# Chapter 1 intro to financial management learning outcomes

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CHAPTER 1 & 2 PPT
 Statement of Cash Flow 现金流量表 Operating activities represent the company’s core business, including sales and expenses. 经营活动代表公司的核心业务，包括销售和费用。 Investing activities include the cash flows that arise out of the purchase and sale of long-term assets such as plant and equipment. 投资活动包括购买和出售厂房和设备等长期资产所产生的现金流量。 Financing activities represent changes in the firm’s use of debt and equity such as issue of new shares, the repurchase of outstanding shares, and the payment of dividends. 融资活动是指公司对债务和股权使用的变化，如发行新股、回购流通股和支付股息。

 Statement of shareholder’s equity It provides a detailed account of the firm’s activities in the following accounts over a period of time: 它提供了公司在以下一段时间内的活动的详细账目: Common share account, 普通股账户， Preferred share account, •       优先股账户， Retained earnings account, and •       留存收益账户，以及 Changes to owner’s equity. •       所有者权益的变化。

 FINANCIAL RATIO ANALYSIS 财务比率分析 Financial managers use ratios to interpret the raw numbers on financial statements. 财务经理使用比率来解释财务报表上的原始数字。 Financial ratios analysis: 财务比率分析： Industry comparative analysis ❖       行业对比分析 Cross sectional analysis ❖       横截面分析 Time series analysis ❖       时间序列分析 Ratios are used by internal and external parties. Example: 比率由内部和外部各方使用。例子： Management for planning and evaluating. ❖       用于计划和评估的管理。 Credit managers to estimate the riskiness of potential borrowers. ❖       信贷经理评估潜在借款人的风险。 Investors to evaluate corporate securities. ❖       投资者评估公司证券。 Managers to identify and assess potential merger candidates. ❖       管理人员识别和评估潜在的合并候选人。 TYPES OF FINANCIAL RATIO 财务比率的类型 LIQUIDITY •       流动性 Current ratio •       目前的比例 Acid test ratio •       酸性测试比率 ASSET ACTIVITY •       资产活动 Average collection period •       平均收款期 Inventory turnover •       存货周转率 Account receivable turnover •       应收账款周转率 Fixed asset turnover •       固定资产周转率 Total asset turnover •       总资产周转率 LEVERAGE •       杠杆作用 Debt to asset •       资产负债 Debt to equity •       债权转股权 Times interest earned •       利息倍数 Fixed charge coverage •       固定费用保障 PROFITABILITY •       盈利能力 Gross profit margin •       毛利润率 Operating profit margin •       营业利润率 Net profit margin •       净利润率 Return on Asset (ROA) •       资产回报率 (ROA) Return on Equity (ROE) •       股本回报率 (ROE) Earning per Share (EPS) •       每股收益 (EPS) MARKET VALUE •       市场价值 Price/Earning (P/E) ratio •       市盈率 (P/E) Market/Book (M/B) ratio •       市场/账面 (M/B) 比率

Balance Sheet

THE SAME AS ABOVE

Income Statement
 Income Statement (\$ millions, except per share data) for the Year Ended Docember 31, 2016 S Sales \$2,700.00 Cost of goods sold (2,025.00) Gross profit \$ 675.00 Operating expcnses: Selling expcnse \$(90.00) General and administrative expense (67.50) Depreciation and amortization expense (135.00) Total operating expcnscs (292.50) Net operating income (ebit, or earnings before interest and taxes) \$ 382.50 Interest expcnse (67.50) Earnings before taxes \$ 315.00 Income taxes (110.25) Net income \$ 204.75 Additional information: Dividends paid to stockholders during 2016 \$ 45.00 Number of common shares outstanding 90.00 Earnings per share (EPS) \$ 2.28 Dividends per share \$ 32.00 LIQUIDITY RATIO 流动性比率 Provide a measure of the firm’s working capital management and its ability to pay short term obligations. 衡量公司的营运资金管理及其支付短期债务的能力。 Current ratio 目前的比例 Acid test ratio 酸性测试比率 1. CURRENT RATIO 1. 电流比 Measure the ability of the firm to meet its short-term financial obligations. •         衡量公司履行其短期财务义务的能力。 Are there sufficient current assets to pay off current liabilities? •         是否有足够的流动资产来偿还流动负债？ If the current ratio is below 1 (current liabilities exceed current assets), then the company may have problems paying its bills on time, and vice versa. •         如果流动比率低于 1 （流动负债超过流动资产），则公司可能无法按时支付账单，反之亦然。

