【正文】 alysis of . Financial Statements ? Statement formats will be different ? Differences in accounting principles ? Ratio analysis will reflect local accounting practices The Quality of Financial Statements ? Reflect reality rather than use accounting tricks or onetime adjustments to make things look better than they are The Quality of Financial Statements ? Highquality balance sheets typically have – Conservative use of debt – Assets with market value greater than book – No liabilities off the balance sheet The Quality of Financial Statements ? Highquality ine statements reflect repeatable earnings ? Gains from nonrecurring items should be ignored when examining earnings ? Highquality earnings result from the use of conservative accounting principles that do not overstate revenues or understate costs The Value of Financial Statement Analysis ? Financial statements, by their nature, are backwardlooking ? An efficient market will have already incorporated these past results into security prices, so why analyze the statements? ? Analysis provides knowledge of a firm’s operating and financial structure ? This aids in estimating future returns Specific Uses of Financial Ratios 1. Stock valuation 2. Identification of corporate variables affecting a stock’s systematic risk (beta) 3. Assigning credit quality ratings on bonds 4. Predicting insolvency (bankruptcy) of firms Stock Valuation Models Valuation models attempt to derive a value based upon one of several cash flow or relative valuation models All valuation models are influenced by: ? Expected growth rate of earnings, cash flows, or dividends ? Required rate of return on the stock Financial ratios can help in estimating these critical inputs Stock Valuation Models ? Financial Ratios 1. Average debt/equity 2. Average interest coverage 3. Average dividend payout 4. Average return on equity 5. Average retention rate 6. Average market price to book value 7. Average market price to cash flow 8. Average market price to sales Stock Valuation Models ? Variability Measures 1. Coefficient of variation of operating earnings 2. Coefficient of variation of sales 3. Coefficient of variation of ine 4. Systematic risk (beta) ? Nonratio Variables 1. Average growth rate of earnings Financial Ratios and Systematic Risk ? Financial Ratios 1. Dividend payout 2. Total debt/total assets 3. Cash flow/total debt 4. Interest coverage 5. Working capital/total assets 6. Current Ratio Financial Ratios and Systematic Risk ? Variability Measures 1. Variance of operating earnings 2. Coefficient of variation of operating earnings 3. Coefficient of variation of operating profit margins 4. Operating earnings beta (pany earnings related to aggregate earnings) Financial Ratios and Systematic Risk ? Nonratio Variables 1. Asset size 2. Market value of stock outstanding Financial Ratios and Bond Ratings ? Financial Ratios 1. Longterm debt/total assets 2. Total debt/total capital 3. Net ine plus depreciation (cash flow)/long term senior debt 4. Cash flow/total debt 5. Net ine plus interest/interest expense (fixed charge coverage) 6. Cash flow/interest expense Financial Ratios and Bond Ratings 7. Market value of stock/par value of bonds 8. Net operating profit/sales 9. Net ine/owners’ equity (ROE) 10. Net ine/total assets 11. Working capital/sales 12. Sales/ worth (equity turnover) Financial Ratios and Bond Ratings ? Variability Ratios 1. Coefficient of variation (CV) of earnings 2. Coefficient of variation of return on assets ? Nonratio variables 1. Subordination of the issue 2. Size of the firm (total assets) 3. Issue size 4. Par value of all publicly traded bonds of the firm Financial Ratios and Insolvency (Bankruptcy) ? Financial Ratios 1. Cash flow/total debt 2. Cash flow/longterm debt 3. Sales/total assets 4. Net ine/total assets 5. EBIT/total assets 6. Total debt/total assets Financial Ratios and Insolvency (Bankruptcy) 7. Market value of stock/book value of debt 8. Working capital/total assets 9. Retained earnings/total assets 10. Current ratio 11. Cash/current liabilities 12. Working capital/sales Limitations of Financial Ratios ? Accounting treatments may vary among firms, especially among . firms ? Firms may have have divisions operating in different industries making it difficult to derive industry ratios ? Results may not be consistent ? Ratios outside an industry range may be cause for concern The Inter Investments Online End of Chapter 12 –Analysis of Financial Statements Future topics Chapter 11 ? Security Valuation Process ? Theory of Valuation ? Valuation of Alternative Investments ? Estimating the Required Rate of Return and Expected Growth Rates 謝謝觀看 /歡迎下載 BY FAITH I MEAN A VISION OF GOOD ONE CHERISHES AND THE ENTHUSIASM THAT PUSHES ONE TO SEEK ITS FULFILLMENT REGARDLESS OF OBSTACLES. BY FAITH I BY FAITH