财务报表分析ch07

《财务报表分析ch07》由会员分享，可在线阅读，更多相关《财务报表分析ch07（46页珍藏版）》请在装配图网上搜索。

1、Copyright 2009 by The McGraw-Hill Companies,Inc.All rights reserved.McGraw-Hill/IrwinFinancial Statement AnalysisK R SubramanyamJohn J Wild7-207CHAPTERCash Flow Analysis7-3ALookAtThisChapterInthischapterweanalyzecashflowmeasuresforinsightsintoallbusinessactivities,withspecialemphasisonoperations.Att

2、entionisdirectedatcompanyandbusinessconditionswheninterpretingcashflows.Wealsoconsideralternativemeasuresofcashflows.7-4AnalysisObjectivesExplaintherelevanceofcashflowsinanalyzingbusinessactivitiesDescribethereportingofcashflowsbybusinessactivitiesInterpretcashflowsfromoperatingactivitiesAnalyzecash

3、flowsunderalternativecompanyandbusinessconditionsDescribealternativemeasuresofcashflowsandtheirusefulness7-5Statement of Cash Flows Cashisthemostliquidofassets.Offersbothliquidityandflexibility.Boththebeginningandtheendofacompanysoperatingcycle.Contrast:AccrualaccountingandCashbasisaccountingFinanci

4、alstatementsanalysisrecognizesthataccrualaccounting,wherecompaniesrecognizerevenuewhenearnedandexpenseswhenincurred,differsfromcashbasisaccounting.RelevanceofCash7-6Statement of Cash FlowsNetcashflowistheendmeasureofprofitability.Itiscash,notincome,thatultimatelyrepaysloans,replaceequipment,expandsf

5、acilities,andpaysdividends.Accordingly,analyzingacompanyscashinflowsandoutflows,andtheiroperating,financing,orinvestingsources,isoneofthemostimportantinvestigativeexercises.Cashflowanalysishelpsinassessingliquidity,solvency,andfinancialflexibility.RelevanceofCash7-7Statement of Cash FlowsLiquidity(流

6、动性)isthenearnesstocashofassetsandliabilitiesSolvency（偿债能力）istheabilitytopayliabilitieswhentheymature.Financial flexibility(财务灵活性)istheabilitytoreactandadjusttoopportunitiesandadversities.7-8Statement of Cash Flows Statementofcashflows(SCF)helpsaddressquestionssuchas:aHow much cash is generated from

7、or used in operations?aWhat expenditures are made with cash from operations?aHow are dividends paid when confronting an operating loss?aWhat is the source of cash for debt payments?aHow is the increase in investments financed?aWhat is the source of cash for new plant assets?aWhy is cash lower when i

8、ncome increased?aWhat is the use of cash received from new financing?RelevanceofCash7-9Statement of Cash Flows TheSCFreportscashreceiptsandcashpaymentsbyoperating,financing,andinvestingactivities:Operating activities aretheearning-relatedactivitiesofacompany.Reporting by ActivitiesBeyond revenue and

9、 expense activities represented in an income statement,they include the net inflows and outflows of cash resulting from related operating activities like extending credit to customers,investing in inventories,and obtaining credit from suppliers.7-10Statement of Cash FlowsInvesting activitiesaremeans

10、ofacquiringanddisposingofnoncashassets.Involveassetsexpectedtogenerateincome;lendingfundsandcollectingtheprincipalontheseloans.Financing activities aremeansofcontributing,withdrawing,andservicingfundstosupportbusinessactivities.Includeborrowingandrepayingfundswithbondsandotherloans;contributionsandw

11、ithdrawalsbyownersandtheirreturnoninvestment.Reporting by Activities7-11Statement of Cash FlowsReporting by Activities7-12Statement of Cash Flows Therearetwoacceptablemethodsforreportingcashflowsfromoperations:IndirectandDirectmethodsConstructing the Cash Flow Statement7-13Statement of Cash FlowsInd

12、irectMethodNetincomeisadjustedfornon-cashincome(expense)itemsandaccrualstoyieldcashflowfromoperations.Theadvantage:thedisclosureofareconciliationofdifferencesbetweennetincomeandoperatingcashflows.Thiscanaidsomeusersthatpredictcashflowsbyfirstpredictingincomeandthenadjustingincomeforleadsandlagsbetwe

13、enincomeandcashflows.Theindirectmethodismostcommonlyemployedinpracticeandweuseitinitiallytoillustratepreparationofthestatementofcashflows.7-14Statement of Cash FlowsDirectMethodEachincomeitemisadjustedforitsrelatedaccrualsBothmethodsyieldidenticalresults-onlythepresentationformatdiffers.7-15Statemen

14、t of Cash FlowsUndertheaccrualbasisofaccounting,whichofthefollowingstatementsistrue?I.ReportednetincomeprovidesameasureofoperatingperformanceII.Revenueisrecognizedwhencashisreceived,andexpensesarerecognizedwhenpaymentismadeIII.Cashinflowsarerecognizedwhentheyarereceived,andcashoutflowsarerecognizedw