Current Assets

Current Ratio =

Current Liabilities

EXAMPLE:

\$643.5 million

=

\$288.0 million

= 2.23x

(SEE THE BALANCE SHEET ABOVE)

 2. ACID-TEST RATIO / QUICK RATIO 2. 酸测试比率/快速比率 Measure the ability of the firm to pay off its short-term obligations without having rely on the sale of inventory. 衡量公司在不依赖库存销售的情况下偿还短期债务的能力。 Is the firm still able to repay current liabilities after what is usually the least liquid of the current assets (Inventory) is subtracted? 在减去通常流动性最低的流动资产（存货）后，公司是否仍然能够偿还流动负债？

Current Assets - Inventories

Acid Test Ratio=

Current Liabilities

EXAMPLE:

\$643.5 million - \$378 million

=

\$288.0 million

= 0.92x

Can a Firm Have Too Much Liquidity?

• A high investment in liquid assets will enable firm to repay its current liabilities in a timely manner.

• 对流动资产的高投资将使公司能够及时偿还其流动负债。

• However, an excessive investment in liquid assets is costly to firm because liquid assets (i.e., cash) generate minimal return.

• 然而，对流动资产的过度投资对公司来说代价高昂，因为流动资产（即现金）产生的回报极少。

SUMMARY

 CATEGORY OF FINANCIAL RATIOS H. J. BOSWELL, INC. COMPARED TO THE INDUSTRY RATIO Current ratio 2.23 1.8 Better Acid test ratio 0.92 0.94 On par

ASSET ACTIVITY RATIO

Help assess how effectiveness and efficiency of the firm in managing it assets.

1. Average collection period

1. Inventory turnover

1. Account receivable turnover

1. Fixed asset turnover

1. Total asset turnover

1. AVERAGE COLLECTION PERIOD (DAY’S RECEIVABLE)

1. 平均收款期（天数）

• It represents that average length of time that the firm must wait after making credit sales before receiving the cash.

• •         它代表了公司在进行信用销售后在收到现金之前必须等待的平均时间长度。

• Shorter period is preferred as the cash cycle is lower and more cash is available in the company to meet cash requirements.

• •         更短的周期是首选，因为现金周期较短，公司有更多现金可以满足现金需求。

• How long does it take for the firm on average to collect its credit sales from customers?

• •         公司平均需要多长时间才能从客户那里收回信用销售？

Accounts Receivable

Average Collection Period =

Avg. Daily Credit Sales

Accounts Receivable

= X 365

Sales

EXAMPLE:

\$162 million

= X 365

\$2,700 million

= 21.9 days
 2. INVENTORY TURNOVER RATIO 2. 库存周转率 It measures how effectively the firm is using its inventory to generate sales. •         它衡量公司如何有效地使用其库存来产生销售。 It shows frequently (how many times) a company's inventory is sold and replaced over a period of time. •         它显示了公司库存在一段时间内被出售和更换的频率（多少次）。 Lower ratio indicates that the firm has excessive inventories, weak sales, or unproductive stocks, while higher ratio implies either strong sales or insufficient inventory. •         较低的比率表明该公司库存过多、销售疲软或库存不足，而较高的比率表明销售强劲或库存不足。

Cost of Goods Sold

(COGS)

