onInvestedCapital(财务报表分析,台湾中兴大学)

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onInvestedCapital(财务报表分析,台湾中兴大学)

Income Investedcapital
Components of ROI
Invested Capital Defined
• No universal measure of invested capital exists
• Different measures of invested capital reflect different financiers’ perspectives
• Perspective is that of the individual investor
• Focus is on individual shareholder, not the company
• Uses the purchase price of securities as invested capital
age
Components of ROI
Long-Term Debt Plus Equity Capital
• Perspective is that of the two main suppliers of long-term financing — long-term creditors and equity shareholders
depreciation expense ➢ Acquisitions of new depreciable assets offset a declining
capital base ➢ It fails to recognize increased maintenance costs as assets
ROI Relation
•ROI relates income, or other performance measure, to a company’s level and source of financing

分析中兴通讯的财务报告(3篇)

第1篇一、前言中兴通讯（ZTE Corporation）是中国领先的通信设备和网络解决方案提供商，成立于1985年，总部位于深圳。

中兴通讯致力于为全球运营商、政企客户和消费者提供创新的产品、解决方案和服务。

本文将对中兴通讯的财务报告进行深入分析，旨在了解其财务状况、经营成果和发展趋势。

二、中兴通讯财务报告概述1. 财务报表中兴通讯的财务报表包括资产负债表、利润表和现金流量表。

以下是2019年度财务报表的主要数据：（1）资产负债表资产总计：人民币2,563.19亿元负债总计：人民币1,979.28亿元所有者权益：人民币583.91亿元（2）利润表营业收入：人民币1,020.7亿元营业利润：人民币-35.5亿元利润总额：人民币-7.6亿元净利润：人民币-2.7亿元（3）现金流量表经营活动产生的现金流量净额：人民币76.7亿元投资活动产生的现金流量净额：人民币-56.1亿元筹资活动产生的现金流量净额：人民币-21.3亿元2. 财务指标（1）资产负债率资产负债率=负债总额/资产总额×100%2019年资产负债率为：1,979.28/2,563.19×100%=77.18%（2）毛利率毛利率=（营业收入-营业成本）/营业收入×100%2019年毛利率为：（1,020.7-820.5）/1,020.7×100%=18.85%（3）净资产收益率净资产收益率=净利润/所有者权益×100%2019年净资产收益率为：-2.7/583.91×100%=-0.46%三、财务报告分析1. 资产负债状况（1）资产结构从资产负债表可以看出，中兴通讯的资产主要由流动资产和非流动资产构成。

流动资产占比最高，说明公司在日常运营中拥有充足的流动资金。

非流动资产主要包括固定资产、无形资产和长期投资等，表明公司在长期发展方面具备一定的实力。

（2）负债结构中兴通讯的负债主要由流动负债和非流动负债构成。

中兴公司财务分析

中兴公司财务分析报告实用文档目录第一部分会计分析 (5)1.1资产负债表分析 (5)1.1.1资产负债表的水平分析 (5)1.1.2资产负债表的垂直分析 (11)1.1.3资产负债表主要项目分析 (17)1.2所有者权益变动表分析 (24)1.2.1所有者权益水平分析 (24)1.2.2所有者权益垂直分析 (26)1.3利润表分析 (29)1.3.1利润表水平分析 (29)1.3.2利润表垂直分析 (31)1.3.3利润表分部分析 (33)1.3.4利润表分项分析 (33)1.4现金流量表分析 (36)1.4.1现金流量表水平分析 (36)实用文档1.4.2现金流量表结构分析 (39)第二部分财务效率分析 (42)2.1企业盈利能力分析 (42)2.1.1资本经营盈利能力分析 (42)2.1.2资产经营盈利能力分析 (44)2.1.2商品经营盈利能力分析 (46)2.2企业营运能力分析 (47)2.2.1总资产营运能力分析 (47)2.2.2流动资产营运能力分析 (48)2.2.3固定资产营运能力分析 (49)2.3企业偿债能力分析 (51)2.3.1企业的短期偿债能力分析 (51)2.3.2企业的长期偿债能力分析 (52)2.4企业发展能力分析 (54)2.4.1企业的单项能力分析 (54)2.4.2企业的综合能力分析 (57)第三部分综合分析 (58)实用文档3.1杜邦分析 (59)3.2趋势分析 (59)3.2.1利润表趋势分析 (59)3.2.2资产负债表趋势分析 (62)3.2.3现金流量趋势分析 (66)实用文档第一部分会计分析1.1资产负债表分析1.1.1资产负债表的水平分析资产负债表水平分析的目的之一就是从总体上概括了解资产、权益的变动情况，揭示出资产、负债和股东权益变动的差异，分析其差异产生的原因。

近年来国内通信行业继续保持较快的增长速度，中兴通讯公司紧抓市场脉搏，充分发挥产品多元化的优势，依靠以市场为导向的差异化策略，稳固国内市场，大力开拓国际市场，总资产稳步增长。

onInvestedCapital(财务报表分析,台湾中兴大学)

• Joint analysis is where one measure is assessed relative to another
• Return on invested capital (ROI) is an important joint analysis
Return on Invested Capital
• Captures the effect of leverage (debt) capital on equity holder return
• Excludes all debt financing and preferred equity
Components of ROI
Market Value of Invested Capital
• Planning • Budgeting • Coordinating activities • Evaluating opportunities • Control
Components of ROI
Definition
Return on invested capital is defined as:
optimisticor pessimistic forecasts
• ROI aids in evaluating prior forecast performance
Return on Invested Capital
For Planning and Control
ROI assists managers with:
construction, surplus plant, surplus inventories, surplus cash, and deferred charges from invested capital

Analysis(财务报表分析,台湾中兴大学)-PPT文档资料

Purpose: To apply analysis tools to aid achuch as income forecasting and estimating earning power
Analyzing Revenues
Revenue Sources
• Evaluation, projection, and valuation of income is aided by segment analysis
• Segments share characteristics of variability, growth, and risk • Income forecasting benefits from forecasts by segments • Must separate and interpret the impact of individual segments
Analyzing Profitability
Measuring Income--Estimation Issues
Management discretion is part of income measurement
Estimates of skilled and experienced professionals Some consensus (less variability)
❖ Estimation Issues ❖ Accounting Methods ❖ Incentives for Disclosure ❖ Diversity across Users
Analyzing Profitability
Measuring Income--Estimation Issues

英文台湾中兴大学金融系王之彦老师的财务报表分析chap(3)_OK

Lease – contractual agreement between a
lessor (owner) and a lessee (user or renter) that gives the lessee the right to use an asset owned by the lessor for the lease term
Potential information sources: Liability prospectus, annual report, SEC filings, and creditor information services (e.g., Moody’s)
7
Leases
Leasing Facts
Frequencies of Different Lease Types - Lessee
7.00% 2.00%
35.83%
55.17%
Operating only Both types Capital only Neither
11
Leases
Accounting for Leases – An Illustration
Obligations that arise from operating activities--examples are accounts payable, unearned revenue, advance payments, taxes payable, postretirement liabilities, and other accruals of
Analyzing Financing Ac
tivities
3
CHAPTER
McGraw-Hill/Irwin

财务报表分析 (台湾中兴大学)chap007

How much cash is generated from or used in operations? What expenditures are made with cash from operations?
How are dividends paid when confronting an operating loss?
Statement of Cash Flows
Depreciation Add-Back Sales - Expenses - Depreciation and amortization expense Net Income + Depreciation expense +/- Gains (losses) on sales of assets +/- Cash generated (used) by current assets and liabilities Net cash flows from operating activities
Cash Flow Analysis
7
CHAPTER
McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved.
Statement of Cash Flows
Relevance of Cash Flows
Gould Corporation Comparative Balance Sheet As of December 31, Year 2 Year 2 $ 75,000 48,000 54,000 6,000 440,000 (145,000) 51,000 $ 529,000 $ 51,000 18,000 30,000 175,000 200,000 55,000 $ 529,000 Year 1 $ 51,000 39,000 60,000 9,000 350,000 (125,000) 58,000 $ 442,000 $ 56,000 14,000 150,000 200,000 22,000 $ 442,000 Absolute Value of Change $ 24,000 9,000 6,000 3,000 90,000 20,000 7,000 5,000 4,000 30,000 150,000 175,000 33,000

财务报表分析的外文文献

Does International Financial Reporting Standards Adoption Matter?The Effects on Financial TransparencyandEarnings ManagementYen Tze—YUNational Chung Cheng University，Chiayi，TaiwanChang Ming—LeiYuan Ze University，Taoyuan，TaiwanYeh Hsiao—ChianNational Chung Cheng University，Chiayi，TaiwanThis paper aims to examine whether or not the adoption of fair value accounting(FVA)has an effect on the level ofinformation transparency and the degree of earnings management，to identify whether the legal institutions havepowers to explain those effects of the adoption of FVA，and to explore the relationship between the effects of theadoption of FVA and several specific characteristics of the banking industry．By investigating the banking sectorsof four Asian countries／regions including China，Hong Kong，the Philippines，and Singapore which have adoptedIntemational Financial Reporting Standards(IFRS)，this paper finds that after the application of FVA，the estimatedcost of equity of the sampled banks significantly decreases and the relationship between banks’loan loss provisions(LLP)and earnings before provisions and tax(EBPT)becomes irrelevant．The evidence suppo~s the effects ofFVA adoption on the enhancement of accounting quali~．In addition，sound legal／extra-legal systems are closelylinked to the degree of accounting quality and still have a strong influence on FVA．Keywords．"earnings management，fair value accounting(FVA)，information transparency，legal institutionsIntroductionWith the globalization of capital markets，multinational enterprises have rapidly grown in recent years．Togain the confidence of internationalinvestors and access capital from overseas funds，it is necessary for theseenterprises’financial statements to confo·rm to intemational standards．However，the workinvolved to meetthese standards is obviously costly，and the delays that result from preparing various versions of the statementsfor international enterprises affect the firms’eficiency．As a result，the harmonization of local withinternational accounting standards has been duly noted and discussed for many years．Most legislators，regulators，and researchers agree that efforts to standardize financial statements will directly help the firms，shareholders，analysts，accountants，auditors，and SO on(Tarca，2004；Barth，Landsman，&Lang，2008；Cai，Rahman．&Courtenay，2008；Wang，2009)．THE EFFECTS ON FINANCIAL TRANSPARENCY AND EARNINGS MANAGEMENT 757Not only for the above considerations but also in order to have relevant and reliable corporate reportinginformation，the two accounting standards bodies，namely，the International Accounting Standards Board(IASB)and the Financial Accounting Standards Board(FASB)，have committed themselves to developing a setof high—quality financ ial reporting standards based on a“performance—style reporting system’’instead of thetraditional financial reporting system．As a consequence，following the full adoption of International FinancialReporting Standards(IFRS)in the European Union(EU)since 2005，there are now more than 1 1 5 countries，including Australia，New Zealand，Hong Kong，and South Africa requiring that their own businesses acceptIFRS as their accounting standards．Other countries，such as Canada，Korea，Brazil，and India，have drawn upschedules and are expected to gradually adopt IFRS by 20 1 2．Currently，among the global top 1 0 capitalmarkets，only Japan and the United States(US)have not yet made a final decision to adopt IFRS．Bothcountries are，however，inclined to work on a plan to converge their own existing accounting standards with theIFRS standards．It is predictable that IFRS will soon become the most important and common language inglobal capital markets．The fundamental scheme of IFRS is the introduction of fair value accounting(FVA)．FVA，also referred toas“mark．to—market”．is a financial reporting approach in which companies are required or permited to measureand report，on an ongoing basis，certain assets and liabilities at estimates of the prices they would receive ifthey were to sell the assets or would pay if they were to be relieved of the liabilities．Most prior studies pointout that the mark．to。

