10AnalysisofFinancialStatements投资分析与投

1、Lecture Presentation Software to accompanyInvestment Analysis and Portfolio ManagementSeventh Editionby Frank K. Reilly & Keith C. BrownChapter 10Chapter 10AnalysisofFinancialStatementsQuestionstobeanswered:What arethemajorfinancial statementsprovidedbyfirmsand whatspecificinformationdoeseach of the

2、mcontain?Whydoweuse financialratiostoexaminetheperformanceofafirm andwhyisitimportant to examineperformancerelativetothe economyand afirms industry?Chapter 10AnalysisofFinancialStatementsWhat arethemajorcategoriesforfinancial ratiosandwhatquestionsare answered by theratiosinthesecategories?What spec

3、ific ratioshelp determinea firmsinternalliquidity, operatingperformance,riskprofile,growthpotential,andexternalliquidity?Howcan theDuPontanalysishelpevaluatea firmsreturnonequity overtime?Chapter 10AnalysisofFinancialStatementsWhat aresome of themajordifferencesbetween U.S.and non-U.S. financialstat

4、ements andhowdothesedifferencesaffect thefinancialratios?What is a“quality” balancesheetorincome statement?Whyisfinancial statementanalysisdone if marketsare efficientandforward-looking?Chapter 10AnalysisofFinancialStatementsWhat major financialratioshelpanalystsinthefollowing areas:stockvaluation,

5、estimatingand evaluatingsystematicrisk,predicting thecreditratingsonbonds,and predictingbankruptcy?MajorFinancialStatementsCorporateshareholderannual andquarterlyreportsmustincludeMajorFinancialStatementsCorporateshareholderannual andquarterlyreportsmustincludeBalance sheetMajorFinancialStatementsCo

6、rporateshareholderannual andquarterlyreportsmustincludeBalance sheetIncomestatementMajorFinancialStatementsCorporateshareholderannual andquarterlyreportsmustincludeBalance sheetIncomestatementStatementofcashflowsMajorFinancialStatementsCorporateshareholderannual andquarterlyreportsmustincludeBalance

7、 sheetIncomestatementStatementofcashflowsReports filed withSecuritiesandExchangeCommission(SEC)MajorFinancialStatementsCorporateshareholderannual andquarterlyreportsmustincludeBalance sheetIncomestatementStatementofcashflowsReports filed withSecuritiesandExchangeCommission(SEC)10-K and10-QGenerallyA

8、cceptedAccountingPrinciples(GAAP)Formulated by theFinancialAccountingStandardsBoard(FASB)Providessome choicesofaccountingprinciplesFinancialstatementsfootnotesmustdisclosewhichaccounting principlesare usedbythe firmBalance SheetShowsresources(assets)ofthe firmand howithasfinancedtheseresourcesIndica

9、tescurrentandfixedassets availableata point in timeFinancingisindicated by itsmixture of currentliabilities, long-termliabilities,and ownersequityIncomeStatementContainsinformationontheprofitabilityofthefirmduringsomeperiodoftimeIndicatesthe flowofsales, expenses,andearningsduring thetime periodStat

10、ementofCashFlowsIntegrates theinformationonthebalancesheetandincome statementShowstheeffectsonthefirms cashflowofincomeflowsand changesinvariousitemsonthebalancesheetStatementofCashFlowsIthasthreesections:Cash FlowfromOperatingActivities thesources anduses of cashthatarisefrom thenormaloperationsofa

11、 firmCash FlowfromInvestingactivities changeingrossplantandequipment plusthe changeintheinvestmentaccountCash FlowfromFinancingactivities financingsources minus financingusesAlternativeMeasuresofCash FlowCash flowfromoperationsTraditionalcash flowequals netincomeplusdepreciationexpenseanddeferredtax

12、esAlso adjustforchangesinoperatingassets andliabilitiesthat useorprovide cashFree cashflowrecognizes thatsomeinvestingand financingactivities arecriticaltoongoing successofthe firmCapital expendituresanddividendsPurpose ofFinancialStatement AnalysisEvaluatemanagement performance in three areas:Profi

13、tabilityEfficiencyRiskAnalysisofFinancialRatiosRatiosare moreinformativethatrawnumbersRatiosprovidemeaningful relationshipsbetweenindividual valuesinthefinancial statementsImportance ofRelativeFinancialRatiosCompare to other entitiesExamine afirms performance relative to:Theaggregate economyItsindus

