TOPIC 3 Cash Flow & Financial Analysis.ppt
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1、ASSET EVALUATION,TOPIC 3,Cash Flow and Financial Analysis,Topics Covered,Financial StatementsNet Working CapitalFinancial Cash FlowExecutive Paper CorporationFinancial RatiosThe DuPont System,Sources of Information,Annual reportsWall Street JournalInternetNYSE () Nasdaq () SECEDGAR (free trial on ht
2、tp:/ & 10Q reports,How to get a copy of a companys balance sheet?-The Annual Report-The 10K-The 10Q,The Balance Sheet,An accountants snapshot of the firms accounting value as of a particular date.The Balance Sheet Identity is:,When analyzing a balance sheet, the financial manager should be aware of
3、three concerns: accounting liquidity, debt versus equity, and value versus cost.,The Balance Sheet of the U.S. Composite Corporation,Liabilities (Debt),Assets,20X2,20X1,and Stockholders Equity,20X2,20X1,Current assets:,Current Liabilities:,Cash and equivalents,$140,$107,Accounts payable,$213,$197,Ac
4、counts receivable,294,270,Notes payable,50,53,Inventories,269,280,Accrued expenses,223,205,Other,58,50,Total current liabilities,$486,$455,Total current assets,$761,$707,Long-term liabilities:,Fixed assets:,Deferred taxes,$117,$104,Property, plant, and equipment,$1,423,$1,274,Long-term debt,471,458,
5、Less accumulated depreciation,-550,-460,Total long-term liabilities,$588,$562,Net property, plant, and equipment,873,814,Intangible assets and other,245,221,Stockholders equity:,Total fixed assets,$1,118,$1,035,Preferred stock,$39,$39,Common stock ($1 per value),55,32,Capital surplus,347,327,Accumul
6、ated retained earnings,390,347,Less treasury stock,-26,-20,Total equity,$805,$725,Total assets,$1,879,$1,742,Total liabilities and stockholders equity,$1,879,$1,742,The assets are listed in order by the length of time it normally would take a firm with ongoing operations to convert them into cash.Cl
7、early, cash is much more liquid than property, plant and equipment.,Balance Sheet Analysis,When analyzing a balance sheet, the financial manager should be aware of three concerns:Accounting liquidityDebt versus equityValue versus cost,Accounting Liquidity,Refers to the ease and quickness with which
8、assets can be converted to cash.Current assets are the most liquid.Some fixed assets are intangible.The more liquid a firms assets, the less likely the firm is to experience problems meeting short-term obligations.Liquid assets frequently have lower rates of return than fixed assets.,Debt versus Equ
9、ity,Generally, when a firm borrows it gives the bondholders first claim on the firms cash flow.Thus shareholders equity is the residual difference between assets and liabilities.,Value versus Cost,Under GAAP (Generally Accepted Accounting Principles ) audited financial statements of firms in the U.S
10、. carry assets at cost.Market value is a completely different concept.,The Income Statement,The income statement measures performance over a specific period of time.The accounting definition of income is,U.S.C.C. Income Statement,(in $ millions),20X2,Income Statement,U.S. COMPOSITE CORPORATION,Total
11、 operating revenues,Cost of goods sold,Selling, general, and administrative expenses,Depreciation,Operating income,Other income,Earnings before interest and taxes,Interest expense,Pretax income,Taxes,Current: $71,Deferred: $13,Net income,Retained earnings: $43,Dividends: $43,The operations section o
12、f the income statement reports the firms revenues and expenses from principal operations,$2,262,- 1,655,- 327,- 90,$190,29,$219,- 49,$170,- 84,$86,(in $ millions),20X2,Income Statement,U.S. COMPOSITE CORPORATION,Total operating revenues,$2,262,Cost of goods sold,- 1,655,Selling, general, and adminis
13、trative expenses,- 327,Depreciation,- 90,Operating income,$190,Other income,29,Earnings before interest and taxes,$219,Interest expense,- 49,Pretax income,$170,Taxes,- 84,Current: $71,Deferred: $13,Net income,$86,Retained earnings: $43,Dividends: $43,The non-operating section of the income statement
14、 includes all financing costs, such as interest expense.,U.S.C.C. Income Statement,(in $ millions),20X2,Income Statement,U.S. COMPOSITE CORPORATION,Total operating revenues,Cost of goods sold,Selling, general, and administrative expenses,Depreciation,Operating income,Other income,Earnings before int
15、erest and taxes,Interest expense,Pretax income,Taxes,Current: $71,Deferred: $13,Net income,Retained earnings: $43,Dividends: $43,Usually a separate section reports as a separate item the amount of taxes levied on income.,$2,262,- 1,655,- 327,- 90,$190,29,$219,- 49,$170,- 84,$86,U.S.C.C. Income State
16、ment,(in $ millions),20x2,Income Statement,U.S. COMPOSITE CORPORATION,Total operating revenues,Cost of goods sold,Selling, general, and administrative expenses,Depreciation,Operating income,Other income,Earnings before interest and taxes,Interest expense,Pretax income,Taxes,Current: $71,Deferred: $1
17、3,Net income,Retained earnings: $43,Dividends: $43,Net income is the “bottom line”.,$2,262,- 1,655,- 327,- 90,$190,29,$219,- 49,$170,- 84,$86,U.S.C.C. Income Statement,bottom line: because it is typically found on the last line of a companys income statement.,Income Statement Analysis,There are thre
18、e things to keep in mind when analyzing an income statement:GAAPNon Cash ItemsTime and Costs,Generally Accepted Accounting Principles,GAAPThe matching principal of GAAP dictates that revenues be matched with expenses. Thus, income is reported when it is earned, even though no cash flow may have occu
19、rred Notes:权责发生制原则(Accrual concept):会计学的基本原则, 国际公 认的标准。,Income Statement Analysis,Non Cash ItemsDepreciation (or amortization) is the most apparent. No firm ever writes a check for “depreciation”.Another noncash item is deferred taxes, which does not represent a cash flow.,Income Statement Analysis,
20、Time and CostsIn the short run, certain equipment, resources, and commitments of the firm are fixed, but the firm can vary such inputs as labor and raw materials.In the long run, all inputs of production (and hence costs) are variable.Financial accountants do not distinguish between variable costs a
21、nd fixed costs. Instead, accounting costs usually fit into a classification that distinguishes product costs from period costs.,Notes: A manufacturers product costs (产品成本)are the direct materials, direct labor, and manufacturing overhead used in making its products. Period costs (期间费用)are not a nece
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