AnalysisandValuation(财务报表分析,台湾中兴大学

reclassified, their pre-tax amounts along with their tax effects
must be removed
•• Income tax disclosures enable one to separate factors that either
reduce or increase taxes such as:
••Analyzing earnings persistence is a main analysis objective
••Attributes of earnings persistence include:
• Stability • Predictability • Variability • Trend • Earnings management • Accounting methods
•
Recast earnings components
to yield meaningful
classifications and a relevant
format for analysis
•
Components
can
be
rearranged, subdivided, and tax
effected
•
ห้องสมุดไป่ตู้
•Earnings Persistence
•Recasting and Adjusting
•Information for Recasting and Adjusting
•➢ Income statement, including its subdivisions: • Income from continuing operations • Income from discontinued operations • Extraordinary gains and losses • Cumulative effect of changes in accounting

英文台湾中兴大学金融系王之彦老师的财务报表分析chap(2)

Management estimates the allowance for uncollectibles based on experience, customer fortunes, economy and industry expectations, and collection policies
some savings accounts.
Current Asset Introduction
Cash, Cash Equivalents and Liquidity
Cash Equivalents
Short-term, highly liquid investments that are: Readily convertible to a known cash amount. Close to maturity date and not sensitive to interest rate changes.
• Examine for restrictions on disposition
— remove restricted balances from current assets since they are not available for paying current obligations
— in assessing liquidity, consider repercussions of violating these agreements
4
2
4
2
3
Services sold to customers
3
Products sold
to customers
Current Asset Introduction