Inventory Turnover Ratio =

Inventory

EXAMPLE:

\$2,025 million

=

\$378 million

= 5.36x
 3. ACCOUNT RECEIVABLE TURNOVER RATIO 3. 应收账款周转率 It is used to quantify a firm's effectiveness in extending credit and in collecting debts on that credit. •         它用于量化公司在提供信贷和收回信贷债务方面的有效性。 measures how many times accounts receivable are “rolled over” during a year. •         衡量一年中应收账款“展期”的次数。 Higher ratios mean that companies are collecting their receivables more frequently throughout the year. •         较高的比率意味着公司在全年中更频繁地收回应收账款。

Account Receivable Turnover Ratio =

Net Credit Sales

Account Receivable

EXAMPLE: \$2,700 million

=

\$162 million

= 16.67x
 4. FIXED ASSET TURNOVER RATIO 4. 固定资产周转率 It measures a company's ability to generate net sales from fixed-asset investments, namely property, plant and equipment (PP&E). •         它衡量公司从固定资产投资，即不动产、厂房和设备(PP&E)产生净销售额的能力。 A higher fixed-asset turnover ratio indicates that a company has more effectively utilized investment in fixed assets to generate revenue. •         较高的固定资产周转率表明公司更有效地利用固定资产投资来产生收入。 How effective is the firm in using its fixed assets to help generate sales? •         公司使用固定资产促进销售的效果如何？

Sales

Fixed Asset Turnover Ratio =

Net Fixed Assets

\$2,700 million

=

\$1,327.5 million

= 2.03x
 5. TOTAL ASSET TURNOVER RATIO 5. 总资产周转率 It measures the value of a company’s sales or revenues generated relative to the value of its assets. •         它衡量公司相对于其资产价值产生的销售额或收入的价值。 The Asset Turnover ratio can often be used as an indicator of the efficiency with which a company is deploying its assets in generating revenue. •         资产周转率通常可用作公司在创收方面部署其资产的效率的指标。 The higher the asset turnover ratio, the better the company is performing, since higher ratios imply that the company is generating more revenue per dollar of assets. •         资产周转率越高，公司的表现就越好，因为更高的比率意味着公司每美元资产产生的收入更多。

Sales

Total Asset Turnover Ratio=

Total Assets
Sales

=

Current Asset +

Non Current Assets

EXAMPLE:

\$2,700 million

=

\$1,971 million

= 1.37x

SUMMARY
 CATEGORY OF FINANCIAL RATIOS H. J. BOSWELL, INC. COMPARED TO THE INDUSTRY RATIO Average collection period 21.9 days 25 days Better Inventory turnover 5.36 times 7 times Worse Account receivable turnover 16.67 times 14.6 times Better Fixed asset turnover 2.03 times 1.75 times Better Total asset turnover 1.37 times 1.15 times Better

LEVERAGE RATIO杠杆比率
 Measure the relative size of the firm’s debt load and the firm’s ability to pay off the debt. 衡量公司债务负担的相对规模和公司偿还债务的能力。 Debt to asset 资产负债 Debt to equity 债权转股权 Times interest earned 利息倍数 Fixed charge coverage 固定费用保障 1. DEBT TO ASSET RATIO 1. 资产负债率 It measures the percentage of total funds provided by creditors as compared to funds provides from owners’ capital. •         它衡量债权人提供的总资金与所有者资本提供的资金的百分比。 What proportion of the firm’s assets is financed with debt? •         公司资产中有多少是通过债务融资的？ Higher ratio normally indicates higher leverage and financial risk, and vice versa. •         较高的比率通常表示较高的杠杆率和财务风险，反之亦然。

Total Liabilities

Debt to Asset Ratio = x 100%

Total Assets
Current Liabities +

Non Current Liabilities

= x 100%

Current Assets +

Non Current Assets

EXAMPLE:

