大连海事财务管理研究生公司理财chapter03

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1、Chapter3McGraw-Hill/IrwinCopyright 2006 by The McGraw-Hill Companies,Inc.All rights reserved.Working With Financial Working With Financial StatementsStatementsKey Concepts and SkillsUnderstand sources and uses of cash and the Statement of Cash FlowsKnow how to standardize financial statements for co

2、mparison purposesKnow how to compute and interpret important financial ratiosBe able to compute and interpret the DuPont IdentityUnderstand the problems and pitfalls in financial statement analysis1Chapter OutlineCash Flow and Financial Statements:A Closer LookStandardized Financial StatementsRatio

3、AnalysisThe DuPont IdentityUsing Financial Statement Information2Sample Balance SheetNumbers in millions3Sample Income StatementRevenues5,000Cost of Goods Sold2,006Expenses1,740Depreciation116EBIT1,138Interest Expense7Taxable Income1,131Taxes442Net Income689EPS3.61Dividends per share1.08Numbers in m

4、illions,except EPS&DPS4Sources and UsesSourcesCash inflow occurs when we“sell”somethingDecrease in asset account(Sample B/S)Accounts receivable,inventory,and net fixed assetsIncrease in liability or equity accountAccounts payable,other current liabilities,and common stockUsesCash outflow occurs when

5、 we“buy”somethingIncrease in asset accountCash and other current assetsDecrease in liability or equity accountNotes payable and long-term debt5Statement of Cash FlowsStatement that summarizes the sources and uses of cashChanges divided into three major categoriesOperating Activity includes net incom

6、e and changes in most current accountsInvestment Activity includes changes in fixed assetsFinancing Activity includes changes in notes payable,long-term debt and equity accounts as well as dividends6Sample Statement of Cash Flows7Standardized Financial StatementsCommon-Size Balance SheetsCompute all

7、 accounts as a percent of total assetsCommon-Size Income StatementsCompute all line items as a percent of salesStandardized statements make it easier to compare financial information,particularly as the company growsThey are also useful for comparing companies of different sizes,particularly within

8、the same industry8Ratio AnalysisRatios also allow for better comparison through time or between companiesAs we look at each ratio,ask yourself what the ratio is trying to measure and why is that information is importantRatios are used both internally and externally9Categories of Financial RatiosShor

9、t-term solvency or liquidity ratiosLong-term solvency or financial leverage ratiosAsset management or turnover ratiosProfitability ratiosMarket value ratios10Computing Liquidity RatiosCurrent Ratio=CA/CL2256/1995=1.13 timesQuick Ratio=(CA Inventory)/CL(2256 1995)/1995=.1308 timesCash Ratio=Cash/CL69

10、6/1995=.35 timesNWC to Total Assets=NWC/TA(2256 1995)/5394=.05Interval Measure=CA/average daily operating costs2256/(2006+1740)/365)=219.8 days11Computing Long-term Solvency RatiosTotal Debt Ratio=(TA TE)/TA(5394 2556)/5394=52.61%Debt/Equity=TD/TE(5394 2556)/2556=1.11 timesEquity Multiplier=TA/TE=1+

11、D/E1+1.11=2.11Long-term debt ratio=LTD/(LTD+TE)843/(843+2556)=24.80%12Computing Coverage RatiosTimes Interest Earned=EBIT/Interest1138/7=162.57 timesCash Coverage=(EBIT+Depreciation)/Interest(1138+116)/7=179.14 times13Computing Inventory RatiosInventory Turnover=Cost of Goods Sold/Inventory2006/301=

12、6.66 timesDays Sales in Inventory=365/Inventory Turnover365/6.66=55 days14Computing Receivables RatiosReceivables Turnover=Sales/Accounts Receivable5000/956=5.23 timesDays Sales in Receivables=365/Receivables Turnover365/5.23=70 days15Computing Total Asset TurnoverTotal Asset Turnover=Sales/Total As

13、sets5000/5394=.93It is not unusual for TAT 1,especially if a firm has a large amount of fixed assetsNWC Turnover=Sales/NWC5000/(2256 1995)=19.16 timesFixed Asset Turnover=Sales/NFA5000/3138=1.59 times16Computing Profitability MeasuresProfit Margin=Net Income/Sales689/5000=13.78%Return on Assets(ROA)