财务报表分析(英文版)标准答案

Chapter 8Return On Invested Capital And Profitability AnalysisReturn on invested capital is important in our analysis of financial statements. Financial statement analysis involves our assessing both risk and return. The prior three chapters focused primarily on risk, whereas this chapter extends our analysis to return. Return on invested capital refers to a company's earnings relative to both the level and source of financing. It is a measure of a company's success in using financing to generate profits, and is an excellent measure of operating performance. This chapter describes return on invested capital and its relevance to financial statement analysis. We also explain variations in measurement of return on invested capital and their interpretation. We also disaggregate return on invested capital into important components for additional insights into company performance. The role of financial leverage and its importance for returns analysis is examined. This chapter demonstrates each of these analysis techniques using financial statement data.•Importance of Return on Invested CapitalMeasuring Managerial EffectivenessMeasuring ProfitabilityMeasuring for Planning and Control •Components of Return on Invested CapitalDefining Invested CapitalAdjustments to Invested Capital and IncomeComputing Return on Invested Capital•Analyzing Return on Net Operating AssetsDisaggregating Return on Net Operating AssetsRelation between Profit Margin and Asset TurnoverProfit Margin AnalysisAsset Turnover Analysis•Analyzing Return on Common EquityDisaggregating Return on Common EquityFinancial Leverage and Return on Common EquityAssessing Growth in Common Equity•Describe the usefulness of return measures in financial statement analysis. •Explain return on invested capital and variations in its computation.•Analyze return on net operating assets and its relevance in our analysis. •Describe disaggregation of return on net operating assets and the importance of its components.•Describe the relation between profit margin and turnover.•Analyze return on common shareholders' equity and its role in our analysis. •Describe disaggregation of return on common shareholders' equity and the relevance of its components.•Explain financial leverage and how to assess a company's success in trading on the equity across financing sources.1. The return that is achieved in any one period on the invested capital of a companyconsists of the returns (and losses) realized by its various segments and divisions. In turn, these returns are made up of the results achieved by individual product lines and projects. A well-managed company exercises rigorous control over the returns achieved by each of its profit centers, and it rewards the managers on the basis of such results. Specifically, when evaluating new investments in assets or projects, management will compute the estimated returns it expects to achieve and use these estimates as a basis for its decision to invest or not.2. Profit generation is the first and foremost purpose of a company. The effectiveness ofoperating performance determines the ability of the company to survive financially, to attract suppliers of funds, and to reward them adequately. Return on invested capital is the prime measure of company performance. The analyst uses it as an indicator of managerial effectiveness, and/or a measure of the company's ability to earn a satisfactory return on investment.3. If the investment base is defined as comprising net operating assets, then netoperating profit (e.g., before interest) after tax (NOPAT) is the relevant income figure to use. The exclusion of interest from income deductions is due to its being regarded asa payment for the use of money from the suppliers of debt capital (in the same waythat dividends are regarded as a payment to suppliers of equity capital). NOPAT is the appropriate amount to measure against net operating assets as both are considered to be operating.4. First, the motivation for excluding nonproductive assets from invested capital isbased on the idea that management is not responsible for earning a return on non-operating invested capital. Second, the exclusion of intangible assets from the investment base is often due to skepticism regarding their value or their contribution to the earning power of the company. Under GAAP, intangibles are carried at cost.However, if their cost exceeds their future utility, they are written down (or there will be an uncertainty exception regarding their carrying value in the auditor's opinion).The exclusion of intangible assets from the asset base must be based on more substantial evidence than a mere lack of understanding of what these assets represent or an unsupported suspicion regarding their value. This implies that intangible assets should generally not be excluded from invested capital.5. The basic formula for computing the return on investment is net income divided bytotal invested capital. Whenever we modify the definition of the investment base by, say, omitting certain items (liabilities, idle assets, intangibles, etc.) we must also adjust the corresponding income figure to make it consistent with the modified asset base.6. The relation of net income to sales is a measure of operating performance (profitmargin). The relation of sales to total assets is a measure of asset utilization or turnover—a means of determining how effectively (in terms of sales generation) the assets are utilized. Both of these measures, profit margin as well as asset utilization,determine the return realized on a given investment base. Sales are an important factor in both of these performance measures.7. Profit margin, although important, is only one aspect of the return on invested capital.The other is asset turnover. Consequently, while Company B's profit margin is high, its asset turnover may have been sufficiently depressed so as to drag down the overall return on invested capital, leading to the shareholder's complaint.8. The asset turnover of Company X is 3. The profit margin of Company Y is 0.5%. Sinceboth companies are in the same industry, it is clear that Company X must concentrate on improving its asset turnover. On the other hand, Company Y must concentrate on improving its profit margin. More specific strategies depend on the product and industry.9. The sales to total assets (asset turnover) component of the return on invested capitalmeasure reflects the overall rate of asset utilization. It does not reflect the rate of utilization of individual asset categories that enter into the overall asset turnover. To better evaluate the reasons for the level of asset turnover or the reasons for changes in that level, it is helpful to compute the rate of individual asset turnovers that make up the overall turnover rate.10. The evaluation of return on invested capital involves many factors. Theinclusion/exclusion of extraordinary gains and losses, the use/nonuse of trends, the effect of acquisitions accounted for as poolings and their chance of recurrence, the effect of discontinued operations, and the possibility of averaging net income are justa few of many such factors. Moreover, the analyst must take into account the effectsof price-level changes on return calculations. It also is important that the analyst bear in mind that return on invested capital is most commonly based on book values from financial statements rather than on market values. And finally, many assets either do not appear in the financial statements or are significantly understated. Examples of such assets are intangibles such as patents, trademarks, research and development activities, advertising and training, and intellectual capital.11. The equity growth rate is calculated as follows:[Net income – Preferred dividends – Common dividend payout] / Average common equity.This is the growth rate due to the retention of earnings and assumes a constant dividend payout over time. It indicates the possibilities of earnings growth without resort to external financing. The resulting increase in equity can be expected to earn the rate of return that the company earns on its assets and, thus, further contribute to growth in earnings.12. a. The return on net operating assets and the return on common stockholders' equitydiffer by the capital investment base (and its corresponding effects on net income).RNOA reflects the return on the net operating assets of the company whereas ROCE reflects the perspective of common shareholders.b. ROCE can be disaggregated into the following components to facilitate analysis:ROCE = RNOA + Leverage x Spread. RNOA measures the return on net operating assets, a measure of operating performance. The second component (Leverage x Spread) measures the effects of financial leverage. ROCE is increased by adding financial leverage so long as RNOA>weighted average cost of capital. That is, if the firm can earn a return on operating assets that is greater than the cost of the capital used to finance the purchase of those assets, then shareholders are better off adding debt to increase operating assets.13. a. ROCE can be disaggregated as follows:equitycommon Average Sales Sales dividends Preferred - income Net ⨯ This shows that “equity turnover” (sales to average common equity) is one of the two components of the return on common shareholders' equity. Assuming a stable profit margin, the equity turnover can be used to determine the level and trend of ROCE. Specifically, an increase in equity turnover will produce an increase in ROCE if the profit margin is stable or declines less than the increase in equity turnover. For example, a common objective of discount stores is to lower prices by lowering profit margins, but to offset this by increasing equity turnover by more than the decrease in profit margin.b. Equity turnover can be rewritten as follows:equitycommon Average assets operating Net assets operating Net Sales ⨯ The first factor reflects how well net operating assets are being utilized. If the ratio is increasing, this can signal either a technological advantage or under-capacity and the need for expansion. The second factor reflects the use of leverage. Leverage will be higher for those firms that have financed more of their assets through debt. By considering these factors that comprise equity turnover, it is apparent that EPS cannot grow indefinitely from an increase in these factors. This is because these factors cannot grow indefinitely. Even if there is a technological advantage in production, the sales to net operating assets ratio cannot increase indefinitely. This is because sooner or later the firm must expand its net operating asset base to meet rising sales or else not meet sales and lose a share of the market. Also, financing new assets with debt can increase the net operating assets to common equity ratio. However, this can only be pursued to a point —at which time the equity base must expand (which decreases the ratio).14. When convertible debt sells at a substantial premium above par and is clearly held byinvestors for its conversion feature, there is justification for treating it as the equivalent of equity capital. This is particularly true when the company can choose at any time to force conversion of the debt by calling it in.Exercise 8-1 (35 minutes)a. First alternative:NOPAT = $6,000,000 * 10% = $600,000Net income = $600,000 – [$1,000,000*12%](1-.40) = $528,000Second alternative:NOPAT = $6,000,000 * 10% = $600,000Net income = $600,000 – [$2,000,000*12%](1-.40) = $456,000b. First alternative:ROCE = $528,000 / $5,000,000 = 10.56%Second alternative:ROCE = $456,000 / $4,000,000 = 11.40%c. First alternative:Assets-to-Equity = $6,000,000 / $5,000,000 = 1.2Second alternative:Assets-to-Equity = $6,000,000 / $4,000,000 = 1.5d. First, let’s compute return on assets (R NOA):First alternative: $600,000 / $6,000,000 = 10%Second alternative: $600,000 / $6,000,000 = 10%Second, notice that the interest rate is 12% on the debt (bonds). More importantly, the after-tax interest rate is 7.2% (12% x (1-0.40)), which is less than RNOA. Hence, the company earns more on its assets than it pays for debt on an after-tax basis. That is, it can successfully trade on the equity—use bondholders’ funds to earn additional profits.Finally, since the second alternative uses more debt, as reflected in the assets-to-equity ratio in c, the second alternative is probably preferred. The shareholders would take on additional risk with the second alternative, but the expected returns are greater as evidenced from computations in b.Exercise 8-2 (40 minutes)a. NOPAT = Net income = $10,000,000 x 10% = $1,000,000b. First alternative:NOPAT = $1,000,000 + $6,000,000*10% = $1,600,000Net income = $1,600,000 – ($2,000,000 ⨯ 5% x [1-.40]) = $1,540,000Second alternative:NOPAT = $1,000,000 + $6,000,000*10% = $1,600,000Net income = $1,600,000 – ($6,000,000 ⨯ 6% x [1-.40]) = $1,384,000c. First alternative: ROCE = $1,540,000 / ($10,000,000 + $4,000,000) = 11%Second alternative: ROCE = $1,384,000 / ($10,000,000 + $0) = 13.84%d. ROCE is higher under the second alternative due to successful use ofleverage—that is, successfully trading on the equity. [Note: Asset-to-Equity is1.14=$16 mil./$14 mil. (1.60=$16 mil./$10 mil.) under the first (second)alternative.] The company should pursue the second alternative in the interest of shareholders (assuming projected returns are consistent with current performance levels).a. RNOA = 2 x 5% = 10%b. ROCE = 10% + 1.786 x 4.4% = 17.86%c. RNOA 10.00%Leverage advantage 7.86%Return on equity 17.86%Exercise 8-4 (30 minutes)a. Computation and Interpretation of ROCE:Year 5 Year 9Pre-tax profit margin .......................................................... 0.112 0.109 Asset turnover .................................................................... 0.46 0.44 Assets-to-equity ................................................................. 3.25 3.40 After-tax income retention * .............................................. 