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注会综合阶段英语水平提升班——第六单元

t-admin154 网校老师 发表于 2017-10-29 16:24:11 | 评论:0  查看:1006次 [注会英语]
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Unit 6  Financial management
1. Common financial ratios
2. Asset valuation
3. Long-term financing
4. Working capital management
1. Common financial ratios
1.1 Short –term solvency, or liquidityratios (短期偿债能力比率)
流动比率
Current ratio = Current assets
                  Current liabilities
速动比率
Quick ratio=Current assets – inventory-advance payment-prepaid expense
                    Current liabilities
营运资本
Working capital =current assets –current liabilities
=long-term capital –non-current assets
图片1.png
现金比率
Cash ratio =        Cash + financial assets held for trading
                                   Current liabilities
现金流量比率
Cash flow ratio =        Net cash flow from operating activities
                                            Current liabilities
1.2 long-term solvency, or financial leverage, ratios (长期偿债能力比率)
资产负债率total debt ratio=   Total debt
                               Total assets
产权比率debt-equity ratio= Total debt
                            Total equity
权益乘数equity multiplier=Total assets
                            Total equity
利息保障倍数interest cover=        profits before interest and tax
                                                    Interest
1.3 Asset utilization, or turnover, ratios (营运能力比率)
存货周转率Inventory turnover =   Cost of goods sold
                                      Inventory
存货周转天数Day’s sales in inventory  =   365 days         
                                 Inventory turnover
应收账款周转率Receivables turnover = Credit sales   
                                       Accounts receivable
应收账款周转天数Day’s sales in receivable =   365 days         
                                             Receivables turnover
总资产周转率Total assets turnover =   Sales     
                                     Total assets
1.4 Profitability ratios (盈利能力比率)
销售利润率Profit margin=Net income
                             Sales
资产利润率Return on assets=Net income
                               Total assets
图片2.png
权益净利率Return on equity=Net income
                              Total equity
图片3.png
图片4.png
1.5 Market value ratios (市价比率)
市盈率Price- earning ratio = Price per share
                              Earnings per share
市净率 Market-to-book ratio= Market value per share
                               Book value per share
1.6 Du Pont Analysis (杜邦分析)
Return on equity=Return on assets×Equity multiplier
= Profit margin×Total assets turnover ×Equity multiplier
Practice Question
WWW is a company that manufactures and retails office products. Their summarized financial statements for the years ended 30 June 2004 and 2005 are given below:
Income statement for the year ended 30 June
[size=10.5000pt]
2004
$’000
2005
$’000
Revenue
1,159,850
1,391,820
Cost of sales
(753,450)
(1,050,825)
Gross profit
406,400
340,995
Operating expenses
(170,950)
(161,450)
Profit from operations
235,450
179,545
Finance costs
(14,000)
(10,000)
Profits before tax
221,450
169,545
Tax
(66,300)
(50,800)
Net profit
155,150
118,745
Statement of Financial Position as at 30 June
[size=10.5000pt]
2004
$’000
2005
$’000
Non-current assets
341,400
509,590
Current assets
[size=10.5000pt]
[size=10.5000pt]
Inventory
88,760
109,400
Receivables
206,550
419,455
Bank
95,400
        
