管理会计英语英文版课件

MODULE2

FinancialStatementsAnalysisReviewFinancialStatementsFinancialstatementsreportonthefinancialperformanceandconditionofanorganization.TherearefourmajorfinancialstatementsIncomeStatementBalanceSheetStatementofOwner’sEquityStatementofCashFlowsIncomeStatementStatementofOwner’sEquityBalanceSheetAsyouknow,thebalancesheetreportsassets,liabilities,andowners’equityatamomentintime.Theincomestatementsummarizesrevenueandexpensetransactionsthatoccurduringaperiodoftime.Sincerevenueandexpensetransactionsaffectowner’sequity,netincomeexplainsmostofthechangethattakesplaceinowner’sequityduringaperiod.Contributionsandwithdrawalsbyownersalsoaffectowner’sequity.Thus,thechangeinowners’equityisexplainedbynetincome,ownercontributions,andownerwithdrawals.Becauseowners’equitymustequalassetsminusliabilities(netassets),thechangesinonesideoftheequationmustequalthechangesintheotherside.Therefore,changesinnetincome,ownercontributions,andownerwithdrawalsalsoexplainchangesinnetassets.Becausebuildingsandequipmentarelong-livedassets,itwouldnotmakesensetotreattheirentirecostasexpensesintheyeartheyareacquired.Ontheotherhand,becausebuildingsandequipmentgraduallylosetheireconomicvalueovertime,itdoesnotmakesensetowaituntiltheendoftheirservicelivestorecognizetheirdecliningusefulnesstothefirm.Asaconsequence,accountantsgraduallyandsystematicallyreducethereportedvaluesofbuildingsandequipmentonsuccessivebalancesheetsinordertoallocateexpensestoindividualyearsofassetuse.Thereductioninthereportedvalueofbuildingsandequipmentduringaperiodiscalleddepreciationexpense.Depreciationistheprocessofallocatingthecostofafixedassetasanexpenseintheyearswhentheassethelpsgeneraterevenue.Depreciationisanapplicationofthematchingprinciple.Becauselandhasanunlimitedlife,itisnotdepreciatedThereareseveralcommonlyusedmethods:straight-line,units-of-production,sum-of-the-years’digitsanddeclining-balance.

MethodsofCalculatingDepreciationStraight-LineMethod

Thestraight-line(SL)methodallocatesanequalamountofdepreciationexpensetoeachyearinanasset’slife.Thismethodisbasedontherationalethateachyearbenefitsequallyfromtheasset’sservices.depreciationexpenseperyear=(Cost-Salvagevalue)

UsefullifeinyearsResidualvalue(orsalvagevalue)istheamountthefirmexpectstoreceivefromsellingtheassetattheendofitsusefuleconomiclife.Ex.assumethatamachinehasacostof$4,900,aneconomiclifeoffiveyears,andanestimatedresidualvalueof$400.Annualdepreciationexpense=($4,900-$400)/5=$900peryearDepreciationexpense,accumulateddepreciation,andbookvalueoverthefiveyearscanbesummarizedasfollows:DateDepreciationAccumulatedBookValueExpenseDepreciationAtacquisition$0$0$4,900Endofyear19009004,000Endofyear29001,8003,100Endofyear39002,7002,200Endofyear49003,6001,300Endofyear59004,500400Units-of-ProductionMethodStep1:

DepreciationPerUnit=(Cost-SalvageValue)

TotalUnitsofProductionStep2:DepreciationExpense=DepreciationPerUnit×NumberofUnitsProduced

