Evaluation of existing profitability analysis

1、 evaluation of existing profitability analysisabstract: the profitability indicator is the core of the financial analysis is the owner of most concern, but also operators and creditors to be concerned about. for a reflection of corporate profitability, we must seek an objective, comprehensive and ac

2、curate. in this paper, the profitability indicator of shortcomings and put forward some ideas to improve and perfect and the concrete operation. keywords: profitability; financial analysis; cash flow the level of corporate earnings is a measure of an important indicator of business performance; are

3、also investors the right to determine their investment destination, judge whether an enterprise can preserve their capital basis; creditors have to go through the analysis of profitability in order to accurately evaluate corporate debt repayment capacity, controlling credit risk. so, whether investo

4、rs, creditors, or business management personnel, are increasing emphasis on enterprise profitability analysis. in the profitability analysis, a comprehensive analysis of insight, the correct method of analysis is essential to master. a, profitability analysis of the contents of the profitability, al

5、so known as profitability, it refers to the ability of corporate profits. profitability analysis should include the level of profitability and earnings stability, persistent two aspects. profitability of the business analysis, people tend to attach importance to the amount of corporate profit, while

6、 ignoring the stability of corporate earnings, persistent analysis. in fact, the profitability of the business not only in the strength of corporate profits high and low levels of total measured. although the total profit can reveal the profitability of the current period or the total size of the ov

7、erall level, but it does not indicate how the formation of the total profits, but also does not reflect the profitability of enterprises in accordance with the current level of ability to maintain or continue in accordance with a certain rate, that is can not reveal the inherent qualities of this pr

8、ofit. therefore, the analysis of profitability not only to conduct an analysis of the total, but also a profit on this basis the structure analysis of the stability of grasping corporate profitability and sustainability. analysis of the latter statement is more important. second, profitability analy

9、sis method (a) stability analysis of profit a stable profit structure from point of view of a variety of business profits, namely through the analysis of a variety of business profits in the profit share of the total profits of the stability of the discriminant. the profits of chinas profit and loss

10、 account by pressing nature of the business is divided into, goods (products) sales profit, other business profits, operating profits, operating income and expenditure and so on. the profits of the project is profitable according to the stability of the order of, any front projects in the higher pro

11、portion of total profit shows that the stronger the stability of earnings. as the main business of enterprises mainly engaged in business, a continued operation of the business has always seek to guarantee the stability of the main business, making stable profit level, so earnings should be focused

12、on the analysis of the stability of main business profit ratio of the analysis critical analysis of main business profit of the overall profitability of the corporate direction and impact. (b) an analysis of earnings persistence earnings persistence, that is, the long-term changes in the trend of co

13、rporate profits. analysis of profit persistence usually be two or several ways to compare the profit and loss. phases of the comparison may be either absolute comparisons can also be relatively few comparisons. comparison of absolute way to be a recurring revenue business, operating business or merc

14、handise to compare the absolute amount of profits, to see whether it can maintain or increase profits. relative number of comparison is the selection of a given year as a base year, with profit and loss account each year the balance of each revenue and expenditure items in order to remove the balanc

15、e of the base year of the same items, and then multiplied by 100%, to seek changes in the relevant items of mouth the percentage, from which to judge whether the level of corporate profits have continued to maintain and increase the possibility of regular goods such as business sales or business pro

16、fits to grow steadily, corporate profits is illustrated in the durability will be. (c) the level of profitability analysis of several indicators of analysis of profitability of enterprises through the financial indicators to assess the relative level of corporate profits. the indicators are generall

17、y based on resource inputs and operating characteristics are divided into four categories: capital, operating profitability analysis, asset management profitability analysis, product profitability analysis and business profitability analysis of listed companies. covers the basic indicators are: roe,

18、 return on total assets, revenue margins, cost margins, earnings per share, return on common equity and dividend payout ratio and so on. on the profitability of the business analysis is mainly refers to the profit margin analysis. third, profitability analysis of the limitations of indicators of (a)

19、 the current income statement reflecting the financial performance of the deficiencies income statement of chinas enterprises is based on the concept of the traditional accounting earnings and revenue cost ratio is based on the service performance report forms, listed in this report have been report

20、ed mainly to achieve gains. it is in the price-based wood stability, market activities, a single, low-risk of external economic environment is appropriate, and can basically accurately reflect the business activities of the proceeds. however, with a higher level of market economy, price volatility h

21、as become a process of national economies can not escape the phenomenon, especially in the 20th century, 80 years of innovation in the rise, there has been strong price volatility of financial assets and financial liabilities, change the traditional value of the asset is determined by the necessary