[size=10.5000pt]
732,110
1,038,445
Share capital
100,000
100,000
Share premium
20,000
20,000
Revaluation reserve
[size=10.5000pt]
50,000
Retained earnings
287,420
376,165
[size=10.5000pt]
407,420
546,165
Non-current liabilities
83,100
61,600
Current liabilities
[size=10.5000pt]
[size=10.5000pt]
Payables
179,590
345,480
Overdraft
[size=10.5000pt]
30,200
Tax
62,000
55,000
[size=10.5000pt]
732,110
1,038,445
The directors concluded that their revenue for the year ended 30 June 2004 fell below budget and introduced measures in the year ended 30 June 2005 to improve the situation. These included:
· Cutting prices;
· Extending credit facilities to customers;
· Leasing additional machinery in order to be able to manufacture more products.
The directors are now reviewing the results for the year ended 30 June 2005 and have asked for your advice as an external business consultant, as to whether or not the above strategies have been successful.
Requirement:
Prepare a report to the directors of WWW assessing the performance and position of the company in the year ended 30 June 2005 compared to the previous year and advise them on whether or not you believe that their strategies have been successful.
Solution
Report
To: Directors of WWW
From: Business Consultant
Date: XXX
Subject: Performance of WWW
Introduction
As requested I have analysed the financial statements of WWW for the year ended 30 June 2005 compared to the previous year to assess the performance and position of the entity and to determine whether the strategies that you have implemented have been successful. The ratios that I have calculated are in an appendix to this report.
Performance
Profitability
The revenue of the entity has increased by 20% on last year. It would therefore appear that the strategy of cutting prices and extending credit facilities has attracted customers and generated an increase in revenue.
Despite this increase however, the profitability has been worsen both gross profit and operating profit being lower than the previous year. Similarly the operating profit margin has declined from 20.3% to 12.9%. There are likely to be several reasons behind this deterioration.
The reduction in prices of goods will have contributed to the worsening gross profit. To rectify this, WWW may consider approaching their suppliers for some bulk-buying discounts.
The move of leasing additional machinery may also have contributed to the lower profitability, with the lease payments being expensed to the income statement (operating lease).
The return on capital employed has dropped significantly from 48% to 29.5%. This is mainly due to the lower operating profit margins and a slight fall in asset turnover.
The revaluation of non-current assets will also have contributed to the fall in the return on capital employed and would explain why the asset utilization has fallen slightly.
The revaluation will have caused additional depreciation charges in the income statement and thus is another factor in the worsening profits.
WWW have probably purchased additional machinery (as well as leasing) to meet the increased production needs. These new machines may not have been fully operational in the current year and so would also explain the lower returns. The higher depreciation charges will also have contributed to lower profits.
Position
Liquidity
Again, the company’s results are showing a worsening position in this area with the current ratio declining from 1.62 to 1.23.
The cause for this would seem to be the extension of credit facilities to customers.
Receivable days have increased from an appropriate level of 65 days to 110 days. Although the benefits of this strategy have been shown by the increase in revenue, it would seem that WWW have now allowed customers too much credit.
As a result of the increase in the receivables collection period, WWW have been taking longer to pay their suppliers. Their payables days are now at an unacceptably high level of 120 days. This is likely to be causing dissatisfaction with suppliers and would reduce the ability of WWW being able to negotiate discounts as discussed above.
Inventory holding days have increased slightly from 38 days to 43 days. This does not give any immediate cause for concern and is probably due to increased production levels.
As a consequence of these factors, by the end of the year WWW are operating a significant overdraft.
Gearing
The gearing ratio has fallen from 16.9% to 10.1% as a result of the reduction in non-current liabilities. Assuming that these are loans, it would appear that WWW have repaid these loans. This does not seem to have been a sensible move given their poor liquidity position. It would have seemed appropriate to have increased the longer term debt of the company to finance the growth rather than increasing their current liabilities.
The revaluation of non-current assets would also have contributed to the lowering of this ratio.
If WWW had leased their additional machinery under finance leases, it is likely that less would be charged to their income statement and so would improve their profitability while the subsequent increase in the gearing ratio would not have caused significant concern.
Also, WWW may have purchased additional non-current assets. Given the gearing and liquidity positions, it would seem that these have been financed from short-term sources rather than more appropriate long-term sources.
Summary
Although the directors’ initial aim of improving revenue has been achieved with the measures taken, the strategies do not appear to have been successful overall.
The cutting off prices has caused lowering profit margins and combined with additional lease expenses and depreciation charges has resulted in worsening profit situation overall.
The extension of credit periods has again been successful to the extent that it has helped increase revenue but has caused a poor liquidity position.
It would seem that WWW are showing signs of overtrading.
To rectify the situation it would seem appropriate to increase the long-term debt of the company as a matter of priority.
Appendix
2004
2005
Movement
Revenue
1,159,850
1,391,820
+20%
Gross profit
406,400
340,995
-16.1%
Operating profit
235,450
179,545
-23.7%
                                                               
[size=10.5000pt]
2004
2005
ROCE
235,450/490,520
48.0%
179,545/607,765
29.5%
OP%
235,450/1,159,850
20.3%
179,545/1,391,820
12.9%
Asset
turnover
1,159,850/490,520
2.36
1,391,820/607,765
2.29
Inventory days
88,760/753,480 *365
43 days
109,400/1,050,825 *365
38 days
Receivable days
206,550/1,159,850 *365
65 days
419,455/1,391,820 *365
110 days
Payable days
179,590/753,450 *365
87 days
345,480/1,050,825 *365
120 days
Current ratio
390,710/241,590
1.62
528,855/430,680
1.23
gearing
83,100/490,520
16.9%
61,600/607,765
10.1%

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