inthePeriodSum-of-the-Years’-DigitsMethodThesum-of-the-years’-digits(SYD)methodisoneofseveralacceleratedmethods.Suchmethodsresultinrelativelylargedepreciationchargesintheearlyyearsofanasset’slife.Thispatterncanbejustifiedbythenotionthatsomeassetsaremoreefficientintheearlieryearsoftheirlifeandthereforerendergreaterservices.Inotherwords,theyhelpgeneratemorerevenue.Toproperlymatchcostswithrevenues,expensesshouldbelargerinthoseearlyyears.SYDannualdepreciationexpenseiscalculatedbymultiplyinganasset’sdepreciablebasisbyafractionthatvariesfromyeartoyear.Thedenominatorisalwaysthesumoftheyears’digitsintheusefullifeoftheasset.Sumoftheyearsdigits=N*(N+1)/2Thefraction’snumeratoristhenumberofyearsremainingintheasset’susefullifeatthebeginningoftheyearforwhichdepreciationisbeingcalculated.Thesameex.assumethatamachinehasacostof$4,900,aneconomiclifeoffiveyears,andanestimatedresidualvalueof$400theentiredepreciablebasisis$4500Sumoftheyearsdigits=5*(5+1)/2=15Depreciationexpenseinyear1=$4,500*5/15=$1,500Depreciationexpenseinyear2=$4,500*4/15=$1,200Underthesum-of-the-years’digitsmethod,depreciationexpensedeclineseachyear.Attheendofthefifthyear,theentiredepreciablebasisof$4,500willbedepreciated.Depreciationexpense,accumulateddepreciation,andbookvalueoverthefiveyearscanbesummarizedasfollows:DateDepreciationAccumulatedBookValueExpenseDepreciationAtacquisition$0$0$4,900Endofyear11,5001,5003,400Endofyear21,2002,7002,200Endofyear39003,6001,300Endofyear46004,200700Endofyear53004,500400Declining-balance(DB)methodsalsoresultinaccelerateddepreciationcharges.Annualdepreciationexpenseiscalculatedbymultiplyinganasset’sbookvalue(costminusaccumulateddepreciation)atthebeginningoftheyearbyapercentage.Thepercentageequalsamultipleofthestraight-linerate.Frequentlyusedmultiplesare200%and150%.Residualvaluesarenotusedintheinitialdeterminationofdeclining-balancedepreciationratesordepreciationexpense.Becausetheassetinourillustrationhasafive-yearlife,thestraight-linerateis20%(1/5=20%).Usingamultipleof200%resultsinadeclining-balancerateof40%(20%*2.0).Amultipleof200%isreferredtoasthedouble-declining-balancemethod(DDB).Double-Declining-BalanceMethodStep1:Straight–linedepreciationrate=100%

UsefullifeinyearsStep2:Double-declining-balancerate=2×Straight–linedepreciationrateStep3:Depreciationexpense=Double-declining-balancerate×Beginningperiod

bookvalue(Ignoressalvagevalueuntillaterinlife)Thesameex.assumethatamachinehasacostof$4,900,aneconomiclifeoffiveyears,andanestimatedresidualvalueof$400Depreciationexpenseyear1=4900*0.4=1960Depreciationexpenseyear2=(4900-1960)*0.4=1176Depreciationexpenseyear3=(4900-1960-1176)*0.4=706Depreciationexpenseyear4=(4900-1960-1176-706)*0.4=423Depreciationexpenseinthefifthyearisnotcalculatedinthesameway.Theconventionalcalculationmultipliesthebookvalueattheendofyear4($635)by40%.Thisyieldsanexpenseof$254.However,thatexpensewouldresultintotalaccumulateddepreciationof$4,519($4,265+$254)andabookvalueof$381.Becauseanassetshouldnotbedepreciatedtoanamountbelowitsresidualvalue,depreciationinyear5islimitedto$235(theamountthatwouldleaveabookvalueof$400).Adepreciationscheduleforthefiveyearsis:DateDepreciationAccumulatedBookValueExpenseDepreciationAtacquisition$0$0$4,900Endofyear11,9601,9602,940Endofyear21,1763,1361,764Endofyear37063,8421,058Endofyear44234,265635Endofyear52354,500400Likemanyfixedassets,intangibleassetshavelimitedusefullives.Accordingly,thecostoftheseassetsmustbeallocatedasanexpensetotheyearswhentheyhelpgeneraterevenue.Withfixedassets,thisexpensewaslabeled“depreciation.”Amortizationexpenseisthetermusedforintangibleassets.Itisusuallycalculatedonastraight-linebasisandthemaximumamortizationperiodis40years.Suppose,forexample,thepatentacquiredabovefor$300,000wasestimatedtohaveasix-yearlife.Amortizationexpenseintheamountof$50,000($300,000/6)wouldberecordedeachyear.MeasuringCashFlowsShort-term,highlyliquidinvestments.Readilyconvertibleintocash.SonearmaturitythatmarketvalueisunaffectedbyinterestratechangesTheStatementofCashFlowsincludesthefollowingthreesections:OperatingActivitiesInvestingActivitiesFinancingActivitiesOperatingActivitiesInflowsinclude:Receiptsfromcustomers.Cashdividendsreceived.Interestfromborrowers.Other.Outflowsinclude:Salariesandwages.Paymentstosuppliers.Taxesandfines.Interestpaidtolenders.Other.InvestingActivitiesInflowsfrom:Sellinglong-termproductiveassets.sellingequityinvestments.Collectingofprincipalonloans.Other.Outflowsto:Purchaselong-termproductiveassets.Purchaseequityinvestments.Purchasedebtinvestments.Makeloans.

