Yo fellow CFA charter holders -
Passed L3 last May, felt great!! Amazing how fast some material slips away though.
I’m helping a private company right now and putting together some profitability metrics for their Controller and CFO to monitor.
3 Questions Came To Mind so I thought I’d try this Forum out…
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DuPont Analysis - I am performing DuPont analysis. This business is capital intensive and there is huge depreciation expense taken for tax reasons…so Net Income shows as a loss…assume I would adjust the depreciation down for analysis reasons to increase net profit margin? And Controller should be able to give me that figure?
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Return On Invested Capital - same as above, looking at their ROIC. When I calculate NOPAT - its held in a pass through entity that does not pay entity level taxes. Do I use what I assume is the investors personal tax rate when I calculate NOPAT?
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PPP Loan Forgiveness - shows as a GAIN under Other Income - assume I would remove this from analysis as its a one time special event?
Hopefully this isn’t too deep for the water cooler!
Thanks.