14、=Net Income/Total Assets689/5394=12.77%Return on Equity(ROE)=Net Income/Total Equity689/2556=26.96%17Computing Market Value MeasuresMarket Price=$87.65 per shareShares outstanding=190.9 millionPE Ratio=Price per share/Earnings per share87.65/3.61=24.28 timesMarket-to-book ratio=market value per shar

15、e/book value per share87.65/(2556/190.9)=6.56 times18Deriving the DuPont IdentityROE=NI/TEMultiply by 1 and then rearrangeROE=(NI/TE)(TA/TA)ROE=(NI/TA)(TA/TE)=ROA*EMMultiply by 1 again and then rearrangeROE=(NI/TA)(TA/TE)(Sales/Sales)ROE=(NI/Sales)(Sales/TA)(TA/TE)ROE=PM*TAT*EM19Using the DuPont Ide

16、ntityROE=PM*TAT*EMProfit margin is a measure of the firms operating efficiency how well does it control costsTotal asset turnover is a measure of the firms asset use efficiency how well does it manage its assetsEquity multiplier is a measure of the firms financial leverage20Expanded DuPont Analysis

17、Aeropostale DataBalance Sheet DataCash=138,356Inventory=61,807Other CA=12,284Fixed Assets=94,601EM=1.654ComputationsTA=307,048TAT=2.393Income Statement DataSales=734,868COGS=505,152SG&A=141,520Interest=(760)Taxes=34,702ComputationsNI=54,254PM=7.383%ROA=17.668%ROE=29.223%21Aeropostale Extended DuPont

18、 ChartROE=29.223%ROA=17.668%EM=1.654PM=7.383%TAT=2.393NI=54,254Sales=734,868Sales=734,868TA=307,048Total Costs=-680,614Sales=734,868COGS=-505,152SG&A=-141,520Interest=-(760)Taxes=-34,702Fixed Assets=94,601Current Assets=212,447Cash=138,356Other CA=12,284Inventory=61,80722Why Evaluate Financial State

19、ments?Internal usesPerformance evaluation compensation and comparison between divisionsPlanning for the future guide in estimating future cash flowsExternal usesCreditorsSuppliersCustomersStockholders23BenchmarkingRatios are not very helpful by themselves;they need to be compared to somethingTime-Tr

20、end AnalysisUsed to see how the firms performance is changing through timeInternal and external usesPeer Group AnalysisCompare to similar companies or within industriesSIC and NAICS codes24Real World Example-IRatios are figured using financial data from the 2003 Annual Report for Home DepotCompare t

21、he ratios to the industry ratios in Table 3.12 in the bookHome Depots fiscal year ends Feb.1Be sure to note how the ratios are computed in the table so that you can compute comparable numbers.Home Depot sales=$64,816 MM25Real World Example-IILiquidity ratiosCurrent ratio=1.40 x;Industry=1.8xQuick ra

22、tio=.45x;Industry=.5xLong-term solvency ratioDebt/Equity ratio(Debt/Worth)=.54x;Industry=2.2x.Coverage ratioTimes Interest Earned=2282x;Industry=3.2x26Real World Example-IIIAsset management ratios:Inventory turnover=4.9x;Industry=3.5xReceivables turnover=59.1x(6 days);Industry=24.5x(15 days)Total as

23、set turnover=1.9x;Industry=2.3xProfitability ratiosProfit margin before taxes=10.6%;Industry=2.7%ROA(profit before taxes/total assets)=19.9%;Industry=4.9%ROE=(profit before taxes/tangible net worth)=34.6%;Industry=23.7%27Potential ProblemsThere is no underlying theory,so there is no way to know whic

24、h ratios are most relevantBenchmarking is difficult for diversified firmsGlobalization and international competition makes comparison more difficult because of differences in accounting regulationsVarying accounting procedures,i.e.FIFO vs.LIFODifferent fiscal yearsExtraordinary events28Work the Web

25、ExampleThe Internet makes ratio analysis much easier than it has been in the pastClick on the web surfer to go to Choose a company and enter its ticker symbolClick on Ratios and then Financial Condition and see what information is available29Quick QuizWhat is the Statement of Cash Flows and how do y

26、ou determine sources and uses of cash?How do you standardize balance sheets and income statements and why is standardization useful?What are the major categories of ratios and how do you compute specific ratios within each category?What are some of the problems associated with financial statement analysis?30Chapter3McGraw-Hill/IrwinCopyright 2006 by The McGraw-Hill Companies,Inc.All rights reserved.End of ChapterEnd of Chapter