15、hentheyaremadeA.IonlyB.IIIonlyC.IandIIID.I,IIandIII7-16c7-17Statement of Cash FlowsThestatementofcashflowsisablendoftheincomestatementandthebalancesheet.Netincomeisfirstadjustedfornoncashincomeandexpenseitemstoyieldcashprofitswhichare,then,furtheradjustedforcashgeneratedandusedbybalancesheettransact

16、ionstoyieldcashflowsfromoperations,aswellasinvestingandfinancingactivities.7-18Statement of Cash Flows Considerfirstthenetcashfromoperations.Preparation of the SCF(Indirect method)7-19Statement of Cash Flows Depreciationandamortizationadd-back.Preparation of the Statement of Cash Flows7-20Statement

17、of Cash Flows Income v/s Cash Flows-ExampleConsidera$100saleonaccount(1)In period of sale,net income is increased by$100 but no cash has been generated.NetIncome100Depreciationandamortizationexpense0Gains(losses)onsaleofassets0Changeinaccountsreceivable(100)NetCashflowfromoperations0In period of col

18、lection no income is recorded.NetIncome0Depreciationandamortizationexpense0Gains(losses)onsaleofassets0Changeinaccountsreceivable100NetCashflowfromoperations1007-21Statement of Cash Flows Adjustmentsforchangesinbalancesheetaccountscanbesummarizedasfollows:Preparation of the Statement of Cash Flows7-

19、22Statement of Cash Flows Constructing the Statement1.Thecompanypurchasedatruckduringtheyearatacostof$30,000thatwasfinancedinfullbythemanufacturer.2.Atruckwithacostof$10,000andanetbookvalueof$2,000wassoldduringtheyearfor$7,000.Therewerenoothersalesofdepreciableassets.3.DividendspaidduringYear2are$51

20、,0007-23Statement of Cash Flows Steps in Constructing the Statement(1)StartwithNetIncome(2)AdjustNetIncomefornon-cashexpensesandgains(3)Recognizecashinflows(outflows)fromchangesincurrentassetsandliabilities(4)Sumtoyieldnetcashflowsfromoperations(5)Changesinlong-termassetsyieldnetcashflowsfrominvesti

21、ngactivities(6)Changesinlong-termliabilitiesandequityaccountsyieldnetcashflowsfromfinancingactivities(7)Sumcashflowsfromoperations,investing,andfinancingactivitiestoyieldnetchangeincash(8)Addnetchangeincashtothebeginningcashbalancetoyieldendingcash7-24Statement of Cash Flows 7-25Analysis Implication

22、s of Cash Flows Somelimitationsofthecurrentreportingofcashflow:Practicedoesnotrequireseparatedisclosureofcashflowspertainingtoeitherextraordinaryitemsordiscontinuedoperations.Interestanddividendsreceivedandinterestpaidareclassifiedasoperatingcashflows.Manyusersconsiderinterestpaidafinancingoutflow,a

23、ndinterestanddividendsreceivedascashinflowsfrominvestingactivities.Incometaxesareclassifiedasoperatingcashflows.Thisclassificationcandistortanalysisofthethreeindividualactivitiesifsignificanttaxbenefitsorcostsareattributedtotheminadisproportionatemanner.Limitations in Cash Flow Reporting7-26Analysis

24、 Implications of Cash FlowsWhichofthefollowingwouldrequireanadjustmentinthecomputationofcashflowfromoperationsusingtheindirectmethod?I.DepreciationexpenseII.LossonsaleofassetIII.SaleofservicestocostumersforcashIV.UtilitybillreceivedandpaidincashA.IB.IandIIC.IandIIID.IV7-27Analysis Implications of Ca

25、sh FlowsBeginningandendingaccountsreceivableare$76,000and$42,000,respectively.Salesfortheperiodtotal$384,000,ofwhich$40,000wasdirectlyforcash.Howmuchcashwascollectedfrommakingsalesandcollectingaccountsreceivable?A.$344,000B.$418,000C.$378,000D.$376,0007-28Analysis Implications of Cash FlowsBeginning

26、accountsreceivableare$76,000.Salesfortheperiodtotal$384,000,ofwhich$40,000wasdirectlyforcash.$418,000wascollectedfrommakingsalesandcollectingaccountsreceivable.Whatistheendingbalanceforaccountsreceivable?A.$42,000B.$2,000C.$82,000D.$68,0007-29BBA7-30Analysis Implications of Cash Flows 7-31Q.LinkingO

27、peratingCashFlowswithEarningsQualityIn reviewing the financial statements of a company,you discover that net income increased while operating cash flows decreased for the most recent two consecutive years.Required:a.Explainhownetincomecouldincreasewhileitsoperatingcashflowsdecrease.Youranswershouldi

28、ncludethreeillustrativeexamples.b.Describehowoperatingcashflowscanserveasoneindicatorofearningsquality.7-32Q.LinkingOperatingCashFlowswithEarningsQualityA.Revenues are,in certain instances,recognized before cash is received(that is,when earned,eg.credit sale).Expenses are,in certain instances,recogn

