财务报表分析ch07

FinancialStatementAnalysis,KRSubramanyamJohnJWild,07,CHAPTER,CashFlowAnalysis,ALookAtThisChapter,Inthischapterweanalyzecashflowmeasuresforinsightsintoallbusinessactivities,withspecialemphasisonoperations.Attentionisdirectedatcompanyandbusinessconditionswheninterpretingcashflows.Wealsoconsideralternativemeasuresofcashflows.,AnalysisObjectives,ExplaintherelevanceofcashflowsinanalyzingbusinessactivitiesDescribethereportingofcashflowsbybusinessactivitiesInterpretcashflowsfromoperatingactivitiesAnalyzecashflowsunderalternativecompanyandbusinessconditionsDescribealternativemeasuresofcashflowsandtheirusefulness,StatementofCashFlows,Cashisthemostliquidofassets.Offersbothliquidityandflexibility.Boththebeginningandtheendofacompanysoperatingcycle.Contrast:AccrualaccountingandCashbasisaccountingFinancialstatementsanalysisrecognizesthataccrualaccounting,wherecompaniesrecognizerevenuewhenearnedandexpenseswhenincurred,differsfromcashbasisaccounting.,RelevanceofCash,StatementofCashFlows,Netcashflowistheendmeasureofprofitability.Itiscash,notincome,thatultimatelyrepaysloans,replaceequipment,expandsfacilities,andpaysdividends.Accordingly,analyzingacompanyscashinflowsandoutflows,andtheiroperating,financing,orinvestingsources,isoneofthemostimportantinvestigativeexercises.Cashflowanalysishelpsinassessingliquidity,solvency,andfinancialflexibility.,RelevanceofCash,StatementofCashFlows,Liquidity(流动性)isthenearnesstocashofassetsandliabilitiesSolvency（偿债能力）istheabilitytopayliabilitieswhentheymature.Financialflexibility(财务灵活性)istheabilitytoreactandadjusttoopportunitiesandadversities.,StatementofCashFlows,Statementofcashflows(SCF)helpsaddressquestionssuchas:Howmuchcashisgeneratedfromorusedinoperations?Whatexpendituresaremadewithcashfromoperations?Howaredividendspaidwhenconfrontinganoperatingloss?Whatisthesourceofcashfordebtpayments?Howistheincreaseininvestmentsfinanced?Whatisthesourceofcashfornewplantassets?Whyiscashlowerwhenincomeincreased?Whatistheuseofcashreceivedfromnewfinancing?,RelevanceofCash,StatementofCashFlows,TheSCFreportscashreceiptsandcashpaymentsbyoperating,financing,andinvestingactivities:Operatingactivitiesaretheearning-relatedactivitiesofacompany.,ReportingbyActivities,Beyondrevenueandexpenseactivitiesrepresentedinanincomestatement,theyincludethenetinflowsandoutflowsofcashresultingfromrelatedoperatingactivitieslikeextendingcredittocustomers,investingininventories,andobtainingcreditfromsuppliers.,StatementofCashFlows,Investingactivitiesaremeansofacquiringanddisposingofnoncashassets.Involveassetsexpectedtogenerateincome;lendingfundsandcollectingtheprincipalontheseloans.Financingactivitiesaremeansofcontributing,withdrawing,andservicingfundstosupportbusinessactivities.Includeborrowingandrepayingfundswithbondsandotherloans;contributionsandwithdrawalsbyownersandtheirreturnoninvestment.,ReportingbyActivities,StatementofCashFlows,ReportingbyActivities,StatementofCashFlows,Therearetwoacceptablemethodsforreportingcashflowsfromoperations:IndirectandDirectmethods,ConstructingtheCashFlowStatement,StatementofCashFlows,IndirectMethodNetincomeisadjustedfornon-cashincome(expense)itemsandaccrualstoyieldcashflowfromoperations.Theadvantage:thedisclosureofareconciliationofdifferencesbetweennetincomeandoperatingcashflows.Thiscanaidsomeusersthatpredictcashflowsbyfirstpredictingincomeandthenadjustingincomeforleadsandlagsbetweenincomeandcashflows.Theindirectmethodismostcommonlyemployedinpracticeandweuseitinitiallytoillustratepreparationofthestatementofcashflows.,StatementofCashFlows,DirectMethodEachincomeitemisadjustedforitsrelatedaccrualsBothmethodsyieldidenticalresults-onlythepresentationformatdiffers.,StatementofCashFlows,Undertheaccrualbasisofaccounting,whichofthefollowingstatementsistrue?I.ReportednetincomeprovidesameasureofoperatingperformanceII.Revenueisrecognizedwhencashisreceived,andexpensesarerecognizedwhenpaymentismadeIII.Cashinflowsarerecognizedwhentheyarereceived,andcashoutflowsarerecognizedwhentheyaremadeA.IonlyB.IIIonlyC.IandIIID.I,IIandIII,c,StatementofCashFlows,Thestatementofcashflowsisablendoftheincomestatementandthebalancesheet.Netincomeisfirstadjustedfornoncashincomeandexpenseitemstoyieldcashprofitswhichare,then,furtheradjustedforcashgeneratedandusedbybalancesheettransactionstoyieldcashflowsfromoperations,aswellasinvestingandfinancingactivities.,StatementofCashFlows,Considerfirstthenetcashfromoperations.,PreparationoftheSCF(Indirectmethod),StatementofCashFlows,Depreciationandamortizationadd-back.,PreparationoftheStatementofCashFlows,StatementofCashFlows,Incomev/sCashFlows-Example,Considera$100saleonaccountInperiodofsale,netincomeisincreasedby$100butnocashhasbeengenerated.NetIncome100Depreciationandamortizationexpense0Gains(losses)onsaleofassets0Changeinaccountsreceivable(100)NetCashflowfromoperations0Inperiodofcollectionnoincomeisrecorded.NetIncome0Depreciationandamortizationexpense0Gains(losses)onsaleofassets0Changeinaccountsreceivable100NetCashflowfromoperations100,StatementofCashFlows,Adjustmentsforchangesinbalancesheetaccountscanbesummarizedasfollows:,PreparationoftheStatementofCashFlows,StatementofCashFlows,ConstructingtheStatement,Thecompanypurchasedatruckduringtheyearatacostof$30,000thatwasfinancedinfullbythemanufacturer.2.Atruckwithacostof$10,000andanetbookvalueof$2,000wassoldduringtheyearfor$7,000.Therewerenoothersalesofdepreciableassets.3.DividendspaidduringYear2are$51,000,StatementofCashFlows,StepsinConstructingtheStatement,StartwithNetIncomeAdjustNetIncomefornon-cashexpensesandgainsRecognizecashinflows(outflows)fromchangesincurrentassetsandliabilitiesSumtoyieldnetcashflowsfromoperationsChangesinlong-termassetsyieldnetcashflowsfrominvestingactivitiesChangesinlong-termliabilitiesandequityaccountsyieldnetcashflowsfromfinancingactivitiesSumcashflowsfromoperations,investing,andfinancingactivitiestoyieldnetchangeincash(8)Addnetchangeincashtothebeginningcashbalancetoyieldendingcash,StatementofCashFlows,AnalysisImplicationsofCashFlows,Somelimitationsofthecurrentreportingofcashflow:Practicedoesnotrequireseparatedisclosureofcashflowspertainingtoeitherextraordinaryitemsordiscontinuedoperations.Interestanddividendsreceivedandinterestpaidareclassifiedasoperatingcashflows.Manyusersconsiderinterestpaidafinancingoutflow,andinterestanddividendsreceivedascashinflowsfrominvestingactivities.Incometaxesareclassifiedasoperatingcashflows.Thisclassificationcandistortanalysisofthethreeindividualactivitiesifsignificanttaxbenefitsorcostsareattributedtotheminadisproportionatemanner.,LimitationsinCashFlowReporting,AnalysisImplicationsofCashFlows,Whichofthefollowingwouldrequireanadjustmentinthecomputationofcashflowfromoperationsusingtheindirectmethod?I.DepreciationexpenseII.LossonsaleofassetIII.SaleofservicestocostumersforcashIV.UtilitybillreceivedandpaidincashA.IB.IandIIC.IandIIID.IV,AnalysisImplicationsofCashFlows,Beginningandendingaccountsreceivableare$76,000and$42,000,respectively.Salesfortheperiodtotal$384,000,ofwhich$40,000wasdirectlyforcash.Howmuchcashwascollectedfrommakingsalesandcollectingaccountsreceivable?A.$344,000B.$418,000C.$378,000D.$376,000,AnalysisImplicationsofCashFlows,Beginningaccountsreceivableare$76,000.Salesfortheperiodtotal$384,000,ofwhich$40,000wasdirectlyforcash.$418,000wascollectedfrommakingsalesandcollectingaccountsreceivable.Whatistheendingbalanceforaccountsreceivable?A.$42,000B.$2,000C.$82,000D.