AnalysisforFinancialManagementChap學(xué)習(xí)課程

1、Introduction Analogy to flight cockpit. Indicators and levers.第1頁(yè)/共47頁(yè)第一頁(yè)，編輯于星期五：十點(diǎn) 四分。Levers of Financial PerformanceROE is Net Income divided by Shareholders equity.Why is this a sensible definition?3 determinants of ROE are1.Profit margin - Net income / Sales2.Asset turnover - Sales / Assets3.Fin

2、ancial leverage - Assets / Shareholders equityCompare different companies on these.第2頁(yè)/共47頁(yè)第二頁(yè)，編輯于星期五：十點(diǎn) 四分。TABLE 2-1 ROEs and Levers of Performance for 10 Diverse Companies, 2007*第3頁(yè)/共47頁(yè)第三頁(yè)，編輯于星期五：十點(diǎn) 四分。Comparisons Differences in ROE across firms is less than differences in components. Why? Role o

3、f competition? Is there any reason why profit margin and asset returns are negatively related?第4頁(yè)/共47頁(yè)第四頁(yè)，編輯于星期五：十點(diǎn) 四分。ROA How defined? Net income / Assets What does this measure? Net income + interest / Assets?第5頁(yè)/共47頁(yè)第五頁(yè)，編輯于星期五：十點(diǎn) 四分。Gross Margin Gross Profit / Sales Gross profit = ? Are COGS vari

4、able or fixed? Why is it important to distinguish between variable and fixed costs?第6頁(yè)/共47頁(yè)第六頁(yè)，編輯于星期五：十點(diǎn) 四分。Asset Turnover Take another look at Table 2-1. Which companies have high asset turnovers? Which is likely to be more sensitive to external events, current assets or fixed assets?第7頁(yè)/共47頁(yè)第七頁(yè)，編輯

5、于星期五：十點(diǎn) 四分。TABLE 2-1 ROEs and Levers of Performance for 10 Diverse Companies, 2007第8頁(yè)/共47頁(yè)第八頁(yè)，編輯于星期五：十點(diǎn) 四分。 What is a self-liquidating loan? What happens to AR and inventory when sales go up? What happens to AR and inventory when sales go down? What does a ratio like AR/Sales tell us? Collection per

6、iod (DSO)?第9頁(yè)/共47頁(yè)第九頁(yè)，編輯于星期五：十點(diǎn) 四分。Inventory Turns COGS / Ending inventory What are the turns?第10頁(yè)/共47頁(yè)第十頁(yè)，編輯于星期五：十點(diǎn) 四分。Days Sales in Cash Cash + Securities / Sales per day What does this ratio measure? Cash as a substitute?第11頁(yè)/共47頁(yè)第十一頁(yè)，編輯于星期五：十點(diǎn) 四分。Payables Period AP / Credit purchases per day COG

7、S as a proxy for Credit purchases. Inventory changes do what? Labor costs do what?第12頁(yè)/共47頁(yè)第十二頁(yè)，編輯于星期五：十點(diǎn) 四分。Fixed Asset Turnover Sales / Net PP&E Capital intensity? Whats the wheel analogy?第13頁(yè)/共47頁(yè)第十三頁(yè)，編輯于星期五：十點(diǎn) 四分。Financial Leverage What does increased financial leverage do to ROE? Is increas

8、ed leverage a good thing? Florida Power vs. Netflix and Genentech in Table 2-1? JPMorgan Chase? Have a look, and describe what you see, along with an explanation.第14頁(yè)/共47頁(yè)第十四頁(yè)，編輯于星期五：十點(diǎn) 四分。TABLE 2-1 ROEs and Levers of Performance for 10 Diverse Companies, 2007第15頁(yè)/共47頁(yè)第十五頁(yè)，編輯于星期五：十點(diǎn) 四分。Balance Sheet

9、 Ratios Debt-to-assets = Total liabilities / Total assets Debt-to-equity = Total liabilities / Shareholders equity What do these ratios measure?第16頁(yè)/共47頁(yè)第十六頁(yè)，編輯于星期五：十點(diǎn) 四分。Coverage Ratios TIE = EBIT / Interest expense Times burden covered = EBIT divided by the sum of interest and principal repayment/

10、1- tax rate. Includes repayment of principal Adjusts for differential impact of what in respect to tax?第17頁(yè)/共47頁(yè)第十七頁(yè)，編輯于星期五：十點(diǎn) 四分。 Which coverage ratio is more important? How much coverage is enough? Cash, borrowing capacity, salable assets, business risk第18頁(yè)/共47頁(yè)第十八頁(yè)，編輯于星期五：十點(diǎn) 四分。Market Value Lever

11、age Ratios D/E and D/A What do they represent? Coverage ratios? Growth prospects and future coverage potential? Rollover risk?第19頁(yè)/共47頁(yè)第十九頁(yè)，編輯于星期五：十點(diǎn) 四分。Liquidity Ratios Current ratio = Current Assets / Current Liabilities Acid test removes inventory from current assets to yield the quick ratio.第20頁(yè)

12、/共47頁(yè)第二十頁(yè)，編輯于星期五：十點(diǎn) 四分。Is ROE a Reliable Yardstick? Timing Forward looking and long-term perspective? Risk Impact of leverage ROIC = EBIT(1-Tax rate) / Interest Bearing Debt + Equity AP excluded Value Book value vs. market value Earnings yield, inverse of P/E Back to ROIC.第21頁(yè)/共47頁(yè)第二十一頁(yè)，編輯于星期五：十點(diǎn) 四分