\$1,059.75 million

= x 100%

\$1,971 million

= 53.8%
 2. DEBT TO EQUITY RATIO (OR GEARING RATIO) 2. 债务与股权比率（或负债比率） Measure the proportion of debt relative to equity financing for the firm and can be used to evaluate how much leverage a company is using. •         衡量公司债务相对于股权融资的比例，可用于评估公司使用的杠杆率。 It reflects the ability of shareholder equity to cover all outstanding debts in the event of a business downturn. •         它反映了股东权益在业务不景气的情况下偿还所有未偿债务的能力。 Creditors prefer less debt and more equity because equity represents a buffer of protection. •         债权人更喜欢更少的债务和更多的股权，因为股权代表了一种保护缓冲。 If ratio higher than 1, indicate more fund is used debt and risky and vice versa. •         如果比率高于 1，则表明更多的资金用于债务和风险，反之亦然。

Total Liabilities

Debt to Equity Ratio =

Common Equity
Current Liabities +

Non Current Liabilities

=

Common Equity

EXAMPLE:
\$1,059.75 million

=

\$911.25 million

= 1.16x
 3. TIMES INTEREST EARNED RATIO 3. 时代利息赚取比率 It measures the firm’s ability to service interest payments on a pretax earnings basis. •         它衡量公司在税前收益基础上支付利息的能力。 Failing to meet these obligations could force a company into bankruptcy •         未能履行这些义务可能会迫使公司破产 Operating Income known as Earning Before Interest and Tax (EBIT) and Profit from Operation •         营业收入称为息税前利润 (EBIT) 和营业利润 Ratio higher than 1, indicates higher capability and lower default risks, and vice versa. •         比率高于 1，表示能力较高，违约风险较低，反之亦然。

Operating Income

Times Interest Earned=

Interest Expense

EXAMPLE:

\$382.5 million

=

\$67.5 million

= 5.67x
 4. FIXED CHARGE COVERAGE RATIO 4. 固定费用覆盖率 It measures a firm's ability to satisfy fixed charges, such as interest expense and lease expense. •         它衡量公司支付固定费用的能力，例如利息费用和租赁费用。 EBITDA stands for earnings before interest, taxes, depreciation, and amortization. •         EBITDA 代表息税折旧摊销前收益。 Higher ratio value (preferably 2 or above) indicates a more financially healthy, and less risky, company or situation. A lower ratio value (less than 1) indicates that the company is struggling to meet its regularly scheduled payments. •         较高的比率值（最好为 2 或以上）表明公司或情况的财务状况更健康，风险更小。较低的比率值（小于 1）表明公司正在努力满足其定期付款。

Fixed Charge Coverage Ratio=

EBITDA + Lease Payment

Interest Expense + Lease Payment

EXAMPLE:

609,608+40,000

=

70,008 + 40,000

= 7.04x

A low ratio means a drop in earnings could be terrible for the company, a situation lenders try to avoid. 低比率意味着收益下降对公司来说可能是可怕的，贷款人试图避免这种情况。

SUMMARY
 CATEGORY OF FINANCIAL RATIOS H. J. BOSWELL, INC. COMPARED TO THE INDUSTRY RATIO Debt to asset 53.8% 35% Worse Debt to equity 1.16 times 1 time Worse Times interest earned 5.67 times 7 times Worse

 PROFITABILITY RATIO 盈利比率 Measure the overall effectiveness of the firm’s management. Did management’s decisions result in satisfactory returns to the owners? 衡量公司管理的整体有效性。管理层的决定是否给业主带来了令人满意的回报？ Gross profit margin 毛利润率 Operating profit margin 营业利润率 Net profit margin 净利润率 Return on Asset (ROA) 资产回报率 (ROA) Return on Equity (ROE) 股本回报率 (ROE) Earning per Share (EPS) 每股收益 (EPS) 1. GROSS PROFIT MARGIN 1. 毛利率 It measures the firm’s ability to control cost of goods sold (COGS) relative to sale revenue. •         它衡量公司控制相对于销售收入的销货成本 (COGS) 的能力。 It reveals the proportion of money left over from revenues after accounting for the COGS. •         它揭示了计入 COGS 后收入剩余资金的比例。