0.570 0.556 ROCE (product of above) .................................................. 9.54% 9.07% * 1-Tax rate.ROCE declines from Year 5 to Year 9 because: (1) pre-tax margin decreases by approximately 3%, (2) asset turnover declines by roughly 4.3%, and (3) the tax rate increases by about 3.8%. The combination of these factors drives the decline in ROCE—this is despite the slight improvement in the assets-to-equity ratio.b. The main reason EPS increases is that shareholders had a large amount ofassets and equity working for them. Namely, the company grew while return on assets and return on equity remained fairly stable. In addition, the amount of preferred stock declined, as did the amount of preferred dividends. With this decline in the cost of carrying preferred stock, earnings available to common stock increased.(CFA Adapted)a. RNOA = 3 x 7% = 21%b. ROCE = RNOA + LEV x Spread = 21% + (1.667 x 8.4%) = 35%c. Net leverage advantage to common equityReturn on net operating assets .................................. 21%Leverage advantage .................................................... 14%Return on common equity (rounding difference) ..... 35%Exercise 8-6 (30 minutes)a. At the present level of debt, ROCE = $157,500 / $1,125,000 = 14%.In the absence of leverage, the noncurrent liabilities would be substituted with equity. Accordingly, there would be no interest expense with all-equityROCE without leverage = $184,500 / $1,800,000 = 10.25%.14% with leverage but only 10.25% without leverage.b. NOPAT = $157,500 + [$675,000 x 8% x (1-.50)] = $184,500RNOA = $184,500 / ($2,000,000-$200,000) = 10.25%c. The company is utilizing borrowed funds in its capital structure. Since theROCE is greater than RNOA, the use of financial leverage is beneficial to stockholders. Specifically, the after cost of debt is 4% and the financial leverage (NFO/Equity) is $675,000 / $1,125,000 = 60%. Therefore,ROCE = RNOA + LEV x Spread = 10.25% + 0.60 x (10.25% - 4%) = 14%, as before. The favorable effect of financial leverage is given by the term [0.60 x (10.25% - 4%)] = 3.75%.1. c2. a3. cExercise 8-8 (20 minutes)(Assessments of profit margin and asset turnover are relative to industry norms.)a. Higher profit margin and lower asset turnover.b. Higher asset turnover and lower profit margin.c. Higher profit margin and similar/lower asset turnover.d. Higher asset turnover and similar/lower profit margin.e. Higher asset turnover and lower/similar profit margin.f. Higher asset turnover and similar/higher profit margin.g. Higher asset turnover and lower profit margin.Exercise 8-9 (20 minutes)The memorandum to Reliable Auto Sales President would include the following points:•Both Reliable and Legend Auto Sales are perpetually investing $100,000 in automobile inventory.•Legend Auto Sales is able to generate more profit than Reliable because it is turning over its inventory (10 cars) more often. Specifically, Legend is turning its inventory over 10 times per year while Reliable is turning its inventory over only 5 times per year. Hence, given the same investment in automobile inventory, Legend is twice as profitable as Reliable.•Encourage Reliable to sacrifice some return on each sale to increase the inventory turnover. By slightly reducing price, relative to that charged by Legend, Reliable predictably will find that overall profitability increases. This is because while profit per sale declines, the number of units sold and, therefore, inventory turnover will increase. These factors predictably yield increased return on assets.Computation of Asset (PP&E) Turnover [computed as Sales / PP&E (net)]: Northern: $12,000 / $20,000 = 0.60Southern: $6,000 / $20,000 = 0.30This implies that Northern generates $0.60 in sales per year for each $1 investment in PP&E. In contrast, Southern generates $0.30 in sales per year for each $1 investment in PP&E. This shows that Northern is able to generate twice the return for each $1 invested in PP&E. Assuming equal profit margins, Northern will report a higher return on assets because of the volume of sales that the company is able to generate with its investment in PP&E (at least in the short run).Exercise 8-11 (15 minutes)Low volume operations mean that fixed costs, which in the case of automakers are substantial, must be absorbed by a low number of units produced. Since the lower of cost or market rule implies that inventory cannot be priced higher than expected sales price less costs of disposal plus a normal profit margin, much of that excess cost must be charged to the period incurred. In this case, that means the fourth quarter financial statements absorb much of this cost. This is probably the most likely accounting-based reason for the fourth quarter losses described in the news release.Problem 8-1 (30 minutes)a. 1. Quaker Oats does not reveal its computation of this return. Accordingly, wemake some simple computations and assumptions: (i) For simplicity, focus on one share, (ii) The dividend is $1.56 for Year 11, (iii) The average stock price is $55 and the price increase for Year 11 is $14—based on the beginning price of $48 and the ending price of $62. Using this information, we compute return to a share of stock as follows:= [Dividend per share + Price increase per share] / Average price per share = [$1.56 + $14] / $55= 28.3%However, if we use the beginning price of $48 per share, we get closer to the company's 34% return:= [$1.56 + $14] / $48= 32.4%2. The return on common equity is based on the relation between net incomeand the book value of the equity capital. In contrast, Quaker Oats’ “return t o shareholders” uses dividends plus market value change in relation to the market price per share (cost of investment to shareholders.)b. The company must have derived the 3.6% from price, market, and otherfactors that are not disclosed. Conceptually, this 3.6% should reflect the added risk of an investment in Quaker Oats’ stock vis-à-vis a risk-free security such as a U.S. Treasury bond.c. Quaker does not reveal its computations. It may disclose a variety of interestrates on long-term debt that it carries in the notes to financial statements.Based on data available to it, but not to the financial statement reader, it probably computed a weighted-average interest rate from which it deducted the tax benefit in arriving at the 6.4% cost of debt.a. Computation of Return on Invested Capital Measures:As a first step, we construct the company’s income statement.Sales (500,000 units @ $10). ................................................ $5,000,000 Fixed costs ....................................................................... 1,500,000 Variable costs (500,000 units @ $4). ............................. 2,000,000 Labor costs (20 employees x $35,000). ......................... 700,000 Income before taxes .......................................................... 800,000 Taxes (50% rate) ................................................................. 400,000 Net income .......................................................................... $ 400,000(1) RNOA = [$400,000 + ($2,000,000 x 7.5%)(1-0.50)] / ($8,000,000-$2,00,000)= $475,000 / $6,000,000 = 7.92%(2) ROCE = [$400,000 - ($1,000,000 x 6%)] / $3,000,000 = 11.33%Fixed costs ($1,500,000 x 1.06) ......................................................... 1,590,000 Variable costs ($550,000 units @ $4) .............................................. 2,200,000 Income before labor costs and taxes ............................................. $1,710,000 To obtain a 10% return on long-term debt and equity capital, Zear will need a numerator of $600,000 given an invested capital base of $6,000,000. The required operating income to yield this $600,000 amount is computed as: Net income + Interest expense x (1 - 0.50) = $600,000Net income + ($2,000,000 x 7.5%) x (1-0.50) = $600,000Net income = $525,000Assuming taxes at a 50% rate, Zear needs pre-tax income of $1,050,000, computed as:Income before labor and taxes ............ $1,710,000Labor costs ........................................... ?Pre-tax income ...................................... $1,050,000This implies:Labor costs = $660,000 orAverage wage per worker = $660,000 / 22 employees = $30,000 per employee Since the current salary level is $35,000, Zear cannot achieve its target return level and give a salary raise to its employees.(CFA Adapted)a. ROCE = $1,650 / $3,860 = 42.7%b. NOPAT = ($2,550 + $10) x (1-0.35) = $1,664NOA = $7,250-$3,290 = $3,960RNOA (using year-end NOA balance) = $1,664 / $3,960 = 42%The effect of financial leverage, thus, is only 0.7% as NFO/NFE are insignificant. Most of Merck’s ROCE in this year is derived from operating results.Pre-tax income to sales 0.36Net income to sales 0.23Sales/current assets 1.47Sales / fixed assets 2.97Sales / total assets 0.98Total liabilities / equity 0.88L-T liabilities / equity 0.03a. 1. RNOA = NOPATAvg. NOANOPAT = [$186,000 + $2,000 - $120,000 - $37,000 + $1,000] x 50% = $16,000 Note: we include income from equity investments under the assumptions that these are operating rather than financial investments. We also include the cumulative effect as operating in the absence of information to the contrary. Minority interest and discontinued operations are nonoperating (minority interest is therefore, treated as equity in the ROCE computation).NOA Year 6 = $138,000 - $29,000 - $7000 - $3,600 = $98,400 NOA Year 5 = $105,000 - $23,000 - $2,000 - $2,000 = $78,000RNOA = $16,000 / ([$98,400 + $78,000]/2) = 18.14%2. ROCE = Net income - Preferred dividendsAverage common equityROCE = ($10,000 –$0) /[($55,400* + $47,800*)/2] = 19.38% *Note: minority interest is treated as equity. If Minority interest is ignored, the ROCE is 19.8%b. NFO = NOA - EquityYear 6: $43,000; Year 5: $30,200LEV = Avg. NFO / Ave Equity = ([$43,000 + $30,200] / 2) / ([$55,400* + $47,800*] /2)= 0.71NFE = NOPAT – Net incomeYear 6: $6,000NFR = NFE / Avg. NFO = $6,000 / ([$43,000 + $30,200] / 2) = 16.4%Spread = RNOA – NFR = 18.14% - 16.4% = 1.74%ROCE = RNOA + LEV x Spread = 18.14 + 0.71 x 1.74% = 19.38%94% (18.14%/19.38%) of Zeta’s ROCE is derived for m operating activities. The company is effectively using leverage, however, as indicated by the positive spread, but the leverage does not contribute significantly to Zeta’s return on equity and may not be worth the added risk.a. ROCE = [Net income –preferred dividends] / stockholders’ equity**end of year in this problemROCE Year 5: [$14 – $0] / $125 = 11.2%ROCE Year 9: [$34 - $0] / $220 = 15.5%RNOA Year 5 = ($35 x 0.50) / ($52 + $123) = 10.0%RNOA Year 9 = ($68 x 0.50) / ($63 + $157) = 15.5%ROCE = RNOA + Leverage x SpreadYear 5: 10.0% + 1.2% = 11.2%Year 9: 15.5% + 0 = 15.5%b. Texas Talcom’s ROCE has increased form years 5 to 9. The source is thisincrease, however, has been an increase in RNOA as the leverage effect is zero in Year 9 since its long-term debt has been retired. Given the RNOA increase, additional leverage might be explored as a way to increase shareholder returns.Selling price per unit ...................... $6.00 $5.00 $50.00 $50.00 Unit cost ........................................... $5.00 $4.00 $32.50 $30.00Analysis of Variation in Product A SalesIncreased quantity at Yr 6 prices (3,000 x $5) ........................ $ 15,000 Price increase at Yr 6 quantity (7,000 x $1) ........................... 7,000 Quantity increase x price increase (3,000 x $1) .................... 3,000 Analysis of Variation in Product A Cost of SalesIncreased quantity at Yr 6 cost (3,000 x $4) ........................... (12,000) Increased cost at Yr 6 quantity (7,000 x $1) ........................... (7,000) Cost increase x quantity increase (3,000 x $1) ...................... (3,000) Net Variation (Increase) in Gross Margin for Product A ............. $ 3,000Analysis of Variation in Product B SalesDecreased quantity at Yr 6 prices (300 x $50) ....................... $ (15,000) Analysis of Variation in Product B Cost of Sales:Decreased quantity at Yr 6 cost (300 x $30) .......................... 9,000 Increased cost at Yr 6 quantity (900 x $2.50) ......................... (2,250) Cost increase x quantity decrease (300 x $2.50) . (750)Net Variation (Decrease) in Gross Margin for Product B ............ $ (7,500)Summary of Net Variation in Margins for Products A and BNet increase from product A ......................................................... $ 3,000 Net decrease from product B ........................................................ (7,500) Net Decrease in Gross Margin ...................................................... $ (4,500)a.SPYRES MANUFACTURING COMPANYComparative Common-Size Income StatementsYear Ended December 31 IncreaseYear 9 Year 8(Decrease)Net sales ............................. 100.0% 100.0% 20.0% Cost of goods sold ............ 81.7 86.0 14.0 Gross margin on sales ...... 18.3 14.0 57.1 Operating expenses .......... 16.8 10.2 98.0 Income before taxes .......... 1.5 3.8 (52.6) Income taxes ...................... 0.4 1.0 (52.0) Net income ......................... 1.1 2.8 (52.9)b. Performance in Year 9 is poor when compared with Year 8. One bright spot isthe percentage of Cost of Goods Sold to Sales, which decreased in Year 9.However, Operating Expenses climbed sharply. This sharp climb in operating expenses is unexpected since there is usually a larger fixed cost component comprising these costs compared with that for Cost of Goods Sold.Management should further check operating expenses. If operating expenses had remained at the Year 8 level of 10.2%, income would have been up favorably for Year 9. Operating expenses may have included a future-directed component such as advertising or training costs. Also, management would want to follow up on the change in gross margin. The sharp improvement in gross margin may have been due to factors such as the liquidation LIFO inventory layers or, alternatively, to something more fundamental with the activities of the firm.。