13、。ROIC Is Not Distorted by Company FinancingABDebt 10% Interest900$ $ 0Equity100 1,000 Total assets1,000$ 1,000$ EBIT120$ 120$ - Interest expense90 0Earnings before tax30 120 - Tax 40%12 48 Earnings after tax18$ 72$ ROE18.0%7.2%ROA1.8%7.2%ROIC7.2%7.2%Company第22頁(yè)/共47頁(yè)第二十二頁(yè)，編輯于星期五：十點(diǎn) 四分。ROE or Market P

14、rice? Which is the better way to measure financial performance? Value creation for investors involves market values. Line of sight? Asymmetric information? External effects, economy, other stocks, etc.?第23頁(yè)/共47頁(yè)第二十三頁(yè)，編輯于星期五：十點(diǎn) 四分。Scatter Plots Price-to-book vs. ROE (weighted average) Figures 2-1 and

15、 2-2 coming up. Slope and dispersion (R-squared)?第24頁(yè)/共47頁(yè)第二十四頁(yè)，編輯于星期五：十點(diǎn) 四分。FIGURE 2-1 Market Value to Book Value of Equity versus Return on Equity for 37 Household Products and Related Companies第25頁(yè)/共47頁(yè)第二十五頁(yè)，編輯于星期五：十點(diǎn) 四分。FIGURE 2-2 Market to Book Value of Equity versus Return on Equity for 87 Lar

16、ge Corporations第26頁(yè)/共47頁(yè)第二十六頁(yè)，編輯于星期五：十點(diǎn) 四分。Using Ratios Effectively Ratio values need to be understood in context. Usually, no “correct” values for ratios. Rely on rule of thumb assessment techniques, such as comps and own time series changes.第27頁(yè)/共47頁(yè)第二十七頁(yè)，編輯于星期五：十點(diǎn) 四分。Figure 2-3 The Levers of Perf

17、ormance Suggest One Road Map for Ratio Analysis第28頁(yè)/共47頁(yè)第二十八頁(yè)，編輯于星期五：十點(diǎn) 四分。Scotts Miracle-Gro Time series of Scotts ROE? Recap in 2007? Quality? ROIC? Profit margin? Puzzle? Gross margin? How strong a brand? 第29頁(yè)/共47頁(yè)第二十九頁(yè)，編輯于星期五：十點(diǎn) 四分。Asset Turnover Asset turnover. Low or high? Good or bad? Fixed a

18、sset turnover? Inventory turnover? Collection period? Days sales in cash?第30頁(yè)/共47頁(yè)第三十頁(yè)，編輯于星期五：十點(diǎn) 四分。Leverage and Liquidity Ratios? Impact of recap? TIE or TBurdenCovered? Compare Scotts to industry averages: see next slide.第31頁(yè)/共47頁(yè)第三十一頁(yè)，編輯于星期五：十點(diǎn) 四分。TABLE 2-2 Ratio Analysis of Scotts Miracle-Gro Co

19、., 2003-2007, and Industry Averages, 2007第32頁(yè)/共47頁(yè)第三十二頁(yè)，編輯于星期五：十點(diǎn) 四分。Common Size Financial Statements Collection period, inventory turnover vs. ratios of AR and inventory to assets? Sales/assets? Working capital? Fraction of assets that are short-term? COGS Small %s can be large relative to net inco

20、me.第33頁(yè)/共47頁(yè)第三十三頁(yè)，編輯于星期五：十點(diǎn) 四分。TABLE 2-3 Scotts Miracle-Gro Co., Common-Size Financial Statements, 2003 2007 and Industry Averages for 2007第34頁(yè)/共47頁(yè)第三十四頁(yè)，編輯于星期五：十點(diǎn) 四分。TABLE 2-3 Scotts Miracle-Gro Co., Common-Size Financial Statements, 2003 2007 and Industry Averages for 2007 (continued)第35頁(yè)/共47頁(yè)第三十五

21、頁(yè)，編輯于星期五：十點(diǎn) 四分。Opportunities for Cash? A challenge? Examine statement of cash flows, contrasting cash flows from operations to cash flows from investment. Excess cash? Recap + distribution to shareholders?第36頁(yè)/共47頁(yè)第三十六頁(yè)，編輯于星期五：十點(diǎn) 四分。TABLE 2-4 Selected Ratios for Representative Industries, 2006 (uppe

22、r-quartile, median and lower-quartile values)第37頁(yè)/共47頁(yè)第三十七頁(yè)，編輯于星期五：十點(diǎn) 四分。TABLE 2-4 Selected Ratios for Representative Industries, 2006 (upper-quartile, median and lower-quartile values) (continued)第38頁(yè)/共47頁(yè)第三十八頁(yè)，編輯于星期五：十點(diǎn) 四分。TABLE 2-5 Definitions of Principal Ratios Appearing in Chapter第39頁(yè)/共47頁(yè)第三十九

23、頁(yè)，編輯于星期五：十點(diǎn) 四分。TABLE 2-5 Definitions of Principal Ratios Appearing in Chapter(continued)第40頁(yè)/共47頁(yè)第四十頁(yè)，編輯于星期五：十點(diǎn) 四分。AppendixInternational Differences In the upcoming table, look at the UK, Germany and Japan. Asset turns and profit margins in Asia and Latin America? Japanese collection periods, payables periods, and keiretsu. Leverage and liquidity across the globe?第41頁(yè)/共47頁(yè)第四十一頁(yè)，編輯于星期五：十點(diǎn) 四分。Public Companies Indebt