财务管理Chap003.ppt

Financial Statements Analysis and Long-Term Planning,Chapter 3,Key Concepts and Skills,Know how to standardize financial statements for comparison purposesKnow how to compute and interpret important financial ratiosBe able to develop a financial plan using the percentage of sales approachUnderstand how capital structure and dividend policies affect a firms ability to grow,Chapter Outline,3.1 Financial Statements Analysis3.2 Ratio Analysis3.3 The Du Pont Identity3.4 Financial Models3.5 External Financing and Growth3.6 Some Caveats Regarding Financial Planning Models,3.1 Financial Statements Analysis,Common-Size Balance SheetsCompute all accounts as a percent of total assetsCommon-Size Income StatementsCompute all line items as a percent of salesStandardized statements make it easier to compare financial information,particularly as the company grows.They are also useful for comparing companies of different sizes,particularly within the same industry.,3.2 Ratio Analysis,Ratios also allow for better comparison through time or between companies.As we look at each ratio,ask yourself:How is the ratio computed?What is the ratio trying to measure and why?What is the unit of measurement?What does the value indicate?How can we improve the companys ratio?,Categories of Financial Ratios,Short-term solvency or liquidity ratiosLong-term solvency or financial leverage ratiosAsset management or turnover ratiosProfitability ratiosMarket value ratios,Computing Liquidity Ratios,Current Ratio=CA/CL708/540=1.31 timesQuick Ratio=(CA Inventory)/CL(708-422)/540=.53 timesCash Ratio=Cash/CL98/540=.18 times,Computing Leverage Ratios,Total Debt Ratio=(TA TE)/TA(3588-2591)/3588=28%Debt/Equity=TD/TE(3588 2591)/2591=38.5%Equity Multiplier=TA/TE=1+D/E1+.385=1.385,Computing Coverage Ratios,Times Interest Earned=EBIT/Interest691/141=4.9 timesCash Coverage=(EBIT+Depreciation+Amortization)/Interest(691+276)/141=6.9 times,Computing Inventory Ratios,Inventory Turnover=Cost of Goods Sold/Inventory1344/422=3.2 timesDays Sales in Inventory=365/Inventory Turnover365/3.2=114 days,Computing Receivables Ratios,Receivables Turnover=Sales/Accounts Receivable2311/188=12.3 timesDays Sales in Receivables=365/Receivables Turnover365/12.3=30 days,Computing Total Asset Turnover,Total Asset Turnover=Sales/Total Assets2311/3588=.64 timesIt is not unusual for TAT 1,especially if a firm has a large amount of fixed assets.,Computing Profitability Measures,Profit Margin=Net Income/Sales363/2311=15.7%Return on Assets(ROA)=Net Income/Total Assets363/3588=10.1%Return on Equity(ROE)=Net Income/Total Equity363/2591=14.0%EBITDA Margin=EBITDA/Sales967/2311=41.8%,Computing Market Value Measures,Market Capitalization=$88 per share x 33 million shares=2904 millionPE Ratio=Price per share/Earnings per share88/11=8 timesMarket-to-book ratio=market value per share/book value per share88/(2591/33)=1.12 timesEnterprise Value(EV)=Market capitalization+Market value of interest bearing debt cash2904+(196+457)98=3465EV Multiple=EV/EBITDA3465/967=3.6 times,Using Financial Statements,Ratios are not very helpful by themselves:they need to be compared to somethingTime-Trend AnalysisUsed to see how the firms performance is changing through timePeer Group AnalysisCompare to similar companies or within industriesSIC and NAICS codes,3.3 The Du Pont Identity,ROE=NI/TEMultiply by 1 and then rearrange:ROE=(NI/TE)(TA/TA)ROE=(NI/TA)(TA/TE)=ROA*EMMultiply by 1 again and then rearrange:ROE=(NI/TA)(TA/TE)(Sales/Sales)ROE=(NI/Sales)(Sales/TA)(TA/TE)ROE=PM*TAT*EM,Using the Du Pont Identity,ROE=PM*TAT*EMProfit margin is a measure of the firms operating efficiency how well it controls costs.Total asset turnover is a measure of the firms asset use efficiency how well it manages its assets.Equity multiplier is a measure of the firms financial leverage.,Calculating the Du Pont Identity,ROA=10.1%and EM=1.39ROE=10.1%*1.385=14.0%PM=15.7%and TAT=0.64ROE=15.7%*0.64*1.385=14.0%,Potential Problems,There is no underlying theory,so there is no way to know which ratios are most relevant.Benchmarking is difficult for diversified firms.Globalization and international competition makes comparison more difficult because of differences in accounting regulations.Firms use varying accounting procedures.Firms have different fiscal years.Extraordinary,or one-time,events,3.4 Financial Models,Investment in new assets determined by capital budgeting decisionsDegree of financial leverage determined by capital structure decisionsCash paid to shareholders determined by dividend policy decisionsLiquidity requirements determined by net working capital decisions,Financial Planning Ingredients,Sales Forecast many cash flows depend directly on the level of sales(often estimate sales growth rate)Pro Forma Statements setting up the plan as projected(pro forma)financial statements allows for consistency and ease of interpretationAsset Requirements the additional assets that will be required to meet sales projectionsFinancial Requirements the amount of financing needed to pay for the required assetsPlug Variable determined by management decisions about what type of financing will be used(makes the balance sheet balance)Economic Assumptions explicit assumptions about the coming economic environment,Percent of Sales Approach,Some items vary directly with sales,others do not.Income StatementCosts may vary directly with sales-if this is the case,then the profit margin is constantDepreciation and interest expense may not vary directly with sales if this is the case,then the profit margin is not constantDividends are a management decision and generally do not vary directly with sales this affects additions to retained earnings,Percent of Sales Approach,Balance SheetInitially assume all assets,including fixed,vary directly with sales.Accounts payable also normally vary directly with sales.Notes payable,long-term debt,and equity generally do not vary with sales because they depend on management decisions about capital structure.The change in the retained earnings portion of equity will come from the dividend decision.External Financing Needed(EFN)The difference between the forecasted increase in assets and the forecasted increase in liabilities and equity.,Percent of Sales and EFN,External Financing Needed(EFN)can also be calculated as:,3.5 External Financing and Growth,At low growth levels,internal financing(retained earnings)may exceed the required investment in assets.As the growth rate increases,the internal financing will not be enough,and the firm will have to go to the capital markets for financing.Examining the relationship between growth and external financing required is a useful tool in financial planning.,The Internal Growth Rate,The internal growth rate tells us how much the firm can grow assets using retained earnings as the only source of financing.Using the information from the Hoffman Co.ROA=66/500=.132b=44/66=.667,The Sustainable Growth Rate,The sustainable growth rate tells us how much the firm can grow by using internally generated funds and issuing debt to maintain a constant debt ratio.Using the Hoffman Co.ROE=66/250=.264b=.667,Determinants of Growth,Profit margin operating efficiencyTotal asset turnover asset use efficiencyFinancial leverage choice of optimal debt ratioDividend policy choice of how much to pay to shareholders versus reinvesting in the firm,3.6 Some Caveats,Financial planning models do not indicate which financial polices are the best.Models are simplifications of reality,and the world can change in unexpected ways.Without some sort of plan,the firm may find itself adrift in a sea of change without a rudder for guidance.,Comprehensive Problem,XYZ Corporation has the following financial information for the previous year:Sales:$8M,PM=8%,CA=$2M,FA=$6M,NWC=$1M,LTD=$3MCompute the ROE using the DuPont Analysis.,