FinancingActivitiesInflowsfrom:Issuingitsownequitysecurities.Issuingbondsandnotes.Issuingtemporaryandlong-termliabilities.Outflowsto:Paydividendstoshareholders.Purchasetreasuryshares.Repaycashloans.CoverwithdrawalsbyownersAnalyzingFinancialStatementsUsersoffinancialstatementscanbefoundinmanysectorsoftheeconomy.Typicalusersincludeafirm’sowners,creditors,managers,employees,customers,andsuppliers.Usersoffinancialstatementsincludethosewhoalreadyhaveaneconomiclinktothefirmaswellasthosewhomaywanttohaveafutureeconomicrelationship.Financialstatementanalysishelpsusersmakebetterdecisions.Investors

usefinancialstatementinformationtohelpdecidewhethertoincreaseordecreasetheirownershipinterestsinthefirm.Thesedecisionsarebasedonprojectionsofinvestmentrisksandreturns.Managers

usefinancialstatementinformationmainlytosetgoals.Managerialgoalscanbestatedintermsofincreasingvariousprofitabilityratios.Goalscanbestatedintermsofmaintainingorincreasingthefirm’sliquidity,ortheycanbestatedintermsofchangingthecapitalstructureinfavorofmoredebtormoreequity.Customersoftenuseannualfinancialstatementstoevaluatethefirm’sstabilityanditscapabilitytodeliveronatimelybasisthequantityandqualityofgoodsorservicesthatmaybepurchased.Potentialsuppliersandcreditorsoftenaremostinterestedinwhetherthefirmcanpayitsbills.Otherusersoffinancialstatementshaveamoredistantrelationshipwiththefirm.Theseusersincludegovernmentregulatorsinareassuchassecuritiestrading,taxation,environmentalprotection,occupationalhealthandsafety,insuranceandotherfinancialmarkets,andsoon.Thesegroupsmightwanttoexplorehowthefirmhasaffectedvariouscomponentsofsociety.ToolsofAnalysisHorizontalAnalysisComparingacompany’sfinancialconditionandperformanceacrosstimeVerticalAnalysisComparingacompany’sfinancialconditionandperformancetoabaseamountRatioAnalysisUsingkeyrelationsamongfinancialstatementitems

HorizontalandVerticalAnalysisAhorizontalanalysisfocusesonyear-to-yearchangesorgrowthforeachmajorelementintheincomestatement.Common-sizefinancialstatements,atoolemployedinaverticalanalysis,examinethepercentagecompositionoftheincomestatement.Percentagesarecalculatedonthebasisofnetrevenues,whereeachitemontheincomestatementisseparatelyanalyzed.Horizontalandverticalanalysesofthemajorsubtotalsinthebalancesheetandinthecashflowstatementshouldalsobeconducted.

HorizontalAnalysisofAnIncomeStatementVerticalAnalysisofAnIncomeStatement

Theresultsoftheseanalyseswillfocusattentiononareasofsignificantchange.Suchanalysesdonotprovidecompleteanswers.Sotheratioanalysisisnecessary.Itisoftenconcernedwithfouraspects:1.LiquidityandEfficiencyAbilitytomeetshort-termobligationsandtoefficientlygeneraterevenues2.SolvencyAbilitytogeneratefuturerevenuesandmeetlong-termobligations3.ProfitabilityAbilitytoprovidefinancialrewardssufficienttoattractandretainfinancing4.MarketAbilitytogeneratepositivemarketexpectationsLiquidityandEfficiency1.Workingcapitalrepresentscurrentassetslesscurrentliabilities.Thecurrentratioconsiderstherelationshipbetweentheseamounts

2.Acid-TestRatioAcid-Test=QuickAssetsRatioCurrentLiabilitiesQuickassetsareCash,Short-TermInvestments,AccountsReceivableandNotesReceivable.Thisratioislikethecurrentratiobutexcludescurrentassetssuchasinventoriesthatmaybedifficulttoquicklyconvertintocash.3.AccountsReceivableTurnoverAccountsReceivableTurnover=SalesonAccount

AverageAccountsReceivable

Thisratiomeasureshowmanytimesacompanyconvertsitsreceivablesintocasheachyear.

4.MerchandiseTurnoverMerchandiseTurnover=CostofGoodsSoldAverageInventoryThisratiomeasuresthenumberoftimesmerchandiseissoldandreplacedduringtheyear5.Days’SaleUncollectedDays’SalesUncollected=Thisratiomeasurestheliquidityofreceivables.

6.Days’SalesInventoryDays’SalesinInventory=Thisratiomeasurestheliquidityofinventory.7.TotalAssetTurnoverTotalAssetTurnover=RevenuesAverageTotalAssetsThisratiomeasurestheefficiencyofassetsinproducingsales

Solvency1.DebtRatio=TotalLi