《基础金融》（英文版）CHAPTER 3 Analysis of Financial Statements

3-1 CHAPTER 3 Analysis of Financial Statements ■ Ratio analysis ■ Du Pont systen Effects of improving ratios Limitations of ratio analysis ■ Qualitative factors Copy right C 2002 Harcourt, Inc All rights reserved

3 - 1 Copyright © 2002 Harcourt, Inc. All rights reserved. ◼Ratio analysis ◼Du Pont system ◼Effects of improving ratios ◼Limitations of ratio analysis ◼Qualitative factors CHAPTER 3 Analysis of Financial Statements

3-2 Balance sheet: Assets 2002E 2001 Cash 14,0007282 INvestments 71.632 AR 878000632160 Inventories 1,716,4801,287360 Total Ca 2,680,1121,926,802 Gross FA ,197,1601,202,950 Less: Deprec 380.120263,160 Net Fa 817.040939790 Total assets 3,497,1522,866,592 Copy right C 2002 Harcourt, Inc All rights reserved

3 - 2 Copyright © 2002 Harcourt, Inc. All rights reserved. Balance Sheet: Assets 2002E 2001 Cash 14,000 7,282 ST investments 71,632 0 AR 878,000 632,160 Inventories 1,716,480 1,287,360 Total CA 2,680,112 1,926,802 Gross FA 1,197,160 1,202,950 Less: Deprec. 380,120 263,160 Net FA 817,040 939,790 Total assets 3,497,152 2,866,592

3-3 Liabilities and Equity 2002E 2001 Accounts payable 436, 800 524, 160 Notes payable 600,000720,000 Accruals 408,000489600 Total cL 1444,8001,733,760 Long-term debt 500,0001,000,000 Common stock 1.680.936 460000 Retained earnings (128, 584)(327, 168) Total equity 552,352132832 Total l&E 3,497,1522,866,592 Copy right C 2002 Harcourt, Inc All rights reserved

3 - 3 Copyright © 2002 Harcourt, Inc. All rights reserved. Liabilities and Equity 2002E 2001 Accounts payable 436,800 524,160 Notes payable 600,000 720,000 Accruals 408,000 489,600 Total CL 1,444,800 1,733,760 Long-term debt 500,000 1,000,000 Common stock 1,680,936 460,000 Retained earnings (128,584) (327,168) Total equity 1,552,352 132,832 Total L&E 3,497,152 2,866,592

3-4 Income statement 2002E 2001 Sales 7,035,603,834,400 COGS 6,100,0005,728,000 Other expenses 312960680,000 Depreciation 120,000116960 Tot op costs6,532,9606,524,960 EBIT 502,640(690,560) Interest exp. 80.000176000 EBT 422,640(866,560 Taxes(40%) 169,056(〈346,624) Net income 253,584(519,936) Copy right C 2002 Harcourt, Inc All rights reserved

3 - 4 Copyright © 2002 Harcourt, Inc. All rights reserved. Income Statement 2002E 2001 Sales 7,035,600 5,834,400 COGS 6,100,000 5,728,000 Other expenses 312,960 680,000 Depreciation 120,000 116,960 Tot. op. costs 6,532,960 6,524,960 EBIT 502,640 (690,560) Interest exp. 80,000 176,000 EBT 422,640 (866,560) Taxes (40%) 169,056 (346,624) Net income 253,584 (519,936)

3-5 Other data 2002E 2001 Shares out 250.000100.000 EPS $1.014($5199) DPS $0220$0110 Stock price $1217 $225 Lease pmts $40,000$40,000 Copy right C 2002 Harcourt, Inc All rights reserved

3 - 5 Copyright © 2002 Harcourt, Inc. All rights reserved. Other Data 2002E 2001 Shares out. 250,000 100,000 EPS $1.014 ($5.199) DPS $0.220 $0.110 Stock price $12.17 $2.25 Lease pmts $40,000 $40,000

3-6 Why are ratios useful? Standardize numbers facilitate comparisons Used to highlight weaknesses and strengths Copy right C 2002 Harcourt, Inc All rights reserved

3 - 6 Copyright © 2002 Harcourt, Inc. All rights reserved. ◼Standardize numbers; facilitate comparisons ◼Used to highlight weaknesses and strengths Why are ratios useful?

3-7 What are the five major categories of ratios, and what questions do they answer? Liquidity: Can we make required payments as they fall due? Asset management: Do we have the right amount of assets for the level of sales? More.) Copy right C 2002 Harcourt, Inc All rights reserved

3 - 7 Copyright © 2002 Harcourt, Inc. All rights reserved. ◼Liquidity: Can we make required payments as they fall due? ◼Asset management: Do we have the right amount of assets for the level of sales? What are the five major categories of ratios, and what questions do they answer? (More…)

3-8 Debt management: Do we have the right mix of debt and equity? Profitability: Do sales prices exceed unit costs, and are sales high enough as reflected in PM, ROE, and ROA? they see as reflected in PlE and Me w Market value: Do investors like wha ratios? Copy right C 2002 Harcourt, Inc All rights reserved

3 - 8 Copyright © 2002 Harcourt, Inc. All rights reserved. ◼Debt management: Do we have the right mix of debt and equity? ◼Profitability: Do sales prices exceed unit costs, and are sales high enough as reflected in PM, ROE, and ROA? ◼Market value: Do investors like what they see as reflected in P/E and M/B ratios?

3-9 Calculate the firm's forecasted current and quick ratios for 2002 cR._cA=51445=185x 2,680 QR CA-Iny 02 CL $2,680-$1716 $1445 =0.67X Copy right C 2002 Harcourt, Inc All rights reserved

3 - 9 Copyright © 2002 Harcourt, Inc. All rights reserved. Calculate the firm’s forecasted current and quick ratios for 2002. CR02 = = = 1.85x. QR02 = = = 0.67x. CA CL $2,680 $1,445 $2,680 - $1,716 $1,445 CA - Inv. CL

3-10 Comments on CR and QR 2002E20012000nd cR185x1.1x23x2.7x QR0.67x0.4X0.8x1.0x Expected to improve but still below the industry average Liquidity position is weak Copy right C 2002 Harcourt, Inc All rights reserved

3 - 10 Copyright © 2002 Harcourt, Inc. All rights reserved. ◼Expected to improve but still below the industry average. ◼Liquidity position is weak. Comments on CR and QR 2002E 2001 2000 Ind. CR 1.85x 1.1x 2.3x 2.7x QR 0.67x 0.4x 0.8x 1.0x