AnalysisofFinancialStatements--鄧冠軍.ppt

Analysis of Financial Statements,Ratio Analysis Du Pont system,Balance Sheet: Assets,Cash A/R Inventories Total CA Gross FA Less: Dep. Net FA Total Assets,Balance sheet: Liabilities and Equity,Accts payable Notes payable Accruals Total CL Long-term debt Common stock Retained earnings Total Equity Total L & E,2008 524,160 636,808 489,600 1,650,568 723,432 460,000 32,592 492,592 2,866,592,2009 436,800 300,000 408,000 1,144,800 400,000 1,721,176 231,176 1,952,352 3,497,152,Income statement,Sales COGS Other expenses EBITDA Depr. & Amort. EBIT Interest Exp. EBT Taxes Net income,2008 6,034,000 5,528,000 519,988 (13,988) 116,960 (130,948) 136,012 (266,960) (106,784) (160,176),2009 7,035,600 5,875,992 550,000 609,608 116,960 492,648 70,008 422,640 169,056 253,584,Other data,No. of shares EPS DPS Stock price Lease pmts,Why are ratios useful?,Ratios standardize numbers and facilitate comparisons. Ratios are used to highlight weaknesses and strengths.,What are the five major categories of ratios, and what questions do they answer?,Liquidity: Can we make required payments? Asset management: right amount of assets vs. sales? Debt management: Right mix of debt and equity? Profitability: Do sales prices exceed unit costs, and are sales high enough as reflected in PM, ROE, and ROA? Market value: Do investors like what they see as reflected in P/E and M/B ratios?,Calculate DLeons forecasted current ratio for 2009.,Current ratio = Current assets / Current liabilities = $2,680 / $1,145 = 2.34x,Comments on current ratio,Expected to improve but still below the industry average. Liquidity position is weak.,What is the inventory turnover vs. the industry average?,Inv. turnover = CGS / Inventories = $7,036 / $1,716 = 4.10x,Comments on Inventory Turnover,Inventory turnover is below industry average. DLeon might have old inventory, or its control might be poor. No improvement is currently forecasted.,DSO is the average number of days after making a sale before receiving cash.,DSO = Receivables / Average sales per day = Receivables / Sales/365 = $878 / ($7,036/365) = 45.6,Appraisal of DSO,DLeon collects on sales too slowly, and is getting worse. DLeon has a poor credit policy.,Fixed asset and total asset turnover ratios vs. the industry average,FA turnover = Sales / Net fixed assets = $7,036 / $817 = 8.61x TA turnover = Sales / Total assets = $7,036 / $3,497 = 2.01x,Evaluating the FA turnover and TA turnover ratios,FA turnover projected to exceed the industry average. TA turnover below the industry average. Caused by excessive currents assets (A/R and Inv).,Calculate the debt ratio and TIE,Debt ratio = Total debt / Total assets = ($1,145 + $400) / $3,497 = 44.2% TIE = EBIT / Interest expense = $492.6 / $70 = 7.0x,How do the debt management ratios compare with industry averages?,D/A and TIE are better than the industry average,Profitability ratios: Profit margin and Basic earning power,Profit margin = Net income / Sales = $253.6 / $7,036 = 3.6% BEP = EBIT / Total assets = $492.6 / $3,497 = 14.1%,Appraising profitability with the profit margin and basic earning power,Profit margin was very bad in 2008, but is projected to exceed the industry average in 2009. Looking good. BEP removes the effects of taxes and financial leverage, and is useful for comparison. BEP projected to improve, yet still below the industry average. There is definitely room for improvement.,Profitability ratios: Return on assets and Return on equity,ROA = Net income / Total assets = $253.6 / $3,497 = 7.3% ROE = Net income / Total common equity = $253.6 / $1,952 = 13.0%,Appraising profitability with the return on assets and return on equity,Both ratios rebounded from the previous year, but are still below the industry average. More improvement is needed. Wide variations in ROE illustrate the effect that leverage can have on profitability.,Effects of debt on ROA and ROE,ROA is lowered by debt-interest lowers NI, which also lowers ROA = NI/Assets. But use of debt also lowers equity, hence debt could raise ROE = NI/Equity.,Problems with ROE,ROE and shareholder wealth are correlated, but problems can arise when ROE is the sole measure of performance. ROE does not consider risk. ROE does not consider the amount of capital invested. Might encourage managers to make investment decisions that do not benefit shareholders.,Calculate the Price/Earnings and Market/Book ratios.,P/E = Price / Earnings per share = $12.17 / $1.014 = 12.0x,Calculate the Price/Earnings, Price/Cash flow, and Market/Book ratios.,M/B = Mkt price per share / Book value per share = $12.17 / ($1,952 / 250) = 1.56x,Analyzing the market value ratios,P/E: How much investors are willing to pay for $1 of earnings. P/CF: How much investors are willing to pay for $1 of cash flow. M/B: How much investors are willing to pay for $1 of book value equity. For each ratio, the higher the number, the better. P/E and M/B are high if ROE is high and risk is low.,Extended DuPont equation: Breaking down Return on equity,ROE = (Profit margin) x (TA turnover) x (Equity multiplier) = 3.6% x 2 x 1.8 = 13.0%,The Du Pont system,Also can be expressed as: ROE = (NI/Sales) x (Sales/TA) x (TA/Equity) Focuses on: Expens