财务报表分析(英文版)答案

Chapter 8Return On Invested Capital And Profitability AnalysisReturn on invested capital is important in our analysis of financial statements. Financial statement analysis involves our assessing both risk and return. The prior three chapters focused primarily on risk, whereas this chapter extends our analysis to return. Return on invested capital refers to a company's earnings relative to both the level and source of financing. It is a measure of a company's success in using financing to generate profits, and is an excellent measure of operating performance. This chapter describes return on invested capital and its relevance to financial statement analysis. We also explain variations in measurement of return on invested capital and their interpretation. We also disaggregate return on invested capital into important components for additional insights into company performance. The role of financial leverage and its importance for returns analysis is examined. This chapter demonstrates each of these analysis techniques using financial statement data.•Importance of Return on Invested CapitalMeasuring Managerial EffectivenessMeasuring ProfitabilityMeasuring for Planning and Control •Components of Return on Invested CapitalDefining Invested CapitalAdjustments to Invested Capital and IncomeComputing Return on Invested Capital•Analyzing Return on Net Operating AssetsDisaggregating Return on Net Operating AssetsRelation between Profit Margin and Asset TurnoverProfit Margin AnalysisAsset Turnover Analysis•Analyzing Return on Common EquityDisaggregating Return on Common EquityFinancial Leverage and Return on Common EquityAssessing Growth in Common Equity•Describe the usefulness of return measures in financial statement analysis. •Explain return on invested capital and variations in its computation.•Analyze return on net operating assets and its relevance in our analysis. •Describe disaggregation of return on net operating assets and the importance of its components.•Describe the relation between profit margin and turnover.•Analyze return on common shareholders' equity and its role in our analysis. •Describe disaggregation of return on common shareholders' equity and the relevance of its components.•Explain financial leverage and how to assess a company's success in trading on the equity across financing sources.1. The return that is achieved in any one period on the invested capital of a companyconsists of the returns (and losses) realized by its various segments and divisions. In turn, these returns are made up of the results achieved by individual product lines and projects. A well-managed company exercises rigorous control over the returns achieved by each of its profit centers, and it rewards the managers on the basis of such results. Specifically, when evaluating new investments in assets or projects, management will compute the estimated returns it expects to achieve and use these estimates as a basis for its decision to invest or not.2. Profit generation is the first and foremost purpose of a company. The effectiveness ofoperating performance determines the ability of the company to survive financially, to attract suppliers of funds, and to reward them adequately. Return on invested capital is the prime measure of company performance. The analyst uses it as an indicator of managerial effectiveness, and/or a measure of the company's ability to earn a satisfactory return on investment.3. If the investment base is defined as comprising net operating assets, then netoperating profit (e.g., before interest) after tax (NOPAT) is the relevant income figure to use. The exclusion of interest from income deductions is due to its being regarded asa payment for the use of money from the suppliers of debt capital (in the same waythat dividends are regarded as a payment to suppliers of equity capital). NOPAT is the appropriate amount to measure against net operating assets as both are considered to be operating.4. First, the motivation for excluding nonproductive assets from invested capital isbased on the idea that management is not responsible for earning a return on non-operating invested capital. Second, the exclusion of intangible assets from the investment base is often due to skepticism regarding their value or their contribution to the earning power of the company. Under GAAP, intangibles are carried at cost.However, if their cost exceeds their future utility, they are written down (or there will be an uncertainty exception regarding their carrying value in the auditor's opinion).The exclusion of intangible assets from the asset base must be based on more substantial evidence than a mere lack of understanding of what these assets represent or an unsupported suspicion regarding their value. This implies that intangible assets should generally not be excluded from invested capital.5. The basic formula for computing the return on investment is net income divided bytotal invested capital. Whenever we modify the definition of the investment base by, say, omitting certain items (liabilities, idle assets, intangibles, etc.) we must also adjust the corresponding income figure to make it consistent with the modified asset base.6. The relation of net income to sales is a measure of operating performance (profitmargin). The relation of sales to total assets is a measure of asset utilization or turnover—a means of determining how effectively (in terms of sales generation) the assets are utilized. Both of these measures, profit margin as well as asset utilization,determine the return realized on a given investment base. Sales are an important factor in both of these performance measures.7. Profit margin, although important, is only one aspect of the return on invested capital.The other is asset turnover. Consequently, while Company B's profit margin is high, its asset turnover may have been sufficiently depressed so as to drag down the overall return on invested capital, leading to the shareholder's complaint.8. The asset turnover of Company X is 3. The profit margin of Company Y is 0.5%. Sinceboth companies are in the same industry, it is clear that Company X must concentrate on improving its asset turnover. On the other hand, Company Y must concentrate on improving its profit margin. More specific strategies depend on the product and industry.9. The sales to total assets (asset turnover) component of the return on invested capitalmeasure reflects the overall rate of asset utilization. It does not reflect the rate of utilization of individual asset categories that enter into the overall asset turnover. To better evaluate the reasons for the level of asset turnover or the reasons for changes in that level, it is helpful to compute the rate of individual asset turnovers that make up the overall turnover rate.10. The evaluation of return on invested capital involves many factors. Theinclusion/exclusion of extraordinary gains and losses, the use/nonuse of trends, the effect of acquisitions accounted for as poolings and their chance of recurrence, the effect of discontinued operations, and the possibility of averaging net income are justa few of many such factors. Moreover, the analyst must take into account the effectsof price-level changes on return calculations. It also is important that the analyst bear in mind that return on invested capital is most commonly based on book values from financial statements rather than on market values. And finally, many assets either do not appear in the financial statements or are significantly understated. Examples of such assets are intangibles such as patents, trademarks, research and development activities, advertising and training, and intellectual capital.11. The equity growth rate is calculated as follows:[Net income – Preferred dividends – Common dividend payout] / Average common equity.This is the growth rate due to the retention of earnings and assumes a constant dividend payout over time. It indicates the possibilities of earnings growth without resort to external financing. The resulting increase in equity can be expected to earn the rate of return that the company earns on its assets and, thus, further contribute to growth in earnings.12. a. The return on net operating assets and the return on common stockholders' equitydiffer by the capital investment base (and its corresponding effects on net income).RNOA reflects the return on the net operating assets of the company whereas ROCE reflects the perspective of common shareholders.b. ROCE can be disaggregated into the following components to facilitate analysis:ROCE = RNOA + Leverage x Spread. RNOA measures the return on net operating assets, a measure of operating performance. The second component (Leverage x Spread) measures the effects of financial leverage. ROCE is increased by adding financial leverage so long as RNOA>weighted average cost of capital. That is, if the firm can earn a return on operating assets that is greater than the cost of the capital used to finance the purchase of those assets, then shareholders are better off adding debt to increase operating assets.13. a. ROCE can be disaggregated as follows:equitycommon Av erage Sales Sales div idends Preferred - income Net ⨯ This shows that “equity turnover” (sales to average common equity) is one of the two components of the return on common shareholders' equity. Assuming a stable profit margin, the equity turnover can be used to determine the level and trend of ROCE. Specifically, an increase in equity turnover will produce an increase in ROCE if the profit margin is stable or declines less than the increase in equity turnover. For example, a common objective of discount stores is to lower prices by lowering profit margins, but to offset this by increasing equity turnover by more than the decrease in profit margin.b. Equity turnover can be rewritten as follows:equitycommon Av erage assets operating Net assets operating Net Sales ⨯ The first factor reflects how well net operating assets are being utilized. If the ratio is increasing, this can signal either a technological advantage or under-capacity and the need for expansion. The second factor reflects the use of leverage. Leverage will be higher for those firms that have financed more of their assets through debt. By considering these factors that comprise equity turnover, it is apparent that EPS cannot grow indefinitely from an increase in these factors. This is because these factors cannot grow indefinitely. Even if there is a technological advantage in production, the sales to net operating assets ratio cannot increase indefinitely. This is because sooner or later the firm must expand its net operating asset base to meet rising sales or else not meet sales and lose a share of the market. Also, financing new assets with debt can increase the net operating assets to common equity ratio. However, this can only be pursued to a point —at which time the equity base must expand (which decreases the ratio).14. When convertible debt sells at a substantial premium above par and is clearly held byinvestors for its conversion feature, there is justification for treating it as the equivalent of equity capital. This is particularly true when the company can choose at any time to force conversion of the debt by calling it in.Exercise 8-1 (35 minutes)a. First alternative:NOPAT = $6,000,000 * 10% = $600,000Net income = $600,000 – [$1,000,000*12%](1-.40) = $528,000Second alternative:NOPAT = $6,000,000 * 10% = $600,000Net income = $600,000 – [$2,000,000*12%](1-.40) = $456,000b. First alternative:ROCE = $528,000 / $5,000,000 = 10.56%Second alternative:ROCE = $456,000 / $4,000,000 = 11.40%c. First alternative:Assets-to-Equity = $6,000,000 / $5,000,000 = 1.2Second alternative:Assets-to-Equity = $6,000,000 / $4,000,000 = 1.5d. First, let’s compute return on assets (R NOA):First alternative: $600,000 / $6,000,000 = 10%Second alternative: $600,000 / $6,000,000 = 10%Second, notice that the interest rate is 12% on the debt (bonds). More importantly, the after-tax interest rate is 7.2% (12% x (1-0.40)), which is less than RNOA. Hence, the company earns more on its assets than it pays for debt on an after-tax basis. That is, it can successfully trade on the equity—use bondholders’ funds to earn additional profits.Finally, since the second alternative uses more debt, as reflected in the assets-to-equity ratio in c, the second alternative is probably preferred. The shareholders would take on additional risk with the second alternative, but the expected returns are greater as evidenced from computations in b.Exercise 8-2 (40 minutes)a. NOPAT = Net income = $10,000,000 x 10% = $1,000,000b. First alternative:NOPAT = $1,000,000 + $6,000,000*10% = $1,600,000Net income = $1,600,000 – ($2,000,000 ⨯ 5% x [1-.40]) = $1,540,000Second alternative:NOPAT = $1,000,000 + $6,000,000*10% = $1,600,000Net income = $1,600,000 – ($6,000,000 ⨯ 6% x [1-.40]) = $1,384,000c. First alternative: ROCE = $1,540,000 / ($10,000,000 + $4,000,000) = 11%Second alternative: ROCE = $1,384,000 / ($10,000,000 + $0) = 13.84%d. ROCE is higher under the second alternative due to successful use ofleverage—that is, successfully trading on the equity. [Note: Asset-to-Equity is1.14=$16 mil./$14 mil. (1.60=$16 mil./$10 mil.) under the first (second)alternative.] The company should pursue the second alternative in the interest of shareholders (assuming projected returns are consistent with current performance levels).a. RNOA = 2 x 5% = 10%b. ROCE = 10% + 1.786 x 4.4% = 17.86%c. RNOA 10.00%Leverage advantage 7.86%Return on equity 17.86%Exercise 8-4 (30 minutes)a. Computation and Interpretation of ROCE:Year 5 Year 9Pre-tax profit margin .......................................................... 0.112 0.109 Asset turnover .................................................................... 0.46 0.44 Assets-to-equity ................................................................. 3.25 3.40 After-tax income retention * .............................................. 