$68,000,BBA,AnalysisImplicationsofCashFlows,Q.LinkingOperatingCashFlowswithEarningsQuality,Inreviewingthefinancialstatementsofacompany,youdiscoverthatnetincomeincreasedwhileoperatingcashflowsdecreasedforthemostrecenttwoconsecutiveyears.Required:a.Explainhownetincomecouldincreasewhileitsoperatingcashflowsdecrease.Youranswershouldincludethreeillustrativeexamples.b.Describehowoperatingcashflowscanserveasoneindicatorofearningsquality.,Q.LinkingOperatingCashFlowswithEarningsQuality,A.Revenuesare,incertaininstances,recognizedbeforecashisreceived(thatis,whenearned,eg.creditsale).Expensesare,incertaininstances,recognizedaftercashispaid(thatis,matchedwithrevenues).Asaresult,netincomecanbepositivewhenoperatingcashflowsarenegative.,Q.LinkingOperatingCashFlowswithEarningsQuality,examples:(1)Ifaccountsreceivableincreasesubstantiallyduringtheyear,thisimpliesthatrevenuesoutpacedcashcollections.(2)Ifacompanybuildsupitsinventorylevelssubstantially,thencashispaidoutbutnoexpenseisrecognized.(3)Ifthecompanyreducesitsaccountspayablebalancessubstantiallyduringtheyear,thencashflowscanbenegativewhennetincomeispositive.,Q.LinkingOperatingCashFlowswithEarningsQuality,B.Operatingcashflowscanserveasoneindicatorofearningsqualitybecauseoveranumberofyears,cashflowsshouldapproximateearnings.Ifcashflowsfromoperationsareconsistentlylowerthanearnings,itispossiblethatthereportedearningsarenotofhighquality.(Aswithanybroadguideline,onemustlookforcorroboratingevidence.),AnalysisImplicationsofCashFlows,InterpretingCashFlowsandNetIncome,AnalysisImplicationsofCashFlows,Anincomestatementrecordsrevenueswhenearnedandexpenseswhenincurred.Itdoesnotshowthetimingofcashinflowsandoutflows,northeeffectofoperationsonliquidityandsolvency.ThisinformationisavailableintheSCF.Cashflowsfromoperations(CFO)isabroaderviewofoperatingactivitiesthanisnetincome.Itisnotameasureofprofitability.Note:Anetmeasure,beitnetincomeorcashflowsfromoperations,isoflimitedusefulness.Thekeyisinformationaboutcomponentsofthesenetmeasures.,InterpretingCashFlowsandNetIncome,AnalysisImplicationsofCashFlows,Accountingaccrualsdeterminingnetincomerelyonestimates,deferrals,allocations,andvaluations.SubjectivityNote:CFOeffectivelyserveasacheckonnetincome,butnotasubstitutefornetincome.CFOexcludeelementsofrevenuesandexpensesnotcurrentlyaffectingcash.Ouranalysisofoperationsandprofitabilityshouldnotproceedwithoutconsideringtheseelements.,InterpretingCashFlowsandNetIncome,AnalysisofCashFlows,Inevaluatingsourcesandusesofcash,theanalystshouldfocusonquestionslike:Areassetreplacementsfinancedfrominternalorexternalfunds?Whatarethefinancingsourcesofexpansionandbusinessacquisitions?Isthecompanydependentonexternalfinancing?Whatarethecompanysinvestingdemandsandopportunities?Whataretherequirementsandtypesoffinancing?Aremanagerialpolicies(suchasdividends)highlysensitivetocashflows?,AnalysisofCashFlows,CaseAnalysisofCashFlowsofCampbellSoup,AnalysisofCashFlows,Inferencesfromanalysisofcashflowsinclude:WheremanagementcommitteditsresourcesWhereitreducedinvestmentsWhereadditionalcashwasderivedfromWhereclaimsagainstthecompanywerereducedDispositionofearningsandtheinvestmentofdiscretionarycashflowsThesize,composition,pattern,andstabilityofoperatingcashflows,InferencesfromAnalysisofCashFlows,AnalysisofCashFlows,FreeCashFlowAusefulanalyticalderivativeofthestatementofcashflowsisthecomputationoffreecashflow,AnalysisofCashFlows,Growthandfinancialflexibilitydependonadequatefreecashflow.,FreeCashFlow,Positivefreecashflowreflectstheamountavailableforbusinessactivitiesafterallowancesforfinancingandinvestingrequirementstomaintainproductivecapacityatcurrentlevels.,AnalysisofCashFlows,TheSCFisusefulinidentifyingmisleadingorerroneousoperatingresultsorexpectations.,CashFlowasValidators,SCFprovidesuswithimportantclueson:Feasibilityoffinancingcapitalexpenditures.Cashsou