本学期资料 财务报表 PPT Chp016

1、Chapter Sixteen,McGraw-Hill/Irwin,Copyright 2013 by The McGraw-Hill Companies, Inc. All rights reserved.,Chapter 16,Prepared by: Stephen H. Penman Columbia University With contributions by Nir Yehuda Northwestern University Mingcherng Deng University of Minnesota Peter D. Easton and Gregory A. Somme

2、rs Notre Dame and Southern Methodist Universities Luis Palencia University of Navarra, IESE Business School,16-2,What You Will Learn from this Chapter,How forecasting is a matter of financial statement analysis for the future How financial statement drivers translate economic factors into a valuatio

3、n How to identify key drivers How to conduct full-information pro forma analysis The 15 steps in pro forma analysis The seven steps involved in forecasting residual operating income and abnormal operating income growth How mergers and acquisitions are evaluated How pro forma analysis is used as a to

4、ol in strategy analysis,16-3,The Big Picture for this Chapter,Pro forma analysis is the tool to add speculative information to the simple valuations of Chapter 15 Pro forma analysis involves forecasting the future financial statements The future financial statements are forecasted by the same driver

5、s of our financial statement analysis Sales growth Operating profit margin Asset turnovers These drivers drive residual operating income,16-4,A Reminder:The Steps of Fundamental Analysis, The Management,16-5,Review of Chapter 1 - Knowing the Business:Know the Firms Products,Type of products Consumer

6、 demand for the product Price elasticity of demand for the product Substitutes for the product. Is it differentiated? On price? On quality? Brand name association of the product Patent protection for the product,16-6,Knowing the Business:Know the Technology,Production process Marketing process Distr

7、ibution channels Supplier network Cost structure Economies of scale,16-7,Knowing the Business:Know the Firms Knowledge Base,Direction and pace of technological change and the firms grasp of it Research and development programs Tie-in to information networks Managerial talent Ability to innovate in p

8、roduct development Ability to innovate in production technology Economies from learning,16-8,Knowing the Business:Know the Competition,Concentration in the industry, the number of firms and their sizes Barriers to entry in the industry and the likelihood of new entrants and substitute products The f

9、irms position in the industry. Is it the first mover or a follower in the industry? Does it have a cost advantage? Competitiveness of suppliers. Do suppliers have market power? Do labor unions have power? Capacity in the industry? Is there excess capacity or under capacity? Relationships and allianc

10、es with other firms,16-9,Knowing the Business:Know the Management,What is managements track record? Is management entrepreneurial? Does management focus on shareholders or their own interests? Do stock compensation plans serve shareholders interests? What is the ethical charter under which the firm

11、operates? How strong are the corporate governance mechanisms,16-10,Knowing the Business: Know the Political, Legal and Regulatory Environment,The firms political influence Legal constraints on the firm including antitrust law, consumer law, labor law and environmental law Regulatory constraints on t

12、he firm including product and price regulations Taxation of the business,16-11,Financial Statement Analysis:The Lens on the Business,Economic Factors,The Filter of Financial Statement Analysis,Economic Factors Interpreted as ReOI Drivers,16-12,Four Points of Focus,Focus on Residual Operating Income

13、and its Drivers Focus on Change Focus on Key Drivers Focus on Choice versus Conditions,16-13,Focus on Residual Operating Income (ReOI),Two drivers: 1. 2. The drivers can be captured in one expression for ReOI: To add ReOI (and AOIG and value): grow sales and increase Core Sales PM with lower Asset T

14、urnover,16-14,Focus on Change,Establish Typical Driver Pattern for Industry Modify Typical Driver Pattern for Forecasted Changes for the Industry and the Economy Discover How a Firms Driver Pattern will be Different from the Typical Pattern Remember,16-15,Driver Patterns: Core RNOA,(All NYSE and AME

15、X firms, 1965 99) The rate of convergence towards common level is referred to as the Fade Rate What economic factors drive fade rates?,Core RNOA,Year Ahead,16-16,Driver Patterns: Core Other Income/NOA,Core Other Income / NOA,Year Ahead,16-17,Driver Patterns: Unusual Items/NOA,Unusual Items / NOA,Yea

16、r Ahead,16-18,Driver Change Patterns:Sales Growth Rates,Sales Growth Rate,Year Ahead,16-19,Driver Change Patterns:Change in Core Sales PM,Year Ahead,Change in Core Sales PM,16-20,Driver Change Patterns:Change in ATO,Year Ahead,Change in ATO,16-21,Forecasting How a Firms Drivers will be Different fro

17、m the Typical Pattern,The tension between the forces of competition and the firms responses to those forces: challenge and counter challenge Firms challenge other firms: Product price reduction Product innovation Lower production costs Imitation of successful firms Entering industries where firms ar

