财务报表分析Chapter04

FinancialStatementAnalysis KRSubramanyamJohnJWild 2 4 CHAPTER AnalyzingInvestingActivities 3 Current Short term Assets Noncurrent Long term Assets Resourcesorclaimstoresourcesthatareexpectedtobesold collected orusedwithinoneyearortheoperatingcycle whicheverislonger Resourcesorclaimstoresourcesthatareexpectedtoyieldbenefitsthatextendbeyondoneyearortheoperatingcycle whicheverislonger CurrentAssetIntroduction Classification 4 CashCurrency coinsandamountsondepositinbankaccounts checkingaccounts andsomesavingsaccounts CurrentAssetIntroduction Cash CashEquivalentsandLiquidity 5 CashEquivalentsShort term highlyliquidinvestmentsthatare Readilyconvertibletoaknowncashamount Closetomaturitydateandnotsensitivetointerestratechanges CurrentAssetIntroduction Cash CashEquivalentsandLiquidity 6 Companiesriskareductioninliquidityshouldthemarketvalueofshort terminvestmentsdecline Cashandcashequivalentsaresometimesrequiredtobemaintainedascompensatingbalancestosupportexistingborrowingarrangementsorascollateralforindebtedness CurrentAssetIntroduction AnalysisofCashandCashEquivalents 7 Receivablesareamountsduefromothersthatarisefromthesaleofgoodsorservices ortheloaningofmoneyAccountsreceivablerefertooralpromisesofindebtednessduefromcustomersNotesreceivablerefertoformalwrittenpromisesofindebtednessduefromothers CurrentAssetIntroduction Receivables 8 Receivablesarereportedattheirnetrealizablevalue totalamountofreceivableslessanallowanceforuncollectibleaccountsManagementestimatestheallowanceforuncollectiblesbasedonexperience customerfortunes economyandindustryexpectations andcollectionpolicies CurrentAssetIntroduction ValuationofReceivables 9 AssessmentofearningsqualityisoftenaffectedbyananalysisofreceivablesandtheircollectibilityAnalysismustbealerttochangesintheallowance computedrelativetosales receivables orindustryandmarketconditions Twospecialanalysisquestions 1 CollectionRiskReviewallowanceforuncollectiblesinlightofindustryconditionsApplyspecialtoolsforanalyzingcollectibility Determiningcompetitors receivablesasapercentofsales vis visthecompanyunderanalysis Examiningcustomerconcentration riskincreaseswhenreceivablesareconcentratedinoneorafewcustomers Investigatingtheagepatternofreceivables overdueandforhowlong Determiningportionofreceivablesthatisarenewalofpriorreceivables Analyzingadequacyofallowancesfordiscounts returns andothercredits 2 AuthenticityofReceivablesReviewcreditpolicyforchangesReviewreturnpoliciesforchangesReviewanycontingenciesonreceivables CurrentAssetIntroduction AnalyzingReceivables 10 Securitization orfactoring iswhenacompanysellsalloraportionofitsreceivablestoathirdpartyReceivablescanbesoldwithorwithoutrecoursetoabuyer recoursereferstoguaranteeofcollectibility Saleofreceivableswithrecoursedoesnoteffectivelytransferriskofownership CurrentAssetIntroduction SecuritizationofReceivables Forsecuritizationswithanytypeofrecourse thesellermustrecordbothanassetandacompensatingliabilityfortheamountfactoredForsecuritizationswithoutanyrecourse thesellerremovesthereceivablesfromthebalancesheet 11 Prepaidexpensesareadvancepaymentsforservicesorgoodsnotyetreceivedthatextendbeyondthecurrentaccountingperiod examplesareadvancepaymentsforrent insurance utilities andpropertytaxes CurrentAssetIntroduction PrepaidExpenses Twoanalysisissues 1 Forreasonsofexpediency noncurrentprepaidssometimesareincludedamongprepaidexpensesclassifiedascurrent whentheirmagnitudeislarge theywarrantscrutiny 2 Anysubstantialchangesinprepaidexpenseswarrantscrutiny AnalysisofPrepaids 12 Inventories Definitions Inventoriesaregoodsheldforsale orgoodsacquired orinprocessofbeingreadied forsale aspartofacompany snormaloperationsExpensingtreatsinventorycostslikeperiodcosts costsarereportedintheperiodwhenincurredCapitalizingtreatsinventorycostslikeproductcosts costsarecapitalizedasanassetandsubsequentlychargedagainstfutureperiod s revenuesbenefitingfromtheirsale 13 UseofInventoryMethodsinPractice Inventories InventoryCostingMethod 14 CostsofGoodsSold EndingInventory OldestCosts RecentCosts Inventories First In First Out FIFO 15 CostsofGoodsSold EndingInventory RecentCosts OldestCosts Inventories Last In First Out LIFO 16 Whenaunitissold theaveragecostofeachunitininventoryisassignedtocostofgoodssold Inventories AverageCost 17 InventoryonJanuary1 Year240 500 20 000Inventoriespurchasedduringtheyear60 60036 000CostofGoodsavailableforsale100units 56 000Note 30unitsaresoldinYear2for 800eachfortotalRevenueof 24 000 Inventories IllustrationofCostingMethods 18 BeginningNetCostofEndingInventory Purchases GoodsSold InventoryFIFO 20 000 36 000 15 000 41 000LIFO 20 000 36 000 18 000 38 000Average 20 000 36 000 16 800 39 200Assumesalesof 35 000fortheperiod thengrossprofitundereachmethodis