1. Lecture 2: Financial Statements Analysis

3. Financial Statements Balance Sheet Income Statement The Statement of Cash Flow

5. Balance sheet Assets = Liability + Equity Current assets –Cash, bills, and currency –Marketable securities –Accounts receivable –Inventories Plant assets –Gross plant and equipment gross plant assets –Accumulated depreciation –Net plant and equipment Intangible assets

6. Liabilities Current liabilities –Accounts payable –Wages and salaries payable –Current portion of long-term indebtedness –Short term bank loans Long-term liabilities –Notes and bonds –Capital lease –Deferred taxes:

7. Equity Book value of equity Par value Additional paid-in-capital Treasury stock Retained earnings

8. The income statement Revenues - Expenses = Income Sales or revenues Cost of goods sold Gross profit Operating profit Net income Earning available to common shareholders

10. The statement of cash flows Cash flow from operating activities Cash flow from investing and financing activities

11. The Sources and Uses of Cash SourcesUses Decrease in nay assetIncrease in any asset Increase in any liabilityDecrease in any liability Net profit after taxesNet loss Sales of stockDividends paid Depreciation and otherRepurchase or retirement of stock noncash charge

13. Book Value vs. Market Value Book Value Market Value

14. ACCOUNTING v.s. FINANCIAL MANAGEMENT ACCOUNTING FINANCIAL MANAGEMENT

15. Financial ratio analysis Financial ratio analysis involves methods of calculating and interpreting financial ratios in order to assess a firm’s performance or status.

16. Steps 1. What is the definition? 2. How to calculate? 3. Is the number food or bad? –Time-series analysis –Cross-sectional analysis 4. Why?

17. Financial Ratios Liquidity Asset Management Debt Management Profitability Market value

19. Liquidity Current ratio: current assets/current liabilities Quick ratio(acid-test): (current assets- inventories)/current liabilities

20. Asset Management Inventory turnover:sales/inventories Days sales outstanding:receivables/(daily sales) Fixed assets turnover:sales/net fixed assets Total assets turnover:sales/total assets

21. Debt Management Total debt to total assets:total debts/total assets Times-interest-earned (TIE):EBIT/interest charges

22. Profitability Profit margin on sales:net income available to common stockholders/sales Basic earning power (BEP):EBIT/total assets Return on total assets (ROA):net income available to common stockholders/total assets Return on common equity (ROE):net income available to common stockholders/common equity

23. Market value Price/earnings (P/E):price per share/earnings per share Market/book (M/B):market price per share/book value per share

24. Du Pont Equation ROA=profit margin x total assets turnover ROE=profit margin x total assets turnover x equity multiplier or = ROA x Equity Multiplier

25. Long-term financial planning Financial planning formulates the way financial goals are to be achieved. The end result is a financial plan. Goal: growth Basic financial policy: Capital budgeting decisions - The firm’s needed investment in new assets. Capital structure policy - The degree of financial leverage the firm choose to employ. Dividend policy - The amount of cash the firm pay to the shareholders. Net working capital decision - The amount of liquidity and working capital the firm needs on an ongoing basis.

26. Pro Forma Statements A financial plan will have a forecasted balance sheet, income statement, and statement of cash flows.

29. 作業 編列 “ 大有塑膠公司 ” 的財務預測報表及做 財務比率分析