【正文】 Lecture Presentation Software to acpany Investment Analysis and Portfolio Management Seventh Edition by Frank K. Reilly Keith C. Brown Chapter 10 Chapter 10 Analysis of Financial Statements Questions to be answered: ? What are the major financial statements provided by firms and what specific information does each of them contain? ? Why do we use financial ratios to examine the performance of a firm and why is it important to examine performance relative to the economy and a firm’s industry? Chapter 10 Analysis of Financial Statements ? What are the major categories for financial ratios and what questions are answered by the ratios in these categories? ? What specific ratios help determine a firm’s internal liquidity, operating performance, risk profile, growth potential, and external liquidity? ? How can the DuPont analysis help evaluate a firm’s return on equity over time? Chapter 10 Analysis of Financial Statements ? What are some of the major differences between . and . financial statements and how do these differences affect the financial ratios? ? What is a “quality” balance sheet or ine statement? ? Why is financial statement analysis done if markets are efficient and forwardlooking? Chapter 10 Analysis of Financial Statements ? What major financial ratios help analysts in the following areas: stock valuation, estimating and evaluating systematic risk, predicting the credit ratings on bonds, and predicting bankruptcy? Major Financial Statements ? Corporate shareholder annual and quarterly reports must include Major Financial Statements ? Corporate shareholder annual and quarterly reports must include – Balance sheet Major Financial Statements ? Corporate shareholder annual and quarterly reports must include – Balance sheet – Ine statement Major Financial Statements ? Corporate shareholder annual and quarterly reports must include – Balance sheet – Ine statement – Statement of cash flows Major Financial Statements ? Corporate shareholder annual and quarterly reports must include – Balance sheet – Ine statement – Statement of cash flows ? Reports filed with Securities and Exchange Commission (SEC) Major Financial Statements ? Corporate shareholder annual and quarterly reports must include – Balance sheet – Ine statement – Statement of cash flows ? Reports filed with Securities and Exchange Commission (SEC) – 10K and 10Q Generally Accepted Accounting Principles (GAAP) ? Formulated by the Financial Accounting Standards Board (FASB) ? Provides some choices of accounting principles ? Financial statements footnotes must disclose which accounting principles are used by the firm Balance Sheet ? Shows resources (assets) of the firm and how it has financed these resources ? Indicates current and fixed assets available at a point in time ? Financing is indicated by its mixture of current liabilities, longterm liabilities, and owners’ equity Ine Statement ? Contains information on the profitability of the firm during some period of time ? Indicates the flow of sales, expenses, and earnings during the time period Statement of Cash Flows ? Integrates the information on the balance sheet and ine statement ? Shows the effects on the firm’s cash flow of ine flows and changes in various items on the balance sheet Statement of Cash Flows It has three sections: ? Cash Flow from Operating Activities – the sources and uses of cash that arise from the normal operations of a firm ? Cash Flow from Investing activities – change in gross plant and equipment plus the change in the investment account ? Cash Flow from Financing activities– financing sources minus financing uses Alternative Measures of Cash Flow ? Cash flow from operations – Traditional cash flow equals ine plus depreciation expense and deferred taxes – Also adjust for changes in operating assets and liabilities that use or provide cash ? Free cash flow recognizes that some investing and financing activities are critical to ongoing success of the firm – Capital expenditures and dividends Purpose of Financial Statement Analysis ? Evaluate management performance in three areas: – Profitability – Efficiency – Risk Analysis of Financial Ratios ? Ratios are more informative that raw numbers ? Ratios provide meaningful relationships between individual values in the financial statements Importance of Relative Financial Ratios ? Compare to other entities ? Examine a firm’s performance relative to: – The aggregate economy – Its industry or industries – Its major petitors within the industry – Its past performance (timeseries analysis) Comparing to The Aggregate Economy ? Most firms are influenced by economic expansions and contractions in the business cycle ? Analysis helps you estimate the future performance of the firm during subsequent business cycles Comparing to A Firm’s Industry ? Most popular