Sales CostofGoodsSold GrossProfitFIFO 24 000 15 000 9 000LIFO 24 000 18 000 6 000Average 24 000 16 800 7 200 Inventories IllustrationofCostingMethods 19 EconomicProfitvs HoldingGain Inperiodsofrisingprices FIFOproduceshighergrossprofitsthanLIFObecauselowercostinventoriesarematchedagainstsalesrevenuesatcurrentmarketprices ThisissometimesreferredtoasFIFO sphantomprofits TheFIFOgrossprofitisactuallyasumoftwocomponents aneconomicprofitandaholdinggain Economicprofit 30unitsx 800 600 6 000Holdinggain 30unitsx 600 500 3 000 20 1 CompaniesmaintainLIFOinventoriesinseparatecostpools 2 Wheninventoryquantitiesarereduced eachcostlayerismatchedagainstcurrentsellingprices 3 Inperiodsofrisingprices dippingintolowercostlayerscaninflateprofits Inventories LIFOLiquidations 21 Threestepprocess ReportedLIFOInventory LIFOreserveDeferredtaxpayable LIFOreservexTaxrate Retainedearnings LIFOreservex 1 Taxrate LIFOreserveistheamountbywhichcurrentcostexceedsreportedcostofLIFOinventories Inventories AnalyzingInventories RestatementofLIFOtoFIFO 22 Long LivedAssetIntroduction Long livedassets resourcesthatareusedtogeneraterevenues orreducecosts inthelongrun Definitions Tangiblefixedassetssuchasproperty plant andequipment Deferredchargessuchasresearchanddevelopment R D expenditures andnaturalresources Intangibleassetssuchaspatents trademarks copyrights andgoodwill 23 Long LivedAssetIntroduction Capitalization processofdeferringacostthatisincurredinthecurrentperiodandwhosebenefitsareexpectedtoextendtooneormorefutureperiodsForacosttobecapitalized itmustmeeteachofthefollowingcriteria Itmustarisefromapasttransactionorevent Itmustyieldidentifiableandreasonablyprobablefuturebenefits Itmustallowowner restrictive controloverfuturebenefits Capitalization 24 Long LivedAssetIntroduction Allocation processofperiodicallyexpensingadeferredcost asset tooneormorefutureexpectedbenefitperiods determinedbybenefitperiod salvagevalue andallocationmethodTerminology Depreciationfortangiblefixedassets Amortizationforintangibleassets Depletionfornaturalresources Allocation 25 Long LivedAssetIntroduction Impairment processofwritingdownassetvaluewhenitsexpected undiscounted cashflowsarelessthanitscarrying book valueTwodistortionsarisefromimpairment Conservativebiasesdistortlong livedassetvaluationbecauseassetsarewrittendownbutnotwrittenup Largetransitoryeffectsfromrecognizingassetimpairmentsdistortnetincome Impairment 26 PlantAssets NaturalResources PlantAssets 27 Acquisitioncostexcludesfinancingchargesandcashdiscounts Allexpendituresneededtopreparetheassetforitsintendeduse Purchaseprice PlantAssets NaturalResources PlantAssetsCostingRule 28 Valuationemphasizesobjectivityofhistoricalcost theconservatismprinciple andaccountingforthemoneyinvestedLimitationsofhistoricalcosts Balancesheetsdonotpurporttoreflectmarketvalues Notespeciallyrelevantinassessingreplacementvalues Notcomparableacrosscompanies Notparticularlyusefulinmeasuringopportunitycosts Collectionofexpendituresreflectingdifferentpurchasingpower PlantAssets NaturalResources ValuationAnalysis 29 Depreciationistheprocessofallocatingthecostofaplantassettoexpenseintheaccountingperiodsbenefitingfromitsuse Depreciation PlantAssets NaturalResources 30 Thecalculationofdepreciationrequiresthreeamountsforeachasset Cost SalvageValue UsefulLife DepreciationMethod PlantAssets NaturalResources FactorsinComputingDepreciation 31 Cost SalvageValueUsefullifeinperiods DepreciationExpenseperYear SL PlantAssets NaturalResources ComparingDepreciationMethods Straight LineMethod 32 Step1 Step2 Step3 Ignoressalvagevalue PlantAssets NaturalResources Double Declining BalanceMethod 33 Step1 Step2 Activity Units of Production Method PlantAssets NaturalResources 34 Totalcost includingexplorationanddevelopment ischargedtodepletionexpenseoverperiodsbenefited Extractedfromthenaturalenvironmentandreportedatcostlessaccumulateddepletion Examples oil coal gold PlantAssets NaturalResources NaturalResources Naturalresources wastingassets rightstoextractorconsumenaturalresources 35 Depletioniscalculatedusingtheunits of productionmethod Unitdepletionrateiscalculatedasfollows PlantAssets NaturalResources DepletionofNaturalResources 36 Totaldepletioncostforaperiodis Totaldepletioncost PlantAssets NaturalResources DepletionofNaturalResources 37 PlantAssets NaturalResources AnalyzingDepreciationandDepletion Assessreasonablenessofdepreciablebase usefullife andallocationmethod Reviewanyrevisionsofusefullives Evaluateadequacyofdepreciation ratioofdepreciationtototalassetsortoothersize relatedfactors Analyzeplantassetage measuresincludeAveragetotallifespan Grossplantandequipmentassets Currentyeardepreciationexpense Averageage Accumulateddepreciation Currentyeardeprec