% 3.29% 3.66% 3.95% 3.92%
- 56,026 - 51,939 61,665 33,849 26,161
9,265 12,089 61,665 33,849 26,161
- 65,291 - 64,121 - - -
93
218,116 243,120 737,915 788,159 802,902
82,610 - 69,119 - 194,656 - 198,920 - 166,652
300,726 174,001 543,259 589,239 636,250
3.33% 1.94% 2.94% 3.09% 3.21%
- 1,477 - - - -
299,249 174,001 543,259 589,239 636,250
3.32% 1.94% 2.94% 3.09% 3.21%

2015 2016 2014 2015 2016

562,489 669,592 612,458 654,578 716,407

340,330 340,781 78,260 98,477 128,180
22,266 25,954 33,988 74,660 102,520
7,815 8,140
154,627 364,600 2,883,414 3,256,993 3,301,810
1,087,527 1,409,067 3,608,120 4,084,708 4,248,917

2,287,607 2,448,019 3,451,995 3,575,406 3,945,720

1,372,010 1,469,078 3,413,712 3,529,883 3,898,464
271,480 314,273 38,283 45,523 47,256
644,117 664,668 - - -
67,495 59,243 - - -
2,355,102 2,507,262 3,451,995 3,575,406 3,945,720
3,442,629 3,916,329 7,060,115 7,660,114 8,194,637

519,958 315,376 - - -
1,615,893 2,053,847 3,040,411 3,160,963 3,191,051
2,135,851 2,369,223 3,040,411 3,160,963 3,191,051

938,857 1,065,058 - - -
51,503 45,841 28,195 24,203 25,272
3,193 44,109 107,303 82,685 66,471
993,553 1,155,008 135,498 106,888 91,743
 62,246 62,246 15,921 15,921 15,921
250,997 329,972 3,868,285 4,376,342 4,895,922
- 18 - 60
313,225 392,158 3,884,206 4,392,263 4,911,843
3,442,629 3,916,389 7,060,115 7,660,114 8,194,637

2015 2016 2014 2015 2016

13.0% 15.7% 46.0% 48.5% 36.4%

3.04% 3.29% 3.66% 3.95% 3.92%
5.70 6.36 16.75 16.34 12.40
75.00% 75.00% 75.00% 75.00% 75.00%
enerate returns from its operations.

2015 2016 2014 2015 2016

11.2% -0.5% 3.4% 3.9%

22.2% 22.7% 24.7% 24.6% 24.2%
5.7% 6.0% 5.4% 6.0% 5.5%
3.0% 3.3% 3.7% 4.0% 3.9%
3.8% 3.8% 0.4% 0.5% 0.6%
6.2% 7.5% 3.3% 3.4% 3.6%
0.1% 0.1% 0.0% 0.0% 0.0%
17.9% 22.9% 16.5% 16.6% 16.1%
25.4% 27.3% 18.7% 18.7% 19.9%
75.0% 75.0% 75.0% 75.0% 75.0%
performance and have a clear idea of what has made ROIC change.

2015 2016 2014 2015 2016

562,489 669,592 612,458 654,578 716,407

6.23% 7.46% 3.32% 3.43% 3.61%
340,330 340,781 78,260 98,477 128,180
3.77% 3.80% 0.42% 0.52% 0.65%
 7,815 8,140 - - -
0.09% 0.09% 0.00% 0.00% 0.00%
1,615,893 2,053,847 3,040,411 3,160,963 3,191,051
17.91% 22.87% 16.47% 16.57% 16.10%
- 705,259 - 1,035,334 - 2,349,693 - 2,407,908 - 2,346,464
-7.817% -11.531% -12.729% -12.622% -11.837%

313,225 392,158 3,884,206 4,392,263 4,911,843

993,553 1,155,008 135,498 106,888 91,743
2,355,102 2,507,262 3,451,995 3,575,406 3,945,720
- 1,048,324 - 960,096 567,709 923,745 1,057,866
-11.620% -10.693% 3.076% 4.842% 5.336%

- 343,065 75,238 2,917,402 3,331,653 3,404,330

Maturity Matching Mercadona

DIA
1,500,000 OWC WC
evenues
1,000,000
2016
500,000
-
2014 2015 2016
-500,000
-1,000,000
-1,500,000
-2,000,000
-2,500,000
-3,000,000

2015 2016 2014 2015 2016

8.74% 4.44% 7.69% 7.69% 7.76%

3.33% 1.94% 2.94% 3.09% 3.21%
8.21 6.29 5.11 4.67 4.66
cess, the results will be missleading, as cash has a different risk profile than the operating assets.
 96.01% 44.37% 13.99% 13.42% 12.95%
8.74% 4.44% 7.69% 7.69% 7.76%
10.99 9.98 1.81 1.74 1.66

cture. Since liabilities are cheaper than equity, debt levers ROE up. Also the risk undertaken.

2015 2016 2014 2015 2017

365,331.00 49,224.00 2,883,414.00 3,256,993.00 3,301,810.00

NA NA NA NA NA
2.39 2.30 3.04 3.06 3.49
0.71 0.09 2.87 2.86 3.02

not only relevant to get ROEs figures, but also understand and identify where the results come from.
their levers. You get 2014 Dia example, to guide your work.
try to adjust ROE and reach a cash free ROE, as was showed inthe Video "ROE and Equity Value Drivers" for Apple Inc.
e of debt that each company has for its leverage (Total Asset/ Equity):
nt on sales. It does not introduce financial risk.

Net Debt, and between Ebitda and the interest expense. These two metrics

situation of a company.
Mercadona

2016
e Drivers" for Apple Inc.