18、e earning abnormal profits Firms counter challenge: Brand creation Patent protection Managing consumer expectations Alliances and agreements with competitors, suppliers and firms with related technology Exploiting first-mover advantages Mergers Creating superior production and marketing technologies

19、 Creating economies of scale that are difficult to replicate Creating a technological standard that consumers and other firms must tie into Government protection,16-22,Focus on Key Drivers,Some firms have one or two drivers that are key to driving ReOI. Analysts focus on these key drivers,16-23,Driv

20、er History for a Brand Name Company: Nike, Inc.,16-24,Driver History for a Brand Name Company: Coca-Cola,16-25,Full Information Forecasting,Forecast all economic factors and the full set of ReOI drivers Express forecasts in a set of pro forma financial statements An Example with PPE Inc. follows,16-

21、26,PPE, Inc.: Initializing Financial Statements,Required return for operations = 10% Required return for debt = 4%,16-27,Forecasting for PPE Inc.,The forecasts: Sales are forecasted to grow at 5% Forecasted Core PM is 7.85% Forecasted ATO is 1.762 With these three forecasts we can value the firm,16-

22、28,PPE Inc.: The Pro Forma for Operating Activities,16-29,PPE, Inc.: The Residual income Valuation,16-30,PPE Inc.The AOIG Valuation,16-31,PPE Inc.The Free Cash Flow Valuation from the Pro Forma,16-32,Filling out the Pro Forma Financial Statements,Dividend forecast: Payout will be 40% of Earnings Bor

23、rowing cost forecast: Same as present (4%),16-33,Full-Information Forecasting: Nike,16-34,Full-Information Forecasting: Nike (cont.),16-35,Full-Information Forecasting: Nike (cont.),16-36,A Forecasting Template,Forecast sales Forecast ATO and calculate NOA NOA=sales/ATO Revise sales forecast for ass

24、et constraints Forecast Core PM and calculate Core OI Core OI = Sales x Core PM Forecast Other Core OI and total Core OI Core OI = Core OI from sales + Other Core OI Forecast unusual operating items Calculate ReOI and AOIG Oit = Core OIt + UIt ReOIt = OIt - (F - 1) NOAt-1 AOIGt = ReOIt Calculate Fre

25、e Cash Flow,16-37,A Forecasting Template (cont.),Forecast net dividend payout Calculate financial expenses (or income) Update net financing position Calculate comprehensive earnings Calculate common stockholders equity Adjust the valuation for stock option overhang (Chapter 13) Adjust for any value

26、for noncontrolling interests Steps 1-6 and step 9 and 10 require forecasting All other forecasts are calculations from forecasted amounts using accounting relations Only steps 1-7 are necessary for valuation (without stock options),16-38,Checking Pro Forma Analysis,Make sure CSE reconciliations in S

27、tep 13 agree Check common size analysis against industry norms. Are differences reasonable? Watch for financial asset build up. What will the firm do with the build-up?,16-39,Features of the OI Valuation Approach,It is efficient: forecast five factors Sales Core PM ATO Other Core OI Unusual Items Fo

28、cuses on the part of the business that adds value: the operations Dividends are irrelevant Financing is irrelevant Zero NPV (zero ReOI) investments dont affect the valuation Value-generating investments are identified Avoids problems of the discount rate changing as leverage changes,16-40,Mergers an

29、d Acquisitions Involving Share Issues,Mergers and Acquisitions often involve share issues Residual earnings valuation cannot be done by forecasting per-share amounts if shares outstanding are likely to change Always carry out residual earnings valuations on a dollar basis, then divide by current sha

30、res outstanding Abnormal Earnings Growth (AEG) valuation can be carried out by forecasting per-share earnings and dividends However, must then work on a levered basis (requiring changes in the cost of equity capital) Best to work with operations on a dollar basis,16-41,Valuation with an Anticipated

31、Acquisition: Dealing with Value Received in the Exchange Ratio,16-42,Financial Statement Indicators,1. Current RNOA different from the past 2. Components of RNOA different from the past Analyze the determinants of the current RNOA: in Core PM is particularly important 3. RNOA different from industry

32、 mean RNOAs tend to revert towards industry averages,16-43,Financial Statement Indicators (cont.),4. Components of RNOA different from industry mean PM components: Cost of sales/Sales Advertising/Sales G & A expenses/Sales R & D /Sales ATO components Inventories/Sales Accounts receivables/Sales Doub

33、tful debts/Sales PPE/Sales 5. Changes in RNOA components different from industry mean 6. Changes in capital expenditures different from industry mean Combine investigation with Quality of Earnings Analysis (Chapter 17).,16-44,Indicators Outside Financial Statements,Firm specific indicators Non-working assets Order backlog Per-unit sales prices R&D success Firms investment plans Change in labor force Management discussion and analysis Insider trading Contingent liabilities (see footnotes