22、labor time, thus the value of the concept of relative stability. as a result, use of fair value measurement of financial instruments as the property has become a necessity, but at the same time brought a: that, because of changes in fair value gains or losses arising from it is recognized in the inc

23、ome statement. if you do not recognized in the income statement, it makes the income statement can not be accurately reflected the full benefits of the current period will be discarded in the unrealized value in terms of revenue, the would make in terms of revenue there was no logical consistency, c

24、an not achieve fair and full disclosure requirements of , thereby reducing the reliability of accounting information. (b) financial indicator systems own shortcomings 1. the current financial indicators of the government with a strong color assessment. due to financial indicators of the provision of

25、 major emphasis on meeting the governments macroeconomic regulation and control of the financial information needs, and thus able to cut these assessments effectively serve the information for internal business decisions have not been fully considered. 2. indicator values with a shallow and some unr

26、eliability. for the protection of its confidential business and market interests of the enterprise value of the public on the various indicators is usually limited to shallow, general financial information. at the same time, taking into account the market image, and because a good assessment of the

27、government and its agencies, enterprises are also often the information on these should be open to varying degrees of modification increases. therefore, investors based on the number of these indicators is difficult to operate a real financial situation of enterprises to make the right assessment. f

28、or the business decision-makers is concerned, these plain index value alone can not be the same operating conditions of the enterprise performance and financial situation in order to grasp the true usefulness of the business of some deep-seated, involving commercial secrets, and detailed financial i

29、nformation , you can not be found from the financial standard system, this will definitely affect the business use of financial instruments, improve management of the initiative, thereby greatly reducing the role of the financial points. 3. in the name of the index, the formula to calculate diameter

30、, etc. there is also a great non-normative; in the analysis did not take into account the time value of money and inflation factors, and so on. in view of the above reasons, the need for the current financial analysis indicators necessary improvements and improved. 4, profitability improvement and p

31、erfection of evaluation index (a) the common evaluation index improvement of profitability 1. net assets rate of return. roe common formula for calculating the two forms, one denominator is the end of the net assets, and the other net assets, and the denominator is the beginning of the end of the av

32、erage net assets. these two forms of molecules are the net profit that year. as the net return on assets is the molecules net profit of the year, so the denominator with the beginning and the end of the average net assets, with the elements to compare the current year profits of more reasonable, tha

33、t is, a form after using the formula for calculating more reasonable. in the distribution of profits, and cash dividends affect year-end net assets, thus affecting the return on equity; while stock dividends because they do not affect year-end net assets, and therefore do not affect the net asset ra

34、te of return. for evaluating the business year earnings targets, not because of the allocation schemes, the calculated values are also different. hence, the denominator of the year-end net assets to further improve the distribution of profits before the end of the year for the net assets of more rea

35、sonable. 2. return on total assets. return on total assets of the general meaning of the total amount paid for a period of time refers to the average ratio of total assets, liabilities, and owner of the said rights and interests of enterprises, including all the assets, including the overall profita

36、bility. total assets in corporate debt from the creditors, the creditors receive interest income from the enterprise, this interest is the corresponding interest payments business. corporate net assets to total assets is the investment of shareholders, shareholders receive dividends from the company

37、, the dividend corresponds to the net profits of enterprises, namely, after-tax profits, not total profit. therefore, the formula for calculating the total return on assets instead of molecules in the sum of net profit and the interest payments tend to be more reasonable. 3. cost margins. cost margi

38、n is the total profits of enterprises in a certain period with the ratio of the total business costs, which targets the adoption of corporate earnings and expenditures compared to evaluate the enterprise in order to achieve the cost benefits from a cost point of view evaluation of corporate earnings

39、 in order to facilitate encourage enterprises to strengthen their internal management, conservation expenses, improve operational efficiency. we know that the total profit including subsidies, income, operating income, net, etc. and the cost does not match the cost of expenses. therefore, the cost m

40、olecular formula for calculating profit margins into operating profits are more reasonable. (b) the common evaluation index improvement of profitability under market conditions, corporate cash flows to a large extent determines the capacity of enterprises to survive and thus to a large extent determ

41、ines the profitability of the enterprises. this is because if the companys cash flow shortage, poor cash flow, cash deployment of ineffective, it will affect the survival and development, thereby affecting corporate profitability. common evaluation of the profitability indicators are basically accrual-based evaluation of the data is calculated and given, such as return on equity rate of return on total assets and the cost of profitability and other indicators, they do not reflect the business cash flows associated with profitability, there can only evaluate profitability of the business numb