【正文】 es turnover Purchases on account** Accounts payable average balance Asset turnover Sales in period Average assets Any turnover ratio can be expressed as a period ratio which measures the number of days in the cycle Days in period*** Turnover ratio Period ratio = 12 Turnover Ratios Transaction Cycle * Accounts payable, inventory, and accounts receivable are the major ponents of working capital It is critical for a firm to manage its payables, inventory, and receivables.* Cash inflow Cash collected for sales made Cash outflow Raw materials purchased Cash disbursed for raw materials purchased Finished goods inventory Sales made Accounts receivable period Accounts payable period X X X 13 Turnover Ratios Description ?Turnover ratios measures how many times per year a given resource is consumed ?Period ratios measure the number of days that is takes for a given resource to “turn over” ?Management’s objective is to stretch out the accounts payable period (., have low accounts payable turnover) and shorten the periods for accounts receivable and inventory (., have high accounts receivable and inventory turnover) Turnover ratios measure how well a firm is managing its resources. 14 Turnover Ratios Tradeoffs Ratio Improvements ?Decrease the receivables collection period – ., collect the accounts receivable faster ?Decrease the inventory holding period – ., sell pleted products faster ?Increase the account payable period – ., take longer to pay suppliers Strategic Tradeoff ?If the receivables collection period is too short, customers may buy at a petitor that has more generous credit terms. (Often this period is dictated by industry norms) ?If the inventory holding period is too short the pany may not have enough inventory to fill a big order. Also, the pany may not be able to outlast a strike, either at its own facility or at one of its primary suppliers’ facilities ?If the accounts payable period is too long, suppliers could raise their prices, charge interest (often at very high rates), or even refuse to supply the firm on credit. Also, workers may get restless if they have to wait longer to receive their paychecks. Managing turnover ratios means managing strategic tradeoffs. 15 Leverage Ratios Definitions * All three ratios here are called “l(fā)everage” ratios by different people, so be sure to understand which ratio is being used when someone is talking about leverage Leverage ratios use line items from the balance sheet. Ratios* Definitions DuPont leverage ratio Assets Equity Debt to equity ratio Longterm debt Equity Debt to total capital or debt to total assets ratio Total liabilities Debt + equity Total liabilities Assets = 16 Leverage Ratios Description ?Money can be raised from debt sources (banks, bond markets) or equity sources (stockholders) ?Leverage ratios reflect both the financing policies of the firm and the riskiness of the business ?In order to analyze a firm’s leverage ratios, one needs to understand the definitions of debt and equity Leverage ratios measure the respective claims of debt and equity holders. 17 Debt Versus Equity ?Contractual payments over the life of the loan ?Investor legally guaranteed full return of principle plus interest – nothing above that ?In case of liquidation, debtor has preferential claim on proceeds from sale of assets ?No guaranteed payments from mon stock ?Investor “owns” part of firm –right to appreciation of firm’s value ?In case of liquidation, equity owner takes what is left (may be nothing) Debt and equity have very different characteristics. Debt = anything that contractually requires payments to be made before the equity holders have access to the firm’s earnings Equity = the value of the firm left over after all the debt holders have been paid Lower risk to investor。 investor demands lower return Higher risk to investor。 investor demands higher return 18 Debt Questions Debt and Equity Debt in Leverage Ratios ?Bain typically looks only at longterm debt (debt with a term of 1 year or more) ?Accountants measure debt as shortterm debt plus long term debt Equity in Leverage Ratios ?Bain typically uses the market value of equity (., the share price multiplied by the number of shares). Others may use the book value of equity, which is the amount shown on the balance sheet 19 Debt Questions ?Accounts payable ? ?Shortterm debt ? ?Longterm debt ? ?Cancelable leases ? ?Noncancelable leases ? ?Preferred stock ? ?Common stock ? ?Deferred tax ? Would you define the following as debt? 20 Debt Answers ?Accounts payable ?Shortterm debt ?Longterm debt ?Cancelable leases ?Noncancelable leases Some items are clearly debt, others are clearly not debt, still others are debatable. Not debt. It is part of working capital, and is “secured” by the inventory and receivables that it is used to finance Debt, if it used to finance capital expansions of the pany Not debt, if it used to finance working capital Debt. Not debt. Because they are cancelable, they are not contractual obligations Debt. Because they are noncancelable, they are contractual obligations. (For all publicly traded US panies, the present value of all the noncancelable lease payments must be disclosed in balance sheet footnotes.) Debatable Argument for equity contractual obligations to pay dividends on preferred stock are met after debtholders’ claims are met Argument for debt there is a contractual obligation to pay dividends on preferred stock before mon stock dividend payments can be made Not debt. It is equity ? Common stock Debt, but debatable. O