0.570 0.556 ROCE (product of above) .................................................. 9.54% 9.07% * 1-Tax rate.ROCE declines from Year 5 to Year 9 because: (1) pre-tax margin decreases by approximately 3%, (2) asset turnover declines by roughly 4.3%, and (3) the tax rate increases by about 3.8%. The combination of these factors drives the decline in ROCE—this is despite the slight improvement in the assets-to-equity ratio.b. The main reason EPS increases is that shareholders had a large amount ofassets and equity working for them. Namely, the company grew while return on assets and return on equity remained fairly stable. In addition, the amount of preferred stock declined, as did the amount of preferred dividends. With this decline in the cost of carrying preferred stock, earnings available to common stock increased.(CFA Adapted)a. RNOA = 3 x 7% = 21%b. ROCE = RNOA + LEV x Spread = 21% + (1.667 x 8.4%) = 35%c. Net leverage advantage to common equityReturn on net operating assets .................................. 21%Leverage advantage .................................................... 14%Return on common equity (rounding difference) ..... 35%Exercise 8-6 (30 minutes)a. At the present level of debt, ROCE = $157,500 / $1,125,000 = 14%.In the absence of leverage, the noncurrent liabilities would be substituted with equity. Accordingly, there would be no interest expense with all-equityROCE without leverage = $184,500 / $1,800,000 = 10.25%.14% with leverage but only 10.25% without leverage.b. NOPAT = $157,500 + [$675,000 x 8% x (1-.50)] = $184,500RNOA = $184,500 / ($2,000,000-$200,000) = 10.25%c. The company is utilizing borrowed funds in its capital structure. Since theROCE is greater than RNOA, the use of financial leverage is beneficial to stockholders. Specifically, the after cost of debt is 4% and the financial leverage (NFO/Equity) is $675,000 / $1,125,000 = 60%. Therefore,ROCE = RNOA + LEV x Spread = 10.25% + 0.60 x (10.25% - 4%) = 14%, as before. The favorable effect of financial leverage is given by the term [0.60 x (10.25% - 4%)] = 3.75%.1. c2. a3. cExercise 8-8 (20 minutes)(Assessments of profit margin and asset turnover are relative to industry norms.)a. Higher profit margin and lower asset turnover.b. Higher asset turnover and lower profit margin.c. Higher profit margin and similar/lower asset turnover.d. Higher asset turnover and similar/lower profit margin.e. Higher asset turnover and lower/similar profit margin.f. Higher asset turnover and similar/higher profit margin.g. Higher asset turnover and lower profit margin.Exercise 8-9 (20 minutes)The memorandum to Reliable Auto Sales President would include the following points:•Both Reliable and Legend Auto Sales are perpetually investing $100,000 in automobile inventory.•Legend Auto Sales is able to generate more profit than Reliable because it is turning over its inventory (10 cars) more often. Specifically, Legend is turning its inventory over 10 times per year while Reliable is turning its inventory over only 5 times per year. Hence, given the same investment in automobile inventory, Legend is twice as profitable as Reliable.•Encourage Reliable to sacrifice some return on each sale to increase the inventory turnover. By slightly reducing price, relative to that charged by Legend, Reliable predictably will find that overall profitability increases. This is because while profit per sale declines, the number of units sold and, therefore, inventory turnover will increase. These factors predictably yield increased return on assets.Computation of Asset (PP&E) Turnover [computed as Sales / PP&E (net)]: Northern: $12,000 / $20,000 = 0.60Southern: $6,000 / $20,000 = 0.30This implies that Northern generates $0.60 in sales per year for each $1 investment in PP&E. In contrast, Southern generates $0.30 in sales per year for each $1 investment in PP&E. This shows that Northern is able to generate twice the return for each $1 invested in PP&E. Assuming equal profit margins, Northern will report a higher return on assets because of the volume of sales that the company is able to generate with its investment in PP&E (at least in the short run).Exercise 8-11 (15 minutes)Low volume operations mean that fixed costs, which in the case of automakers are substantial, must be absorbed by a low number of units produced. Since the lower of cost or market rule implies that inventory cannot be priced higher than expected sales price less costs of disposal plus a normal profit margin, much of that excess cost must be charged to the period incurred. In this case, that means the fourth quarter financial statements absorb much of this cost. This is probably the most likely accounting-based reason for the fourth quarter losses described in the news release.Problem 8-1 (30 minutes)a. 1. Quaker Oats does not reveal its computation of this return. Accordingly, wemake some simple computations and assumptions: (i) For simplicity, focus on one share, (ii) The dividend is $1.56 for Year 11, (iii) The average stock price is $55 and the price increase for Year 11 is $14—based on the beginning price of $48 and the ending price of $62. Using this information, we compute return to a share of stock as follows:= [Dividend per share + Price increase per share] / Average price per share = [$1.56 + $14] / $55= 28.3%However, if we use the beginning price of $48 per share, we get closer to the company's 34% return:= [$1.56 + $14] / $48= 32.4%2. The return on common equity is based on the relation between net incomeand the book value of the equity capital. In contrast, Quaker Oats’ “return t o shareholders” uses dividends plus market value change in relation to the market price per share (cost of investment to shareholders.)b. The company must have derived the 3.6% from price, market, and otherfactors that are not disclosed. Conceptually, this 3.6% should reflect the added risk of an investment in Quaker Oats’ stock vis-à-vis a risk-free security such as a U.S. Treasury bond.c. Quaker does not reveal its computations. It may disclose a variety of interestrates on long-term debt that it carries in the notes to financial statements.Based on data available to it, but not to the financial statement reader, it probably computed a weighted-average interest rate from which it deducted the tax benefit in arriving at the 6.4% cost of debt.a. Computation of Return on Invested Capital Measures:As a first step, we construct the company’s income statement.Sales (500,000 units @ $10). ................................................ $5,000,000 Fixed costs ....................................................................... 1,500,000 Variable costs (500,000 units @ $4). ............................. 2,000,000 Labor costs (20 employees x $35,000). ......................... 700,000 Income before taxes .......................................................... 800,000 Taxes (50% rate) ................................................................. 400,000 Net income .......................................................................... $ 400,000(1) RNOA = [$400,000 + ($2,000,000 x 7.5%)(1-0.50)] / ($8,000,000-$2,00,000)= $475,000 / $6,000,000 = 7.92%(2) ROCE = [$400,000 - ($1,000,000 x 6%)] / $3,000,000 = 11.33%Fixed costs ($1,500,000 x 1.06) ......................................................... 1,590,000 Variable costs ($550,000 units @ $4) .............................................. 2,200,000 Income before labor costs and taxes ............................................. $1,710,000 To obtain a 10% return on long-term debt and equity capital, Zear will need a numerator of $600,000 given an invested capital base of $6,000,000. The required operating income to yield this $600,000 amount is computed as: Net income + Interest expense x (1 - 0.50) = $600,000Net income + ($2,000,000 x 7.5%) x (1-0.50) = $600,000Net income = $525,000Assuming taxes at a 50% rate, Zear needs pre-tax income of $1,050,000, computed as:Income before labor and taxes ............ $1,710,000Labor costs ........................................... ?Pre-tax income ...................................... $1,050,000This implies:Labor costs = $660,000 orAverage wage per worker = $660,000 / 22 employees = $30,000 per employee Since the current salary level is $35,000, Zear cannot achieve its target return level and give a salary raise to its employees.(CFA Adapted)a. ROCE = $1,650 / $3,860 = 42.7%b. NOPAT = ($2,550 + $10) x (1-0.35) = $1,664NOA = $7,250-$3,290 = $3,960RNOA (using year-end NOA balance) = $1,664 / $3,960 = 42%The effect of financial leverage, thus, is only 0.7% as NFO/NFE are insignificant. Most of Merck’s ROCE in this year is derived from operating results.Pre-tax income to sales 0.36Net income to sales 0.23Sales/current assets 1.47Sales / fixed assets 2.97Sales / total assets 0.98Total liabilities / equity 0.88L-T liabilities / equity 0.03a. 1. RNOA = NOPATAvg. NOANOPAT = [$186,000 + $2,000 - $120,000 - $37,000 + $1,000] x 50% = $16,000 Note: we include income from equity investments under the assumptions that these are operating rather than financial investments. We also include the cumulative effect as operating in the absence of information to the contrary. Minority interest and discontinued operations are nonoperating (minority interest is therefore, treated as equity in the ROCE computation).NOA Year 6 = $138,000 - $29,000 - $7000 - $3,600 = $98,400 NOA Year 5 = $105,000 - $23,000 - $2,000 - $2,000 = $78,000RNOA = $16,000 / ([$98,400 + $78,000]/2) = 18.14%2. ROCE = Net income - Preferred dividendsAverage common equityROCE = ($10,000 –$0) /[($55,400* + $47,800*)/2] = 19.38% *Note: minority interest is treated as equity. If Minority interest is ignored, the ROCE is 19.8%b. NFO = NOA - EquityYear 6: $43,000; Year 5: $30,200LEV = Avg. NFO / Ave Equity = ([$43,000 + $30,200] / 2) / ([$55,400* + $47,800*] /2)= 0.71NFE = NOPAT – Net incomeYear 6: $6,000NFR = NFE / Avg. NFO = $6,000 / ([$43,000 + $30,200] / 2) = 16.4%Spread = RNOA – NFR = 18.14% - 16.4% = 1.74%ROCE = RNOA + LEV x Spread = 18.14 + 0.71 x 1.74% = 19.38%94% (18.14%/19.38%) of Zeta’s ROCE is derived for m operating activities. The company is effectively using leverage, however, as indicated by the positive spread, but the leverage does not contribute significantly to Zeta’s return on equity and may not be worth the added risk.a. ROCE = [Net income –preferred dividends] / stockholders’ equity**end of year in this problemROCE Year 5: [$14 – $0] / $125 = 11.2%ROCE Year 9: [$34 - $0] / $220 = 15.5%RNOA Year 5 = ($35 x 0.50) / ($52 + $123) = 10.0%RNOA Year 9 = ($68 x 0.50) / ($63 + $157) = 15.5%ROCE = RNOA + Leverage x SpreadYear 5: 10.0% + 1.2% = 11.2%Year 9: 15.5% + 0 = 15.5%b. Texas Talcom’s ROCE has increased form years 5 to 9. The source is thisincrease, however, has been an increase in RNOA as the leverage effect is zero in Year 9 since its long-term debt has been retired. Given the RNOA increase, additional leverage might be explored as a way to increase shareholder returns.Selling price per unit ...................... $6.00 $5.00 $50.00 $50.00 Unit cost ........................................... $5.00 $4.00 $32.50 $30.00Analysis of Variation in Product A SalesIncreased quantity at Yr 6 prices (3,000 x $5) ........................ $ 15,000 Price increase at Yr 6 quantity (7,000 x $1) ........................... 7,000 Quantity increase x price increase (3,000 x $1) .................... 3,000 Analysis of Variation in Product A Cost of SalesIncreased quantity at Yr 6 cost (3,000 x $4) ........................... (12,000) Increased cost at Yr 6 quantity (7,000 x $1) ........................... (7,000) Cost increase x quantity increase (3,000 x $1) ...................... (3,000) Net Variation (Increase) in Gross Margin for Product A ............. $ 3,000Analysis of Variation in Product B SalesDecreased quantity at Yr 6 prices (300 x $50) ....................... $ (15,000) Analysis of Variation in Product B Cost of Sales:Decreased quantity at Yr 6 cost (300 x $30) .......................... 9,000 Increased cost at Yr 6 quantity (900 x $2.50) ......................... (2,250) Cost increase x quantity decrease (300 x $2.50) . (750)Net Variation (Decrease) in Gross Margin for Product B ............ $ (7,500)Summary of Net Variation in Margins for Products A and BNet increase from product A ......................................................... $ 3,000 Net decrease from product B ........................................................ (7,500) Net Decrease in Gross Margin ...................................................... $ (4,500)a.SPYRES MANUFACTURING COMPANYComparative Common-Size Income StatementsYear Ended December 31 IncreaseYear 9 Year 8(Decrease)Net sales ............................. 100.0% 100.0% 20.0% Cost of goods sold ............ 81.7 86.0 14.0 Gross margin on sales ...... 18.3 14.0 57.1 Operating expenses .......... 16.8 10.2 98.0 Income before taxes .......... 1.5 3.8 (52.6) Income taxes ...................... 0.4 1.0 (52.0) Net income ......................... 1.1 2.8 (52.9)b. Performance in Year 9 is poor when compared with Year 8. One bright spot isthe percentage of Cost of Goods Sold to Sales, which decreased in Year 9.However, Operating Expenses climbed sharply. This sharp climb in operating expenses is unexpected since there is usually a larger fixed cost component comprising these costs compared with that for Cost of Goods Sold.Management should further check operating expenses. If operating expenses had remained at the Year 8 level of 10.2%, income would have been up favorably for Year 9. Operating expenses may have included a future-directed component such as advertising or training costs. Also, management would want to follow up on the change in gross margin. The sharp improvement in gross margin may have been due to factors such as the liquidation LIFO inventory layers or, alternatively, to something more fundamental with the activities of the firm.。