14、tryorindustriesItsmajorcompetitorswithin theindustryItspastperformance(time-seriesanalysis)ComparingtoTheAggregateEconomyMost firms areinfluenced by economic expansionsand contractionsinthebusinesscycleAnalysishelpsyouestimatethe futureperformanceofthefirmduringsubsequentbusinesscyclesComparingtoAFi

15、rms IndustryMost popularcomparisonIndustries affectthefirmswithin themdifferently, buttherelationship is alwayssignificantTheindustryeffect is strongestforindustrieswith homogenousproductsExamine theindustrys performance relative to aggregateeconomicactivityComparingtoAFirms Major CompetitorsIndustr

16、yaveragesmaynot be representativeSelectasubsetofcompetitorstocomparetousingcross-sectionalanalysis, orConstructacompositeindustryaveragefrom industriesthe firmoperatesinComparingtoAFirms HistoricalPerformanceDeterminewhetheritisprogressingordecliningHelpful forestimating futureperformanceConsidertre

17、ndsaswellasaveragesover timeFive CategoriesofFinancial Ratios1.Internalliquidity(solvency)2.Operatingperformancea.Operatingefficiencyb.Operatingprofitability3.Risk analysisa.Businessriskb.FinancialriskSixCategoriesofFinancialRatios4.GrowthanalysisSixCategoriesofFinancialRatios5.Externalliquidity(mar

18、ketability)CommonSizeStatementsNormalizebalancesheetsand incomestatementitemstoalloweasier comparisonofdifferent sizefirmsA commonsize balancesheetexpresses accounts as apercentageoftotalassetsA commonsize incomestatementexpresses allitemsasa percentageofsalesEvaluating Internal LiquidityInternalliq

19、uidity(solvency)ratiosindicatethe abilitytomeetfutureshort-termfinancialobligationsCurrent Ratio examines currentassets andcurrent liabilitiesEvaluating Internal LiquidityQuickRatioadjusts currentassets by removing lessliquid assetsEvaluating Internal LiquidityCash Ratio is themost conservativeliqui

20、dityratioEvaluating Internal LiquidityReceivablesturnoverexaminesthequalityofaccountsreceivableReceivablesturnovercanbeconverted intoanaveragecollection periodEvaluating Internal LiquidityInventoryturnoverrelatesinventorytosalesorcostofgoodssold (CGS)Giventheturnovervalues,youcan computethe averagei

21、nventory processingtimeAverage InventoryProcessing Period= 365/AnnualTurnoverEvaluating Internal LiquidityCash conversioncyclecombinesinformationfromthereceivablesturnover, inventoryturnover,and accounts payableturnoverReceivable Days+Inventory ProcessingDays-PayablesPaymentPeriodCash ConversionCycl

22、eEvaluating OperatingPerformanceRatiosthatmeasure howwell managementisoperating abusiness(1)Operating efficiencyratiosExamine howthemanagementuses itsassetsand capital, measured in terms of sales dollarsgenerated by asset or capitalcategories(2)Operating profitabilityratiosAnalyze profitsasapercenta

23、ge of sales andasa percentageofthe assetsandcapitalemployedOperatingEfficiencyRatiosTotalassetturnoverratioindicatesthe effectivenessofafirmsuse of itstotalassetbase (netassets equalsgrossassetsminusdepreciation on fixed assets)OperatingEfficiencyRatiosNetfixedassetturnoverreflectsutilizationoffixed

24、assetsOperatingProfitabilityRatiosOperatingprofitabilityratiosmeasure1.Therateofprofitonsales(profitmargin)2.ThepercentagereturnoncapitalOperatingProfitabilityRatiosGrossprofitmargin measures therate of profitonsales(grossprofit equalsnetsalesminusthe costofgoodssold)OperatingProfitabilityRatiosOper

25、atingprofit marginmeasurestherateofprofitonsalesafteroperating expenses (operatingprofit is gross profitminussales,generalandadministrative(SG +A)expenses)OperatingProfitabilityRatiosNetprofit marginrelates netincometosalesOperatingProfitabilityRatiosReturnontotalcapitalrelates thefirmsearningstoall

26、 capitalinthe enterpriseOperatingProfitabilityRatiosReturnonownersequity(ROE)indicates therate of returnearnedonthe capitalprovidedbythe stockholdersafterpayingfor allothercapital usedOperatingProfitabilityRatiosReturnonownersequity(ROE)can be computed forthecommon-shareholders equityOperatingProfit

