第3章-财务报表分析与长期计划.ppt

FinancialStatementsAnalysisandLong TermPlanning KeyConceptsandSkills KnowhowtostandardizefinancialstatementsforcomparisonpurposesKnowhowtocomputeandinterpretimportantfinancialratiosBeabletodevelopafinancialplanusingthepercentageofsalesapproachUnderstandhowcapitalstructureanddividendpoliciesaffectafirm sabilitytogrow ChapterOutline 3 1FinancialStatementsAnalysis3 2RatioAnalysis3 3TheDuPontIdentity3 4UsingFinancialStatementInformation3 5Long TermFinancialPlanning3 6ExternalFinancingandGrowth3 7SomeCaveatsRegardingFinancialPlanningModels 3 1FinancialStatementsAnalysis Common SizeBalanceSheetsComputeallaccountsasapercentoftotalassetsCommon SizeIncomeStatementsComputealllineitemsasapercentofsalesStandardizedstatementsmakeiteasiertocomparefinancialinformation particularlyasthecompanygrows Theyarealsousefulforcomparingcompaniesofdifferentsizes particularlywithinthesameindustry 3 2RatioAnalysis Ratiosalsoallowforbettercomparisonthroughtimeorbetweencompanies Aswelookateachratio askyourself Howistheratiocomputed Whatistheratiotryingtomeasureandwhy Whatistheunitofmeasurement Whatdoesthevalueindicate Howcanweimprovethecompany sratio CategoriesofFinancialRatios Short termsolvencyorliquidityratiosLong termsolvency orfinancialleverage ratiosAssetmanagementorturnoverratiosProfitabilityratiosMarketvalueratios ComputingLiquidityRatios CurrentRatio CA CL708 540 1 31timesQuickRatio CA Inventory CL 708 422 540 53timesCashRatio Cash CL98 540 18times ComputingLeverageRatios TotalDebtRatio TA TE TA 3588 2591 3588 28 Debt Equity TD TE 3588 2591 2591 38 5 EquityMultiplier TA TE 1 D E1 385 1 385 ComputingCoverageRatios TimesInterestEarned EBIT Interest691 141 4 9timesCashCoverage EBIT Depreciation Interest 691 276 141 6 9times ComputingInventoryRatios InventoryTurnover CostofGoodsSold Inventory1344 422 3 2timesDays SalesinInventory 365 InventoryTurnover365 3 2 114days ComputingReceivablesRatios ReceivablesTurnover Sales AccountsReceivable2311 188 12 3timesDays SalesinReceivables 365 ReceivablesTurnover365 12 3 30days ComputingTotalAssetTurnover TotalAssetTurnover Sales TotalAssets2311 3588 64timesItisnotunusualforTAT 1 especiallyifafirmhasalargeamountoffixedassets ComputingProfitabilityMeasures ProfitMargin NetIncome Sales363 2311 15 7 ReturnonAssets ROA NetIncome TotalAssets363 3588 10 1 ReturnonEquity ROE NetIncome TotalEquity363 2591 14 0 ComputingMarketValueMeasures MarketPrice 88pershareSharesoutstanding 33millionPERatio Pricepershare Earningspershare88 11 8timesMarket to bookratio marketvaluepershare bookvaluepershare88 2591 33 1 12times 3 3TheDuPontIdentity ROE NI TEMultiplyby1andthenrearrange ROE NI TE TA TA ROE NI TA TA TE ROA EMMultiplyby1againandthenrearrange ROE NI TA TA TE Sales Sales ROE NI Sales Sales TA TA TE ROE PM TAT EM UsingtheDuPontIdentity ROE PM TAT EMProfitmarginisameasureofthefirm soperatingefficiency howwellitcontrolscosts Totalassetturnoverisameasureofthefirm sassetuseefficiency howwellitmanagesitsassets Equitymultiplierisameasureofthefirm sfinancialleverage CalculatingtheDuPontIdentity ROA 10 1 andEM 1 39ROE 10 1 1 385 14 0 PM 15 7 andTAT 0 64ROE 15 7 0 64 1 385 14 0 3 4UsingFinancialStatements Ratiosarenotveryhelpfulbythemselves