中兴通讯2008到2013年财务报表分析英文版

ZTEFINANCIAL ANALYSISREPORTGroup3胡希1206040204 (组长)ContentPART 1 BACKGROUND ANALYSIS (1)1.Corporate profile (1)2.Overview of the industry (1)PART 2 FINANCIAL STATEMENT ANALYSIS (2)1. Income Statement Analysis (2)2. Balance Sheet Analysis (4)3. Cash flow statement Analysis (9)PART 3 FINANCIAL RATIOS ANALYSIS (12)1. Profitability (12)2. Liquidity (15)3. Sufficiency (17)4. Solvency (21)5. Dividend policy ratios (23)6. Market-based ratios (23)PART 4 DUPONT ANALYSIS (25)PART 5 CONCLUSION (27)PART 6 REFERENCE (27)PART 1 BACKGROUND ANALYSIS1.Corporate profileZTE Corporation is a globally-leading provider of telecommunications equipment and network solutions. With operations in 160 countries, the company is a leader in technology innovation, delivering superior products and business solutions to clients all over the world. Founded in 1985, ZTE is listed on both the Hong Kong and Shenzhen Stock Exchanges and is China’s largest listed telecoms equipment company.Offering the industry’s most comprehensive product range and end-to-end solutions, ZTE delivers cutting-edge technology to telecommunications clients in wireless, access & bearer, value-added services, terminals, managed network services, and ICT solutions for enterprises and government agencies. The company’s expertise and flexibility in these areas enables telecommunications operators and enterprises globally to achieve business objectives and attain increased competitiveness. ZTE’s technology is deployed by leading international operators and Fortune-500 enterprises globally. The company is the world’s fourth-largest handset maker, offering stylish and intelligent devices for consumers around the world.ZTE believes in technology innovation as a core value of the company, investing more than 10% of annual revenue in R&D. The company has established 18 state-of-the-art R&D centers in the China, France, India and employs over 30,000 research professionals. With 107 subsidiaries devoted to innovation globally, ZTE was the world’s biggest originator of technology patents in each of the past two years, according to data from the World Intellectual Property Organization.As a member of the UN Global Compact, ZTE is committed to a vision of balanced, sustainable development in the social, environmental and economic arenas. Promoting freedom of communications around the world, the company has incorporated innovation, technological convergence and the concept of "going green" into the product life cycle. This includes R&D, production, logistics and customer service. The company also is committed to maximizing energy efficiency and minimizing the CO2 emissions.Active in community programs, ZTE participated in relief efforts related to the 2004 tsunami in Indonesia, the 2008 earthquake in Sichuan, China, and the 2010 earthquake in Haiti. ZTE also established the ZTE Special Children Care Fund, the largest charity fund in China.Looking forward, ZTE will continue to shape the global telecommunications industry, working with our customers and partners to stay on top of shifts in technology, business models and market needs.2.Overview of the industry2.1 Overview of the domestic telecommunications industry for the first half of 2014During the first six months of 2014, the Big Three domestic carriers stepped up with their investments in equipment mainly in connection with the large-scale deployment of 4G networksand the construction of related ancillary facilities. The rapid development of the Mobile Internet and the launch of 4G smart phones has accelerated the commercialization of 4G networks. While the wireless sector remained a heavily favored spot in the telecommunications industry, emerging new sectors such as the Mobile Internet, Cloud Computing, Big Data and Smart City were becoming new growth niches in the industry. According to statistics published by the Ministry of Industry and Information Technology, revenue from the telecommunication services amounted to RMB595.73 billion for the six months ended 30 June 2014, representing a year-on-year growth of 5.6%.2.2 Overview of the global telecommunications industry for the first half of 2014There was stable growth in equipment investment by the global telecommunications industry in the first half of 2014. The traditional telecommunications industry was facing opportunities as well as challenges in its development under the impact of comprehensive 4G applications, the integration of ICT industries and the trend of informationalization. While continuing to enhance network performance, global carriers were actively investigating new profit models, such as service innovations, flow business and applications for the government and corporate sectors, in a bid to realize effective transformation by exploring new opportunities for development.PART 2 FINANCIAL STATEMENT ANALYSIS1. Income Statement Analysis1.1 Horizontal AnalysisFrom the horizontal analysis table we can find that the company's annual net profit in 2013 is 1,433,636,000 yuan, which has increased 4,038,257,000 yuan. The growth rate is 155.04%, which is a dramatically rise.The increase of total profit is 3,811,043,000 yuan, and the growth rate is 192.17%, which mainly due to the increase of operating profit, whose growth rate is 70.15%.The increase of operating profit is 3,509,068,000 yuan, and the growth rate is 70.15%, which mainly due to the increase of operating revenue.Besides, the selling and distribution costs and R&D costs decrease sharply, and the financial expenses increased slightly.1.2Vertical AnalysisFrom the vertical analysis table, we can see the financial results of ZTE. The proportion operating profit in operating revenue was -1.98% in 2013 and it rose by 3.96% compared with the ratio in 2012. The net profit ratio was 2.43% in 2013 and it rose by 4.79% compared with the ratio in 2012. So in the view of profit, the profitability of ZTE promoted. The reason why the ZTE’s financial results change results from the descending of the selling and distribution costs and administrative expenses. However, the rise of operating costs also has a negative influence on profit.2. Balance Sheet Analysis2.1 Horizontal AnalysisOne of the goals of the horizontal analysis of balance sheet is to generally summarize the changes of assets and equity and to reveal the difference between changes in assets, liabilities and stockholder's equity, and analyzes the reason of the changes. In recent years the domestic communication industry continues to maintain a rapid growth rate. ZTE Corp grasps the pulse of the market and takes the advantages of the diversification of products and strengthens domestic market depending on the different market strategies. At the same time, ZTE vigorously explore the international market and total assets are improved steadily. According to the annual report of ZTE in 2013, we prepare the horizontal balance sheet as below:From the perspective of assets:The total assets of the company in the current period are reduced by 7,366,809,000 yuan, having subsequently declined by 6.86 percent. It suggests that the asset size of the company decreased.According to the further analysis:(1) The current assets decreased 6,213,729,000 yuan, which made the total asset be reduced by 5.78%. Non-current assets reduced 1,153,080,000 yuan, leading to the total asset be reduced by1.07%.(2) The main reason of the decrease of the total assets is the decrease of the current assets. The relevant changes mainly reflected in the following two aspects:To some degree, the drop of the current assets reflects that the liquidity of assets have declined. The change is mainly reflected in the following terms:A. Cash reduced 3,223,388,000 yuan, with a drop of total assets in 3%. It’s not desirable to improve the liquidity of the company. At the same time, we should do an in-depth analysis of the effectiveness of the use of funds.B. Decrease of the accounts receivables and the notes receivables. The accounts receivables decreased by 3.06%, which results in the drop of total assets. The project will have a certain impact on current capital. So the company need to do an in-depth analysis in the company's annual sales and credit policy, to control the collection of the accounts receivables.From the aspect of liabilities and stockholder’s equity:(1)The liabilities decreased by 8,396,659,000 yuan with a degree of 9.90%, which leaded to the 7.81% decline of total liabilities and stockholder’s equity. The stockholder’s equity increased 1,032,850,000 yuan, with a degree of 4.57%, leading to the 0.96% growth of total liabilities and stockholder’s equity. These two factors made the total liabilities and stockholder’s equity decreased by 7,363,809,000 yuan with a degree of 6.85%.(2)The main reason resulted in the decrease of total liabilities and stockholder’s equity is the decline of current liabilities. The current liabilities decreased by 11,985,122,000 yuan with a degree of 16.43%, which leaded to the 11.15% decline of total liabilities and stockholder’s equity. The decline of short-term loan leads to the decrease of current liabilities. This change may reduce the reimbursement of liabilities pressure and the financial risk.(3)The increase of undistributed profit is the main factor leading to the increase of stockholder’s equity. This indicates the good sales condition of the company in this term. Other changes may be caused by the changes of accounting policies.1.2Vertical AnalysisFrom the perspective of asset structure(1) From the static angle the current assets of this period accounted for 76.34% and the proportion of non-current assets is as high as 23.66%, suggesting that ZTE has an elastic asset structure which is conducive to quickly mobilize funds to lower the risk.(2) From the dynamic angle, the proportion of current-assets fell by 0.55% and the proportion of non-current assets increased by 0.55%. The narrow range of these assets adds up to explain that the stable asset structure of ZTE.From the aspect of capital structure(1) From the static point of view, the proportion of stockholder’s equity is 23.61%, but the proportion of liabilities is 76.39%. The high debt ratio implies the high financial risk. However, it requires to take the profitability into consideration when determine whether to optimize the capital structure.(2) From the dynamic angle, the proportion of stockholder’s equity increased by 2.58% and the proportion of liabilities decreased by 2.58% without great changes in other accounts. This indicates that the financial strength of ZTE declines mildly. But the capital structure of ZTE is stable.3. Cash flow statement Analysis3.1 Horizontal AnalysisFrom the chart above, we can calculate that the balance of the cash and cash equivalents was decreased by 25,413,600,000 yuan which with the percentage of difference reach 227.22%. The reason for the slump was the greater decreasing range than the operation revenue. The net cash inflow was equal to the amount of last year generally because the faster speed of decline in cash outflows than the cash inflows.Investing activities were stable while the financing activities caused the dramatically decreased in cash because of issuing the convertible debt which increased the more debt in this period.3.2 Vertical AnalysisAs we can see in the chart that the cash inflows of operation activities reached 78% while the percentages of investing and financing are 2% and 20%, respectively. From the proportion of cash inflows in the different activities we can easily conclude that the policy of their investing and financing actives are conservative especially the investing.From the aspect of cash outflows, the shares of three activities are similar to the cash inflows. The purchase of assets increased the cash outflows in investing activity.PART 3 FINANCIAL RATIOS ANALYSIS1. Profitability1.1 Gross Profit Margin= (sales-cost of sales)/salesIt gives a good indication of financial health. In general, a company's gross profit margin should be stable. It should not fluctuate much from one period to another, unless the industry it isFrom 2009 to 2011, the gross profit has increased steadily.In 2012, however, the gross profit has fallen considerably in 2012, which is the result of the adoption of a rather aggressive marketing strategy for fast breakthroughs of some key operators and markets, as well as the lack of rapid realignments in enhancing certain aspects, such as management efficiency and risk control, in response to changes in industry competition. What’s more, as the result of a larger number of low-margin contracts in Africa, South America, Asia and the domestic market recognized for 2012, the gross profit margin decreased obviously. It implies that the gross profit is not adequate to pay its operating and other expenses and build for the future.In 2013, the company finished selling some equity of two companies who had lower gross profit without being consolidated in the financial statements. In this way, the gross profit increased. During the year, the Group strengthened its management over contract profitability and exercised stringent control over the execution of low gross margin contracts, resulting in improved gross margin for international projects and the increase in operating revenue from domestic systems projects as a percentage of total revenue. So the gross profit margin increased, too. It means that the financial health is recovering.Cross-sectional AnalysisHowever, the gross profit of 2013 is much lower than Huawei which is 98,020 million yuanand the gross profit margin is much lower than that of Huawei which is 41.01%. It indicates the financial health is worse than that of Huawei.1.2 Return on stockholders’ equity=Earnings after taxes (EAT)/Stockholders’ equityIt measures a corporation's profitability by revealing how much profit a company generates with the money shareholders have invested.Trend AnalysisFrom 2009 to 2012, the ROE decreased from 15.02% to -11.53%, However, from 2012 to 2013, the ROE increased dramatically from -11.53% to 6.07%, which means ZTE’s return on equity has improved.Cross-sectional AnalysisBut the ratio is still below the average level of industry, which is 7.63%. And it is almost 4 times lower than Huawei, whose ROE is 24.35%. It suggests that the profitability of stock equity can still be improved.1.3 Return on Investment Ratio=EAT/Total assetsIt measures a firm’s net income in relation to the total assets investment.Trend AnalysisFrom 2009 to 2010, the ROI increased, but it decreased sharply in 2011 because of the substantial increase of period costs such as financial expense. In 2012, ROI decreased to -2.42%, which is the result of the lower gross profit and higher period cost. It indicates that some investments should not be undertaken.During the 2013, on the one hand, ZTE strengthened its management over contract profitability and exercised stringent control over the execution of low gross margin contracts, resulting in improved gross margin for international projects. On the other hand, total expenses (selling and distribution costs, administrative expenses and research and development costs) for the reporting period decreased significantly as compared to the same period last year, reflecting the Group’s effort to enhance cost management and improve efficiency.Cross Sectional AnalysisBut it is lower than the average level of the industry which is 3.16%. What’s worse, it is much lower than Huawei’ ROI which is 9.07%. It showed that ZTE should improve the efficiency of an investment.*Compare ROE with ROIThe trends of growth or decline of these two ratio are synchronous. Excepting the ration of 2012, the ROE is higher than ROI, for example, in 2013, ZTE managed to magnify a 1.43% return on total investment into a 6.07% return on stockholders’ equity, it suggested that ZTE made more extensive use of debt financing.1.4Return on Assets Ratio=EBIT/Total AssetsAn indicator of how profitable a company is relative to its total assets. ROA gives an idea as to how efficient management is at using its assets to generate earnings. Here it adds interest and tax expense back into EAT because it can better reflect operating returns before interest expense than ROI.Trend AnalysisThe trend is the same as ROI from 2009 to 2013, but the ratio is higher than ROI, which implies that the interest expense is too high, as a result of high loan.Cross Sectional AnalysisExcept to the interest expense, the operating ability is outstanding but the ROA is still lower than that of Huawei’s ROA which is 11.45%.2. Liquidity2.1 Current ratio=current assets/current liabilitiesThe current ratio is interpreted to satisfy the claims of short-term creditors exclusively from existing current assets.Trend analysisApparently, the current ratio of ZTE, which had declined gradually from 2009 to 2012, is slightly below the industry average, but it gone up a little in 2013. It means that the ability of ZTE to pay back the short-term liabilities was stable.Cross-sectional analysisThe Industry average for the current ratio is 1.49 times, meaning that the average firm in the industry convert only ￥0.67(￥1/1.49=￥0.671,or ￥0.67) of each yuan of current assets into cash to meet short-term obligations. The current ratio of Huawei at the end of 2013 is 1.67times. By comparing with industry average and Huawei, we can see that the short-term liquidity of ZTE is in a lower level.2.2 Quick ratio= (current assets-inventories)/current liabilitiesThis ratio, sometimes called the “acid test”, is a more stringent measure of liquidity than the current ratio. By subtracting inventory from current assets, this ratio recognizes that a firm’s inventories are often one of its least-liquid assets.Trend analysisFrom 2009 to 2013, the quick ratio of ZTE went down with each passing year. And in 2012 it drop dramatically. By analysis the change of total current assets and total liabilities, we can find that the sharp drop in 2012 may be caused by the increase of current liabilities, especially the increase of short-term loan. But the dramatic rise in 2013 shows that the short-term liquidity of ZTE was improved.Cross-Sectional analysisThe Industry average for the quick ratio is 1.19 times while the quick ratio of Huawei is 1.45 times. Apparently, the quick ratio of ZTE is quite low, which means the short-term liquidity is insufficient.2.3 Cash ratio= (Cash + Trading securities)/Current liabilitiesThe cash ratio of ZTE is stable during the past 5 years and it's higher than the empirical value. This indicates that the direct reimbursement ability of current liabilities is good.By the flow chart analysis, we can imply that the solvency of short-term liabilities of ZTE isn't good. The problem may lies in the management of inventory and the too liberal credit policy.3. Sufficiency3.1Avg. collection period=Accounts receivable/(Annual credit sales/365)If the credit policy is too liberal, it will take an enterprise a long time to turn it receivables into cash. The occupation of funds will limit its investment activity, affecting the profitability of the enterprise. In contrast, if the credit policy is too stringent, it will hurt sales by restricting credit to the very best customers.Trend analysisFrom 2009 to 2013, the average collection period of ZTE rose with fluctuations which is from 92.77 days to 103.79 days. It means that the management of receivables is weak.Cross-Sectional analysisThe Avg. collection period of Huawei is 90 days. An average collection period substantially above the industry norm is usually not desirable and may indicate too liberal a credit policy. Ultimately, ZTE’s managers must determine the proper credit policy to generate enough incremental sales and profits.3.2Inventory turnover= Cost of sales/Average inventoryInventory turnover is an activity ratio measuring the number of times per period, a business sells and replaces its entire batch of inventory again. In general, a higher value of inventory turnover indicates better performance and lower value means inefficiency in controlling inventory levels. A lower inventory turnover ratio may be an indication of over-stocking which may pose risk of obsolescence and increased inventory holding costs. However, a very high value of this ratio may be accompanied by loss of sales due to inventory shortage.Trend analysisFrom the picture above we can see that the inventory turnover ratio floated mildly around 4.5 times from 2009 to 2011. But it surged to 4.96 times in 2012 and plunged to 4.59 times in 2013. The main reason of the high ratio in 2012 is the increase of cost of sales.Cross-Sectional analysisThe inventory turnover of Huawei is 5.98 times, which is higher than ZTE’s ratio. Generally, a high ratio implies either strong sales or ineffective purchasing. A low turnover implies poor sales and, therefore, excess inventory. It suggests that the selling capacity of ZTE is insufficient.3.3Fixed-Assets Turnover Ratio=Sales/Net fixed assetsThe fixed-asset turnover ratio measures a company's ability to generate net sales from fixed-asset investments - specifically property, plant and equipment (PP&E) - net of depreciation.A higher fixed-asset turnover ratio shows that the company has been more effective in using the investment in fixed assets to generate revenues. When companies make these large purchases, prudent investors watch this ratio in following years to see how effective the investment in the fixed assets was.Trend analysisObviously, the fixed-assets turnover ratio of ZTE declined generally over the 5-year period, fluctuating around the number of 11. According to the analysis of the annual report, we can conclude that ZTE has invested in the fixed assets because of the aggressive marketing strategy, which leads to the decrease of this ratio.3.4Total Assets Turnover Ratio=Sales/Total assetsIt indicates how effectively a firm use its total resources to generate sales and is a summary measure influenced by each of the asset management ratios.Trend analysisThe lower total assets turnover ratio is, the less efficiently the company manages its assets. The total assets turnover ratio will not only affect the company's profitability, but also affect the dividend distribution of the listing corporation directly. Total assets turnover rate is an index of measuring the efficiency of the company operating asset. From the chart we can see that the total-asset turnover ratio declined generally during recent five years, from 88.19% to 75.17%. These data indicates that the company’s usage of assets is inefficient.Cross-Sectional analysisThe industry average for the total-asset turnover ratio was 78.76% while the total-asset turnover ratio of Huawei was 108%, which was much higher than ZTE’s ratio. These data show that the total-asset turnover ratio of ZTE is approximately equal to the industry average, but severely falls behind that of Huawei. The company can accelerate the turnover of the assets through puerile, in order to increase the total-asset turnover ratio.Flow chart analysis of short-term liquidity:Conclusion:By the flow chart analysis, we can imply that the solvency of short-term liabilities of ZTE isn't good. The problem may lies in the management of inventory and the too liberal credit policy.The liquidity of short-term is affected by the several aspects. The process starts from the current ratio, which is lower than the industry average and Huawei and indicates the insufficient liquidity of short-term. On the first stage, we compare the inventory turnover to the industry average and Huawei’s which is also in a lower situation. Then we minus the inventories on the denominator and get the quick ratio. However, it is also not desirable. So we estimate the average collection period then. It is in a bad situation, too. While apart from the accounts receivable factor we catch the cash ratio and by compared with the standard value, we can conclude the short-term liquidity is satisfactory. From the procedures above, we can distinguish the main reasons of the insufficient liquidity short-term are inventories and accounts receivable.4. Solvency4.1Debt ratio=Total debt/Total assetDebt ratio represents the proportion of debt in liabilities and stockholder's equity. It is a common used measure and target for financial leverage at firms. The ratio means the riskiness the enterprise meets and the solvency of the long-term loans.Trend analysisFrom 2009 to 2013, the debt ratio fluctuated slightly near 0.75 while it reached the peak in 2012. Through checking the statistic in the financial report, we found that the large amount of debt in 2012 caused the higher debt ratio.Cross-Sectional analysisIt is higher than the Huawei's debt ratio (0.63) in 2013. What’s more, compared to the industry average debt ratio, we found that it was near 0.54 year on year. It reflects potential threaten of its debt.As for creditors, it is the lower, the better. Too high level of this ratio may cause less creditors being willing to lend their money to the enterprise.As for stockholders, the high level of debt ratio implies the probability of being not able to pay back the debt and it will make them to loss the control of company and their investment. What’s more, it will bring the decline of the stock option price.4.2Debt-to-equity ratio=Total debt/Total equityThe debt-to-equity ratio represents the riskiness of financial situation and confirms that sufficient funds are in place to meet its debt repayment obligations as due.Trend analysisFrom 2009 to 2013, the debt-to-equity ratio fluctuated between 2.3 to 3.7, which reached a peak at 2012. The bad financial situation ZTE met in 2012 led to the higher debt and the higher debt-to-equity ratio.Cross-Sectional analysisIt is much higher than the Huawei's ratio whose was 1.7 in 2013. Furthermore, compared to the industry average debt-to-equity ratio, we found that it was near 1.2 year on year. The situation ZTE in was not safe enough to guarantee the creditors’ claims through the equity of the enterprise.4.3Times interest earned=EBIT (EBT + interest cost)/Interest charged (interest cost)It is a ratio that measures a firm's capacity to meet its debt obligation. The higher this ratio, the lower the default spread for a firm.Trend analysisFrom 2009 to 2013, the times interest earned was in a decline tendency in all, which reached a lowest point in 2012 because of the negative net profit in that year. However, due to the unbalanced performance the subsidiaries had with whose tax paid separately, the negative total EBT and positive tax expense existed together.Cross-Sectional analysisOn the whole, their interest coverage ratio is in a low level which is not safe enough for the creditors. It is lower than the Huawei's ratio whose was adjacent to 9.9 in recent years. This ratio is a further evidence of the fact that the company makes extensive use of creditor’ funds to finance its operations.Summary:Through the analysis before we can conclude that the solvency of long-term debt is in a worse tendency with the higher proportion of debt and the lower level of time interest earned.From the static point, the debt ratio was 0.76 and the debt-to-equity ratio was 3.2 in 2013. The debt ratio is high which means that ZTE has a high financial risk. But whether the structure needs to be optimized depends on profitability.From the dynamic point, both the debt ratio and debt-to-equity ratio declined in 2013. The debt declined by 2.54% and the equity rose by 2.54% and it’s a good phenomenon. We can see that these items changed slightly which means that the financial structure is stable and the financial strength declines slightly. The times interest earned declined year by year which indicated that the solvency of ZTE was weakened.5. Dividend policy ratios5.1 Payout ratio=Dividends per share/EPSThe payout ratio indicates the percentage of a firm’s earnings that are paid out as dividends. The payout ratio is a key financial metric used to determine the sustainability of a company’s dividend payments.Trend analysisAs can be seen from the chart, we can easily find that before 2012 it was in a relatively high level. Because of the deficit in 2012 net profit, no dividend was paid out. In 2013, the condition became better than last year, after covering the deficit, the company paid dividends, but still not catch up with past levels. A lower payout ratio is generally preferable to a higher payout ratio, with a lower ratio indicating the company is paying out less in dividends so the capital can stay in the enterprise to develop more profit. However, on the other hand, the stockholders’ are guaranteed by the higher payout ratio.6. Market-based ratios6.1 M/B=Market price per share/Book value per shareA lower M/B ratio could mean that the stock is undervalued. However, it could also mean。

