Financial Analysis and Decision Making 期末

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Part 1: Financial Analysis Framework

• The Firm and its Operation Analysis

1. Introduction to Operational Finance

2. Financial Statement Concepts

Balance Sheet
• Limitations:
– Does not show the events or activities that resulted in the balances in each of the accounts
• Use:
– Major use as a statement of a firm’s financial condition at a given point in time
– When used in conjunction with an income statement and other financial data, it provides valuable information on the firm

3. Financial Ratio Analysis

The goal of Financial Ratio Analysis is to determine the efficiency and performance of the firm’s management

Why do we need Return on Investment (ROI)?
• The profit margin ignores the money invested by the firm to earn the profit
• The asset turnover does not consider the profits made on the use of the assets

4. Finance and Corporate Strategies

• Security Analysis

1. Introduction to Common Stocks

Characteristics of Common Stock
conveys a number of rights
Limited Liability
entitled to vote at the firm’s annual meeting.

Importance of Dividend Stability

– Preference of Investors
– Routinizing of Dividend Decisions
– Flexibility of the Extra Dividend

2. How Securities are Traded

3. Valuing Stocks and/or Firms

4. Dividend Policies and Decisions

5. Option Pricing Analysis

Part 2: Financial Decision Making

• Introduction to Decision Making Tools and Techniques

• Regression Analysis for Data Modeling

• Discovering Classification Rules

• Problem Classification
  – The k-NN Neighbor Algorithm
  – The Linear Discriminant Function
  – The Bayesian Approach
  – The Decision Tree Approach

• Basic Clustering Analysis

• Genetic Algorithm for Decision Making

分析

条件	情况	导致结果
level of fixed costs	high	the firm must generate a large volume of sales to cover them
times interest earned	5-7 times	then a firm could experience an 80 to 86 percent drop in EBIT and still cover interest payments

问题	解决方案
Inadequate cash	Raise additional funds
Excessive receivables	Restrict terms of trade / institute a more aggressive collection policy
Excessive inventory	Improve inventory management
Excessive current liabilities	Obtain additional long-term financing
High production costs	Institute cost-cutting measures
Idle assets	Sell excess or obsolete assets
Inadequate sales	Increase size and quality of sales force; improve advertising
Inadequate selling price	Raise it
High administrative expenses	Reduce them
Excessive interest payments	Seek lower-cost debt financing; seek equity financing

比例名称	标准	过低	过高
Current Ratio	2/1	indicates that a firm may not be able to pay its future bills on time	indicates that an excessive amount of current assets and management’s failure to utilize the firm’s resources properly
Quick Ratio or Acid Test	1/1	• Could indicate that the firm has excessive cash or receivables, both signs of lax management • Could indicate that the firm is too cautiously ensuring sufficient liquidity	indicates possible difficulties in the prompt payment of future bills
Gross Profit Margin	30 – 50%
Profit Margin	15 – 25%
Asset Turnover	1 – 2 times
Return on Investment	25 – 40%
Return on Equity	70 – 90% of ROI
Earning Power	12 – 16%
Times Interest Earned	5 – 7 times
debt-equity ratio	小于 1/1
debt-asset ration	小于0.5/1
dividend yield	0 - 10 or 12 % 高速增长公司2-3，成熟公司7-8

Liquity Rotios

$$Quick\ Ratio\ or\ Acid\ Test = \frac{current\ assets - inventories}{current\ liabilities}$$

$$Accounts\ receivable\ turnover = \frac{sales}{Accounts\ receivable}$$

$$Average\ collection\ period = \frac{Accounts\ receivable}{daily\ sales}$$

$$Inventory\ turnover = \frac{cost\ of\ goods\ sold}{inventory} = \frac{sales}{inventory}$$

Profitability Ratios

$$\ profit\ margin = \frac{operating income}{sales}$$

$$Ggross\ profit\ margin = \frac{sales - cost\ of\ goods\ sold}{sales}$$

$$Asset\ turnover= \frac{sales}{total\ assets} =\frac{sales}{operating\ assets}$$

$$Return\ on\ investment = \frac{EBIT}{total\ asset}$$
$$Return\ on\ equity = \frac{ net\ income }{total\ equity(不含优先股) }$$
$$Earning\ Power = \frac{net\ income }{ total\ assets}$$
$$times\ interest\ earned = \frac{operating\ income }{interest }$$
0

Ownership Ratios

$$Earnings\ per\ Share(EPS) = \frac{net\ income }{the number\ of\ shares\ outstanding}$$
$$Price-Earnings\ Ratio (P/E) = \frac{MktPr }{EPS }$$
$$Debt-Equity\ Ratio = \frac{total\ debt }{ total\ equity}$$
$$Debt-Asset\ Ratio = \frac{total\ debt }{ total\ assets}$$
若负债过高，难以追加债务 If the ratio is low, it may indicate a failure to use relatively lower cost borrowed funds to raise the return earned on the common stock

$$Dividend\ Payment = \frac{DPS }{ EPS}$$
$$Dividend\ Yield = \frac{ DPS}{MktPr }$$
$$Book\ Value\ per\ Share = \frac{stockholders’\ equity }{the number\ of\ shares\ outstanding }$$