27、abilityRatiosTheDuPont Systemdivides theratiointo severalcomponentsthat provideinsightsintothecauses of afirms ROEandany changesinitOperatingProfitabilityRatios Profit Total Asset Financial Margin Turnover Leverage=xxOperatingProfitabilityRatiosAnextendedDuPontSystem provides additionalinsightsintot

28、heeffect of financialleverageonthefirmandpinpoints theeffectofincome taxes on ROEOperatingProfitabilityRatiosAnextendedDuPontSystem provides additionalinsightsintotheeffect of financialleverageonthefirmandpinpoints theeffectofincome taxes on ROEWebeginwith theoperatingprofit margin(EBITdivided by sa

29、les)andintroduce additionalratios to deriveanROEvalueOperatingProfitabilityRatiosOperatingProfitabilityRatiosThis is theoperatingprofit returnontotalassets.Toconsiderthenegativeeffectsoffinancialleverage, we examinethe effectofinterestexpense as apercentageoftotalassetsOperatingProfitabilityRatiosOp

30、eratingProfitabilityRatiosWeconsiderthepositiveeffect of financialleveragewith thefinancialleveragemultiplierOperatingProfitabilityRatiosOperatingProfitabilityRatiosThis indicatesthepretax returnonequity.ToarriveatROE we mustconsiderthe taxrate effect.OperatingProfitabilityRatiosOperatingProfitabili

31、tyRatiosInsummary,wehave thefollowingfivecomponents of returnonequity(ROE)OperatingProfitabilityRatiosOperatingProfitabilityRatiosOperatingProfitabilityRatiosOperatingProfitabilityRatiosOperatingProfitabilityRatiosRisk AnalysisRisk analysis examines theuncertaintyofincomeflowsfor thetotalfirm andfor

32、the individualsourcesofcapitalDebtPreferredstockCommonstockRisk AnalysisTotalrisk of afirmhastwo components:BusinessriskTheuncertaintyofincome causedbythefirms industryGenerallymeasuredbythe variability of thefirmsoperating incomeover timeFinancialriskAdditional uncertainty of returnstoequity holder

33、sdue to afirms useoffixedobligation debtsecuritiesTheacceptableleveloffinancialriskforafirm dependsonits business riskBusinessRiskVariabilityofthefirms operatingincomeovertimeBusinessRiskVariabilityofthefirms operatingincomeovertimeStandarddeviationofthe historicaloperating earnings seriesBusinessRi

34、skTwofactorscontribute to thevariabilityofoperatingearningsSalesvariabilityEarningsmust be as volatile as salesSome industriesare cyclicalOperatingleverageProduction hasfixedandvariablecostsFixedproduction costs cause profitvolatility withchangesinsalesFixedproduction costs areoperatingleverageFinan

35、cialRiskBondsinterestpaymentscome beforeearningsareavailable to stockholdersThesearefixedobligationsSimilar to fixed productioncosts, these leadtolarger earnings duringgood times,andlowerearningsduring abusinessdeclineThis debtfinancing increasesthefinancial riskand possibility of defaultFinancialRi

36、skTwosetsoffinancialratios helpmeasurefinancialriskBalance sheet ratiosEarningsorcash flowavailable to payfixedfinancialchargesAcceptable levelsoffinancialriskdependonbusinessriskFinancialRiskProportion of debt(balancesheet) ratiosFinancialRiskProportion of debt(balancesheet) ratiosFinancialRiskProp

37、ortion of debt(balancesheet) ratiosThis maybecomputedwith andwithout deferred taxesFinancialRiskLong-termdebt/totalcapital ratio indicatestheproportionoflong-termcapitalderived fromlong-term debtcapitalFinancialRiskLong-termdebt/totalcapital ratio indicatestheproportionoflong-termcapitalderived from

38、long-term debtcapitalFinancialRiskTotaldebt ratioscompare total debt(currentliabilitiespluslong-termliabilities) to total capital(total debtplustotalequity)FinancialRiskTotaldebt ratioscompare total debt(currentliabilitiespluslong-termliabilities) to total capital(total debtplustotalequity)Financial

39、RiskEarningsorCash FlowRatiosRelatethe flowofearningsCash availabletomeet thepaymentsHigherratiomeanslowerriskFinancialRiskInterestCoverageFinancialRiskInterestCoverageFinancialRiskInterestCoverageFinancialRiskFirmsmayalsohave non-interestfixedpaymentsduefor lease obligationsTheriskeffectissimilarto