Gross Profit

Gross Profit Margin = x 100%

Sales

EXAMPLE:

\$675 million

= x 100%

\$2,700 million

= 25%
 Without an adequate gross profit margin, a company is unable to pay for its operating expenses. 如果没有足够的毛利率，公司就无法支付其运营费用。 2. OPERATING PROFIT MARGIN 2. 营业利润率 It measures of operating profit relative to sales; the ability to control all costs except interest and taxes in operation. •         它衡量相对于销售额的营业利润；能够控制运营中除利息和税收之外的所有成本。 It indicates how much of each dollar of revenues is left over after both costs of goods sold and operating expenses are considered. •         它表明在考虑销售成本和运营费用后，每一美元的收入还有多少剩余。 Higher ratio is preferred as it indicates a lower cost structure and will result in higher profit. •         较高的比率是首选，因为它表明成本结构较低，并将导致较高的利润。 Operating profit also known profit from operation, earning before interest and taxes (EBIT) •         营业利润也称为营业利润，息税前利润 (EBIT)

Operating Profit Margin =

Operating Profit

x 100%

Sales

EXAMPLE:

\$382.5 million

= x 100%

\$2,700 million

= 14.17%
 The higher the operating margin, the more profitable a company's core business is. 营业利润率越高，公司核心业务的盈利能力就越高。 3. NET PROFIT MARGIN 3. 净利润率 The percentage of revenue that a company keeps as profit after accounting for fixed and variable costs. •         公司在计入固定和可变成本后保留为利润的收入百分比。 It measures the after tax profit per ringgit of sales after deducting all expenses including interest and taxes. •         它衡量扣除所有费用（包括利息和税款）后每令吉销售额的税后利润。 The ability of the firm to get higher returns indicates a better growth prospect, and therefore higher margin is preferable. •         公司获得更高回报的能力表明更好的增长前景，因此更高的利润率是可取的。

Net Income

Net Profit Margin = x 100%

Sales

EXAMPLE:

\$204.75 million

= x 100%

\$2,700 million

= 7.60%
 Lower Net Profit Margin can be caused by decreasing sales or poor customer experience or inadequate expense management. 较低的净利润率可能是由于销售额下降或客户体验不佳或费用管理不当造成的。 4. RETURN ON ASSET (ROA) 4. 资产回报率（ROA） ROA gives an idea as to how efficient management is at using its assets to generate earnings. •         ROA 给出了管理层如何有效地利用其资产产生收益的想法。 ROA indicates the productivity of assets in producing revenues and the firm’s ability to control costs in its operation. Therefore, higher ratio is better. •         ROA 表示资产在产生收入方面的生产力以及公司在其运营中控制成本的能力。因此，比率越高越好。 ROA also known as Return on Investment (ROI) •         ROA 也称为投资回报率 (ROI)

Net Income

Return on Assets = x 100%

Total Assets
Net Income

= x 100%

Current Assets +

Non Current Assets

How effectively is the firm generating net income from its assets?
EXAMPLE:

\$204.75 million

= x 100%

\$1,971 million

= 10.39%
 5. RETURN ON EQUITY (ROE) 5. 股本回报率（ROE） How well is the firm generating return to its equity providers? •         公司为其股权提供者产生的回报如何？ It measures a corporation's profitability by revealing how much profit a company generates with the money shareholders have invested. •         它通过揭示公司用股东投资的资金产生多少利润来衡量公司的盈利能力。 A firm’s net income consists of earnings that is available for distribution to firm’s shareholders. •         公司的净收入包括可分配给公司股东的收益。 The higher the return on equity, the more efficient the company's operations are making use of those funds. •         股本回报率越高，公司运营利用这些资金的效率就越高。