theyneedtobecomparedtosomethingTime TrendAnalysisUsedtoseehowthefirm sperformanceischangingthroughtimePeerGroupAnalysisComparetosimilarcompaniesorwithinindustriesSICandNAICScodes PotentialProblems Thereisnounderlyingtheory sothereisnowaytoknowwhichratiosaremostrelevant Benchmarkingisdifficultfordiversifiedfirms Globalizationandinternationalcompetitionmakescomparisonmoredifficultbecauseofdifferencesinaccountingregulations Firmsusevaryingaccountingprocedures Firmshavedifferentfiscalyears Extraordinary orone time events 3 5Long TermFinancialPlanning Investmentinnewassets determinedbycapitalbudgetingdecisionsDegreeoffinancialleverage determinedbycapitalstructuredecisionsCashpaidtoshareholders determinedbydividendpolicydecisionsLiquidityrequirements determinedbynetworkingcapitaldecisions FinancialPlanningIngredients SalesForecast manycashflowsdependdirectlyonthelevelofsales oftenestimatesalesgrowthrate ProFormaStatements settinguptheplanasprojected proforma financialstatementsallowsforconsistencyandeaseofinterpretationAssetRequirements theadditionalassetsthatwillberequiredtomeetsalesprojectionsFinancialRequirements theamountoffinancingneededtopayfortherequiredassetsPlugVariable determinedbymanagementdecisionsaboutwhattypeoffinancingwillbeused makesthebalancesheetbalance EconomicAssumptions explicitassumptionsaboutthecomingeconomicenvironment PercentofSalesApproach Someitemsvarydirectlywithsales othersdonot IncomeStatementCostsmayvarydirectlywithsales ifthisisthecase thentheprofitmarginisconstantDepreciationandinterestexpensemaynotvarydirectlywithsales ifthisisthecase thentheprofitmarginisnotconstantDividendsareamanagementdecisionandgenerallydonotvarydirectlywithsales thisaffectsadditionstoretainedearnings PercentofSalesApproach BalanceSheetInitiallyassumeallassets includingfixed varydirectlywithsales Accountspayablealsonormallyvarydirectlywithsales Notespayable long termdebt andequitygenerallydonotvarywithsalesbecausetheydependonmanagementdecisionsaboutcapitalstructure Thechangeintheretainedearningsportionofequitywillcomefromthedividenddecision ExternalFinancingNeeded EFN Thedifferencebetweentheforecastedincreaseinassetsandtheforecastedincreaseinliabilitiesandequity PercentofSalesandEFN ExternalFinancingNeeded EFN canalsobecalculatedas 3 6ExternalFinancingandGrowth Atlowgrowthlevels internalfinancing retainedearnings mayexceedtherequiredinvestmentinassets Asthegrowthrateincreases theinternalfinancingwillnotbeenough andthefirmwillhavetogotothecapitalmarketsforfinancing Examiningtherelationshipbetweengrowthandexternalfinancingrequiredisausefultoolinlong rangeplanning TheInternalGrowthRate Theinternalgrowthratetellsushowmuchthefirmcangrowassetsusingretainedearningsastheonlysourceoffinancing UsingtheinformationfromtheHoffmanCo ROA 66 500 132b 44 66 66700 TheSustainableGrowthRate Thesustainablegrowthratetellsushowmuchthefirmcangrowbyusinginternallygeneratedfundsandissuingdebttomaintainaconstantdebtratio UsingtheHoffmanCo ROE 66 250 264b 667 DeterminantsofGrowth Profitmargin operatingefficiencyTotalassetturnover assetuseefficiencyFinancialleverage choiceofoptimaldebtratioDividendpolicy choiceofhowmuchtopaytoshareholdersversusreinvestinginthefirm 3 7