40、bond riskBond-ratingagenciestypicallyadd 1/3leasepaymentsastheinterestcomponent of theleaseobligationsFinancialRiskTotalfixedchargecoverageincludesany noncancellable lease payments andanypreferred dividendspaid outofearningsaftertaxesFinancialRiskTotalfixedchargecoverageincludesany noncancellable le

41、ase payments andanypreferred dividendspaid outofearningsaftertaxesFinancialRiskCash flowratios relatetheflowofcash availablefrom operationstoeither interest expense, total fixed charges, or theface value of outstanding debtFinancialRiskFinancialRiskFinancialRiskExternalMarketLiquidityMarketLiquidity

42、 is theability to buyorsell an asset quicklywithlittlepricechange fromapriortransactionassumingnonewinformationExternalmarketliquidity is asource of risktoinvestorsExternalMarketLiquidityDeterminantsofMarket LiquidityThedollar value of sharestradedThis canbeestimatedfromthetotalmarket value of outst

43、anding securitiesItwill be affected by thenumberofsecurityownersNumerousbuyersand sellersprovideliquidityExternalMarketLiquidityTrading turnover (percentage of outstanding sharestradedduring aperiod of time)ExternalMarketLiquidityA measureofmarket liquidityisthebid-askspreadAnalysisofGrowthPotential

44、Creditorsare interestedinthe firmsability to payfutureobligationsValueofa firmdependsonitsfuture growthinearningsanddividendsDeterminantsofGrowthResourcesretainedand reinvestedinthe entityRate of returnearnedonthe resourcesretained= RR xROEwhere:g =potential growthrateRR= theretentionrateofearningsR

45、OE=thefirms returnonequityDeterminantsofGrowthROEisafunctionofNetprofit marginTotalassetturnoverFinancialleverage(total assets/equity)ComparativeAnalysisofRatiosInternalliquidityCurrent ratio,quickratio,and cashratioOperatingperformanceEfficiency ratiosandprofitabilityratiosFinancialriskGrowthanalys

46、isAnalysisofNon-U.S.Financial StatementsStatementformatswill be differentDifferencesinaccounting principlesRatioanalysiswill reflectlocalaccountingpracticesTheQualityofFinancialStatementsReflect realityrather thanuse accountingtricks or one-time adjustments to makethings lookbetter thantheyareTheQua

47、lityofFinancialStatementsHigh-qualitybalancesheetstypically haveConservativeuse of debtAssetswithmarketvaluegreaterthan bookNoliabilitiesoffthe balancesheetTheQualityofFinancialStatementsHigh-qualityincome statementsreflectrepeatable earningsGainsfrom nonrecurringitemsshouldbeignoredwhen examiningea

48、rningsHigh-qualityearningsresult fromthe useofconservativeaccountingprinciples thatdonot overstaterevenuesorunderstate costsTheValueofFinancialStatementAnalysisFinancialstatements,bytheirnature,arebackward-lookingAnefficientmarket willhavealready incorporatedthesepast resultsintosecurityprices, so w

49、hyanalyze thestatements?Analysisprovidesknowledgeofafirmsoperating andfinancialstructureThis aidsinestimatingfuturereturnsSpecificUses of FinancialRatios1.Stockvaluation2.Identificationofcorporatevariables affectinga stockssystematicrisk (beta)3.Assigningcredit qualityratingsonbonds4.Predicting inso

50、lvency(bankruptcy) of firmsStockValuationModelsValuationmodels attempttoderive avaluebasedupononeofseveralcash floworrelativevaluation modelsAllvaluation modelsareinfluencedby:Expectedgrowthrateofearnings,cashflows,or dividendsRequiredrate of returnonthestockFinancialratios canhelp in estimatingthes

51、ecriticalinputsStockValuationModelsFinancialRatios1.Average debt/equity2.Average interest coverage3.Average dividend payout4.Average returnonequity5.Average retentionrate6.Average marketpricetobook value7.Average marketpricetocash flow8.Average marketpricetosalesStockValuationModelsVariabilityMeasur

52、es1.Coefficientofvariationofoperating earnings2.Coefficientofvariationofsales3.Coefficientofvariationofnet income4.Systematic risk(beta)NonratioVariables1.Average growthrate of earningsFinancialRatios andSystematic RiskFinancialRatios1.Dividendpayout2.Totaldebt/total assets3.Cash flow/totaldebt4.Interestcoverage5.Working capital/totalassets6.Current RatioFinancialRatios andSystematic RiskVariabilityMeasures1.Varianceofoperatingearnings2.Coefficientofvariationofoperating earnings3.Coefficientofvariationofoperating profitmargins4.Operatingearningsbeta(c