Net Income x 100%

Return on Equity =

Common Equity

EXAMPLE:

\$204.75 million

= x 100%

\$911.25 million

= 22.5%
 6. EARNING PER SHARE (EPS) 6. 每股收益 (EPS) How well is the firm generating return to its equity providers? •         公司为其股权提供者产生的回报如何？ It measures a corporation's profitability by revealing how much profit a company generates with the money shareholders have invested. •         它通过揭示公司用股东投资的资金产生多少利润来衡量公司的盈利能力。

Net Income

Earning Per Share =

Number of share of

common stock outstanding

EXAMPLE:

\$204.75 milion

=

\$90 million

= \$2.28 per share

SUMMARY

 CATEGORY OF FINANCIAL RATIOS H. J. BOSWELL, INC. COMPARED TO THE INDUSTRY RATIO Gross profit margin 25% 28.2% Worse Operating profit margin 14.2% 15.5% Worse Net profit margin 7.6% 10.2% Worse Return on Asset (ROA) 10.39% 10% Better Return on Equity (ROE) 22.5% 18% Better Earning per Share (EPS) \$2.28 \$2.20 Better
MARKET RATIO市场比率
 Give the insight into how investors in marketplace feel the firm is doing in term of risk and return. They tend to reflect on relative basis, the common shareholders’ assessment of all aspects of the firm past and expected future performance. 深入了解市场上的投资者如何看待公司在风险和回报方面的表现。他们倾向于在相对基础上反映普通股股东对公司过去和预期未来业绩各方面的评估。 Price/Earning (P/E) ratio 市盈率 (P/E) Market/Book (M/B) ratio 市场/账面 (M/B) 比率 1. PRICE – EARNING (P/E) RATIO 1. 市盈率 (P/E) Indicates how much investors are currently willing to pay for \$1 of reported earnings. 表示投资者目前愿意为 1 美元的报告收益支付多少。 A higher ratio indicates that investors place a higher dollar value on each dollar of firm earnings. 较高的比率表明投资者对每一美元的公司收益赋予更高的美元价值。

Market Price per Share

P/E RATIO=

Earning Per Share

EXAMPLE:

\$32

=

\$2.28

= 14.07x
 The higher PE ratio, the greater investor confidence. 市盈率越高，投资者信心越大。 2. MARKET TO BOOK (M/B) RATIO 2. 市场预订（M/B）比率 measures the relationship between the market value and the accumulated investment in the firm’s equity. •         衡量市场价值与公司股权的累计投资之间的关系。 A higher ratio indicates that investors place a higher dollar value on each dollar of investment made in the firm by its common stockholders •         较高的比率表明投资者对其普通股股东在公司进行的每一美元投资的美元价值较高

Market Price per Share

M/B RATIO=

Book Value per Share
Common Stock Equity

Book Value per Share =

Number of Share Outstanding

EXAMPLE:

Market Price per Share

= x Number of Share Outstanding

Common Stock Equity

\$32

= x 90 million

\$911.25 million

= 3.16x

Firm expected to earn high return relative to their risk typically sell at higher M/B multiples. 期望获得相对于其风险的高回报的公司通常以更高的 M/B 倍数出售。

SUMMARY
 CATEGORY OF FINANCIAL RATIOS H. J. BOSWELL, INC. COMPARED TO THE INDUSTRY RATIO Price/Earning (P/E) ratio 14.07 times 12 times Better Market/Book (M/B) ratio 3.16 times 2.7 times Better

 LIMITATION OF RATIO ANALYSIS 比率分析的局限性 LIMITATION •       局限性 Historical •       历史的 Detail •       细节 Non-financial performance •       非财务表现 Accounting figures •       会计数据 Accounting policies •       会计政策 Accounting standard •       会计准则