管理会计学英文版课件：Chap16 Financial Statement Analysis

1、“How Well Am I Doing?” Financial Statement AnalysisChapter 16Learning ObjectivesPrepare and interpret financial statements in comparative and common-size form. Compute and interpret financial ratios that would be useful to a common stockholder. Compute and interpret financial ratios that would be us

2、eful to a creditor.Limitations of Financial Statement AnalysisDifferences in accounting methods between companies sometimes make comparisons difficult.We use the LIFO method to value inventory.We use the average cost method to value inventory.Limitations of Financial Statement AnalysisAnalysts shoul

3、d look beyond the ratios.Economic factorsIndustry trendsChanges within the companyTechnological changesConsumer tastesStatements in Comparative and Common-Size Form Dollar and percentage changes on statements Common-size statements RatiosAn item on a financial statement has little meaning by itself.

4、 The meaning of the numbers can be enhanced by drawing comparisons.Dollar and Percentage Changes on Statements Horizontal analysis (or trend analysis) shows the changes between years in the financial data in both dollar and percentage form.ExampleThe following slides illustrate a horizontal analysis

5、 of Clover Corporations December 31, 2007 and 2006, comparative balance sheets and comparative income statements. Horizontal AnalysisHorizontal AnalysisHorizontal AnalysisCalculating Change in Dollar AmountsDollarChangeCurrent YearFigureBase YearFigure=The dollar amounts for 2006 become the “base” y

6、ear figures.Calculating Change as a PercentagePercentageChangeDollar Change Base Year Figure 100%=Horizontal AnalysisHorizontal Analysis($11,500 $23,500) 100% = 48.9%$12,000 $23,500 = $(11,500)Horizontal AnalysisHorizontal AnalysisWe could do this for the liabilities & stockholders equity, but now l

7、ets look at the income statement accounts. Horizontal AnalysisHorizontal AnalysisHorizontal AnalysisSales increased by 8.3%, yet net income decreased by 21.9%.Horizontal AnalysisThere were increases in both cost of goods sold (14.3%) and operating expenses (2.1%). These increased costs more than off

8、set the increase in sales, yielding an overall decrease in net income.Trend Percentages Trend percentages state several years financial data in terms of a base year, which equals 100 percent. Trend AnalysisTrendPercentage Current Year Amount Base Year Amount100%=Trend AnalysisExampleLook at the inco

9、me information for Berry Products for the years 2003 through 2007. We will do a trend analysis on these amounts to see what we can learn about the company.Trend AnalysisThe baseyear is 2003, and its amountswill equal 100%.Berry ProductsIncome InformationFor the Years Ended December 31 Trend Analysis

10、2004 Amount 2003 Amount 100% ( $290,000 $275,000 ) 100% = 105%( $198,000 $190,000 ) 100% = 104%( $ 92,000 $ 85,000 ) 100% = 108%Berry ProductsIncome InformationFor the Years Ended December 31Trend AnalysisBy analyzing the trends for Berry Products, we can see that cost of goods sold is increasing fa

11、ster than sales, which is slowing the increase in gross margin.Berry ProductsIncome InformationFor the Years Ended December 31Trend AnalysisWe can use the trend percentages to construct a graph so we can see the trend over time.Common-Size StatementsVertical analysis focuses on the relationships amo

12、ng financial statement items at a given point in time. A common-size financial statement is a vertical analysis in which each financial statement item is expressed as a percentage. Common-Size StatementsIn income statements, all items usually are expressed as a percentage of sales. Gross Margin Perc

13、entageGross Margin Percentage Gross Margin Sales=This measure indicates how muchof each sales dollar is left after deducting the cost of goods sold to cover expenses and provide a profit.Common-Size StatementsIn balance sheets, all items usually are expressed as a percentage of total assets. Common-

14、Size StatementsCommon-size financial statements are particularly useful when comparing data from different companies. Example Lets take another look at the information from the comparative income statements of Clover Corporation for 2007 and 2006. This time, lets prepare common-size statements. Comm

15、on-Size StatementsCommon-Size StatementsSales is usually the base and is expressed as 100%.Common-Size Statements2006 Cost 2006 Sales 100% ( $315,000 $480,000 ) 100% = 65.6%2007 Cost 2007 Sales 100% ( $360,000 $520,000 ) 100% = 69.2%Common-Size StatementsWhat conclusions can we draw?Now, lets look a

16、t Norton Corporations 2007 and 2006 financial statements.Ratio Analysis The Common Stockholder The ratios that are of the most interest to stockholders include those ratios that focus on net income, dividends, and stockholders equities. Earnings Per ShareEarnings per ShareNet Income Preferred Divide

17、nds Average Number of Common Shares Outstanding=Whenever a ratio divides an income statement balance by a balance sheet balance, the average for the year is used in the denominator.Earnings form the basis for dividend payments and future increases in the value of shares of stock.Earnings Per ShareEa

18、rnings per ShareNet Income Preferred Dividends Average Number of Common Shares Outstanding=Earnings per Share $53,690 $0 ($17,000 + $27,400)/2= $2.42This measure indicates how muchincome was earned for each share of common stock outstanding.Price-Earnings RatioPrice-EarningsRatio Market Price Per Sh

19、are Earnings Per Share=Price-EarningsRatio $20.00 $2.42= 8.26 timesA higher price-earnings ratio means that investors are willing to pay a premium for a companys stock because of optimistic future growth prospects. Dividend Payout RatioDividendPayout Ratio Dividends Per Share Earnings Per Share=Divi

20、dendPayout Ratio $2.00 $2.42= 82.6%This ratio gauges the portion of current earnings being paid out in dividends. Investors seeking dividends (market price growth) would like this ratio to be large (small).Dividend Yield RatioDividendYield Ratio Dividends Per Share Market Price Per Share=DividendYie

21、ld Ratio $2.00 $20.00= 10.00%This ratio identifies the return, in terms of cash dividends, on the current market price of the stock.Return on Total AssetsAdding interest expense back to net income enables the return on assets to be compared for companies with different amounts of debt or over time f

22、or a single company that has changed its mix of debt and equity.Return onTotal Assets$53,690 + $7,300 (1 .30) ($300,000 + $346,390) 2= 18.19%Return onTotal AssetsNet Income + Interest Expense (1 Tax Rate)Average Total Assets=Return on Common Stockholders EquityReturn on CommonStockholders EquityNet

23、Income Preferred Dividends Average Stockholders Equity=Return on CommonStockholders Equity $53,690 $0 ($180,000 + $234,390) 2= 25.91%This measure indicates how well the company used the owners investments to earn income.Financial Leverage Financial leverage results from the difference between the ra

24、te of return the company earns on investments in its own assets and the rate of return that the company must pay its creditors. Return on investment in assetsFixed rate of return on borrowed fundsPositive financial leverage=Book Value Per ShareBook Value per Share Common Stockholders Equity Number o

25、f Common Shares Outstanding=This ratio measures the amount that would be distributed to holders of each share of common stock if all assets were sold at their balance sheet carrying amounts after all creditors were paid off.= $ 8.55Book Value per Share$234,390 27,400=Book Value Per ShareNotice that

26、the book value per share of $8.55 does not equal the market value per share of $20. This is because the market price reflects expectations about future earnings and dividends, whereas the book value per share is based on historical cost.Book Value per Share Common Stockholders Equity Number of Commo

27、n Shares Outstanding= $ 8.55Book Value per Share$234,390 27,400=Working CapitalThe excess of current assets over current liabilities is known as working capital.Working capital is not free. It must be financed with long-term debt and equity.Working CapitalCurrent RatioThe current ratio measures a co

28、mpanys short-term debt paying ability.A declining ratio may be a sign of deteriorating financial condition, or it might result from eliminating obsolete inventories.CurrentRatio Current Assets Current Liabilities=Current RatioCurrentRatio Current AssetsCurrent Liabilities=CurrentRatio $65,000$42,000

29、=1.55Acid-Test (Quick) Ratio Quick Assets Current Liabilities=Acid-TestRatioQuick assets include Cash,Marketable Securities, Accounts Receivable and current Notes Receivable. This ratio measures a companys ability to meet obligations without having to liquidate inventory. $50,000 $42,000=1.19=Acid-T

30、estRatioAccounts Receivable Turnover Sales on Account Average Accounts ReceivableAccounts ReceivableTurnover=This ratio measures how many times a company converts its receivables into cash each year.= 26.7 times $494,000 ($17,000 + $20,000) 2Accounts ReceivableTurnover=Average Collection PeriodAvera

31、ge Collection Period= 365 Days Accounts Receivable TurnoverThis ratio measures, on average, how many days it takes to collect an account receivable. = 13.67 daysAverage Collection Period= 365 Days 26.7 TimesInventory TurnoverThis ratio measures how many times a companys inventory has been sold and r

32、eplaced during the year.If a companys inventory turnover Is less than its industry average, it either has excessive inventory or the wrong types of inventory. Cost of Goods Sold Average InventoryInventoryTurnover=Inventory Turnover Cost of Goods Sold Average InventoryInventoryTurnover= 12.73 times $140,000 ($10,000 + $12,000) 2InventoryTurnover=Average Sale PeriodAverage Sale Period= 365 Days Inventory TurnoverThis ratio measures how many