29、ized after cash is paid(that is,matched with revenues).As a result,net income can be positive when operating cash flows are negative.7-33Q.LinkingOperatingCashFlowswithEarningsQuality examples:(1)If accounts receivable increase substantially during the year,this implies that revenues outpaced cash c

30、ollections.(2)If a company builds up its inventory levels substantially,then cash is paid out but no expense is recognized.(3)If the company reduces its accounts payable balances substantially during the year,then cash flows can be negative when net income is positive.7-34Q.LinkingOperatingCashFlows

31、withEarningsQualityB.Operating cash flows can serve as one indicator of earnings quality because over a number of years,cash flows should approximate earnings.If cash flows from operations are consistently lower than earnings,it is possible that the reported earnings are not of high quality.(As with

32、 any broad guideline,one must look for corroborating evidence.)7-35Analysis Implications of Cash Flows Interpreting Cash Flows and Net Income7-36Analysis Implications of Cash Flows Anincomestatementrecordsrevenueswhenearnedandexpenseswhenincurred.Itdoesnotshowthetimingofcashinflowsandoutflows,northe

33、effectofoperationsonliquidityandsolvency.ThisinformationisavailableintheSCF.Cashflowsfromoperations(CFO)isabroaderviewofoperatingactivitiesthanisnetincome.Itisnotameasureofprofitability.Note:Anetmeasure,beitnetincomeorcashflowsfromoperations,isoflimitedusefulness.Thekeyisinformationaboutcomponentsof

34、thesenetmeasures.Interpreting Cash Flows and Net Income7-37Analysis Implications of Cash Flows Accountingaccrualsdeterminingnetincomerelyonestimates,deferrals,allocations,andvaluations.SubjectivityNote:CFOeffectivelyserveasacheckonnetincome,butnotasubstitutefornetincome.CFOexcludeelementsofrevenuesa

35、ndexpensesnotcurrentlyaffectingcash.Ouranalysisofoperationsandprofitabilityshouldnotproceedwithoutconsideringtheseelements.Interpreting Cash Flows and Net Income7-38Analysis of Cash Flows Inevaluatingsourcesandusesofcash,theanalystshouldfocusonquestionslike:aAreassetreplacementsfinancedfrominternalo

36、rexternalfunds?aWhatarethefinancingsourcesofexpansionandbusinessacquisitions?aIsthecompanydependentonexternalfinancing?aWhatarethecompanysinvestingdemandsandopportunities?aWhataretherequirementsandtypesoffinancing?aAremanagerialpolicies(suchasdividends)highlysensitivetocashflows?7-39Analysis of Cash

37、 FlowsCase Analysis of Cash Flows of Campbell Soup7-40Analysis of Cash Flows Inferencesfromanalysisofcashflowsinclude:WheremanagementcommitteditsresourcesWhereitreducedinvestmentsWhereadditionalcashwasderivedfromWhereclaimsagainstthecompanywerereducedDispositionofearningsandtheinvestmentofdiscretion

38、arycashflowsThesize,composition,pattern,andstabilityofoperatingcashflowsInferences from Analysis of Cash Flows7-41Analysis of Cash Flows Free Cash FlowA useful analytical derivative of the statement of cash flows is the computation of free cash flow7-42Analysis of Cash Flows Growthandfinancialflexib

39、ilitydependonadequatefreecashflow.Free Cash FlowPositivefreecashflowreflectstheamountavailableforbusinessactivitiesafterallowancesforfinancingandinvestingrequirementstomaintainproductivecapacityatcurrentlevels.7-43Analysis of Cash Flows TheSCFisusefulinidentifyingmisleadingorerroneousoperatingresult

40、sorexpectations.Cash Flow as ValidatorsSCF provides us with important clues on:Feasibility of financing capital expenditures.Cash sources in financing expansion.Dependence on external financing.Future dividend policies.Ability in meeting debt service requirements.Financial flexibility to unanticipat

41、ed needs/opportunities.Financial practices of management.Quality of earnings.7-44Specialized Cash Flow RatiosCash Flow Adequacy Ratio Measure of a companys ability to generate sufficient cash from operations to cover capital expenditures,investments in inventories,and cash dividends:Three-year sum o

42、f cash from operationsThree-year sum of expenditures,inventory additions,and cash dividendsCash Reinvestment Ratio Measure of the percentage of investment in assets representing operating cash retained and reinvested in the company for both replacing assets and growth in operations:Operating cash fl

43、ow DividendsGross plant+Investment+Other assets+Working capital7-45Specialized Cash Flow RatiosThecashflowadequacyratioA.MeasuresacompanysabilitytogeneratesufficientcashflowfrominvestingtocoverdebtrepaymentsB.MeasuresacompanysabilitytogeneratesufficientcashflowsfromoperationstocovercapitalexpendituresanddebtrepaymentC.Measuresacompanysabilitytogeneratesufficientcashflowsfromoperationstocovercapitalexpenditures,inventoryadditionsanddividendsD.Measuresacompanysabilitytogeneratesufficientcashflowsfromoperationstocovercapitalexpenditures,debtrepaymentanddividends7-46c