Analysis(财务报表分析,台湾中兴大学)

• Evaluation, projection, and valuation of income is aided by segment analysis
• Segments share characteristics of variability, growth, and risk • Income forecasting benefits from forecasts by segments • Must separate and interpret the impact of individual segments
Analyzing Profitability
Measuring Income--Estimation Issues
Income measurement depends on estimates of future events
These estimates require:
• Use of judgment and probabilities • Allocations of revenues and expenses across periods • Prediction of the future usefulness of many assets • Forecasts of future obligations
• Different segments usually experience varying rates of profitability, risk, and growth
• Asset composition and financing requirements of segments often vary
Income is defined as revenues less expenses over a reporting period

AnalysisandValuation(财务报表分析,台湾中兴大学

195.4
220.4
212.9
219.1
203.5
181.4
Repairs and maintenance (see Note 1 below)
173.9
180.6
173.9
155.6
148.8
144.0
Administrative expen
232.6
213.9
Earnings Persistence
Recasting and Adjusting
General Recasting Procedures
Income statements of several years (typically at least five) are recast
Recast earnings components to yield meaningful classifications and a relevant format for analysis
$ 672.2 $ 510.7 $ 444.4 $ 421.9 $ 387.7 $ 384.2
Equity in earnings of affiliates
2.4
13.5
10.4
6.3
15.1
4.3
Minority interests
(7.2)
(5.7)
(5.3)
(6.3)
(4.7)
(3.9)
Income before taxes
195.9
Research and development expenses
56.3
53.7
47.7
46.9
44.8
42.2

chap002 Financial Reporting and Analysis(财务报表分析-台湾中兴大学)

Environmental Factors
International Accounting Standards (IAS)
Set by International Accounting Standards Board Not currently accepted in U.S. SEC under pressure to accept IAS
Politicians
Others
Accountants
Provide input to
Financial Accounting Standards Board
Help set
Generally Accepted Accounting Principles
Environmental Factors
IAS
Environmental Factors
Corporate Governance
Board of directors oversightAccounting Set by International Audit committeeBoard Standards of the board - oversee accounting process Not currently accepted in U.S. - oversee internal control - oversea internal/external audit SEC Auditor pressure to accept under Internal
Environmental Factors
Economic, Industry & Company News
Impacts current & future financial condition and performance

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(4) planning and
control
Return on Invested Capital
Evaluating Managerial Effectiveness
• Management is responsible for all company activities
• ROI is a measure of managerial effectiveness in business activities
optimisticor pessimistic forecasts
• ROI aids in evaluating prior forecast performance
Return on Invested Capital
For Planning ath:
depreciation expense Acquisitions of new depreciable assets offset a declining
capital base It fails to recognize increased maintenance costs as assets
• ROI relates key summary measures: profits with financing
• ROI conveys return on invested capital from different financing perspectives
Return on Invested Capital
construction, surplus plant, surplus inventories, surplus cash, and deferred charges from invested capital
Adjustment is not valid as it fails to: recognize that management has discretion
depreciable assets
Adjustment is not valid as: ROA analysis focuses on the performance
of the entire company It is inconsistent with computation of income net of
• Joint analysis is where one measure is assessed relative to another
• Return on invested capital (ROI) is an important joint analysis
Return on Invested Capital
• Excludes intangible assets from invested capital
Adjustment is not valid as: Lack of information or increased
uncertainty does not justify exclusion
• ROI depends on the skill, resourcefulness, ingenuity, and motivation of management
Return on Invested Capital
Measuring Profitability
• ROI is an indicator of company profitability
Income Investedcapital
Components of ROI
Invested Capital Defined
• No universal measure of invested capital exists
• Different measures of invested capital reflect different financiers’ perspectives
• Planning • Budgeting • Coordinating activities • Evaluating opportunities • Control
Components of ROI
Definition
Return on invested capital is defined as:
financing sources
Components of ROI
Total Assets
Some adjust this invested capital base for:
1. Unproductive Assets 2. Intangible Assets 3. Accumulated Depreciation
• Captures the effect of leverage (debt) capital on equity holder return
• Excludes all debt financing and preferred equity
Components of ROI
Market Value of Invested Capital
Components of ROI
Total Assets
Accumulated Depreciation Adjustment • Assumes plant assets maintained in prime condition • Assumes inappropriate to assess return relative to net assets • Concern with a decreasing invested capital base • Includes an addback for accumulated depreciation on
Components of ROI
Alternative Measures of Invested Capital
Five Common Measures:
• Total Assets • Long-Term Debt Plus Equity • Equity • Market Value of Invested Capital • Investor Invested Capital
•Riskier investments are expected to yield a higher ROI
•ROI impacts a company’s ability to succeed, attract financing, repay creditors,and reward owners
Return on Invested Capital
McGraw-Hill/Irwin
8
CHAPTER
© 2004 The McGraw-Hill Companies, Inc., All Rights Reserved.
Return on Invested Capital
Importance of Joint Analysis
Components of ROI
Total Assets
Unproductive Asset Adjustment • Assumes management not responsible for
earning a return on capital not in operations • Excludes idle plant, facilities under
Assists in Forecasting Earnings
• ROI links past, current, and forecasted earnings with
invested capital
• ROI adds discipline
to forecasting
• ROI helps identify
ROI Relation
•ROI relates income, or other performance measure, to a company’s level and source of financing
•ROI allows comparisons with alternative investment opportunities
Components of ROI
Computing Invested Capital
• Usually computed using average capital available for the period
• Typically add beginning and ending invested capital amounts and divide by 2
age
Components of ROI
Long-Term Debt Plus Equity Capital
• Perspective is that of the two main suppliers of long-term financing — long-term creditors and equity shareholders
Components of ROI
Total Assets
• Perspective is that of its total financing base
• Called return on assets (ROA)
ROA: measures operating efficiency/ performance reflects return from all financing does not distinguish return by

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