财务管理-onInvestedCapital(财务报表分析,台湾中兴大学)
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财务报表分析-(台湾中兴大学)chap008
• Referred to as long-term capitalization
• Excludes current liability financing
Components of ROI
Equity Capital
• Perspective is that of equity holders
Return on Invested Capital
Application of ROI
ROI is applicable to:
(1) evaluating managerial effective-
ness
(2) assessing profitability
(3) earnings forecasting
• ROI relates key summary measures: profits with financing
• ROI conveys return on invested capital from different financing perspectives
Return on Invested Cቤተ መጻሕፍቲ ባይዱpital
• Assumes certain assets not recognized in financial statements
• Uses the market value of invested capital (debt and equity)
Components of ROI
Investor Invested Capital
age
Components of ROI
Long-Term Debt Plus Equity Capital
• Excludes current liability financing
Components of ROI
Equity Capital
• Perspective is that of equity holders
Return on Invested Capital
Application of ROI
ROI is applicable to:
(1) evaluating managerial effective-
ness
(2) assessing profitability
(3) earnings forecasting
• ROI relates key summary measures: profits with financing
• ROI conveys return on invested capital from different financing perspectives
Return on Invested Cቤተ መጻሕፍቲ ባይዱpital
• Assumes certain assets not recognized in financial statements
• Uses the market value of invested capital (debt and equity)
Components of ROI
Investor Invested Capital
age
Components of ROI
Long-Term Debt Plus Equity Capital
onInvestedCapital(财务报表分析,台湾中兴大学)-PPT文档资料
over all investment ➢ assess overall management effectiveness
Components of ROI
Total Assets
Intangible Asset Adjustment
• Assumes skepticism of intangible asset values
• Referred to as long-term capitalization
• Excludes current liability financing
Components of ROI
Equity Capital
• Perspective is that of equity holders
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
Adjustment is not valid as it fails to: ➢ recognize that management has discretion
Components of ROI
Computing Invested Capital
• Usually computed using average capital available for the period
Components of ROI
Total Assets
Intangible Asset Adjustment
• Assumes skepticism of intangible asset values
• Referred to as long-term capitalization
• Excludes current liability financing
Components of ROI
Equity Capital
• Perspective is that of equity holders
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
Adjustment is not valid as it fails to: ➢ recognize that management has discretion
Components of ROI
Computing Invested Capital
• Usually computed using average capital available for the period
最新英文台湾中兴大学金融系王之彦老师的财务报表分析chap006精品资料
Economic Income
Income Measurement
Concepts
Accounting Concept of Income:
• Based on accrual accounting • Capture aspects of both economic income and
permanent income
income - $500 depreciation*)
*Condo’s useful life is 50 years and its salvage value is $75,000—yearly straight-line depreciation is $500
Income Measurement
Concepts
Illustration Facts:
• Net (free) cash flow = $(88,000) • Operating cash flow = $12,000 • Economic income = $37,000 • ($12,000 rental income + $25,000 holding gain) • Accounting income = $11,500 ($12,000 rental
Concepts
Economic Income:
Two measures reflect the economic concept
• economic income • permanent income
Income Measurement
Concepts
Economic Income:
• Equals net cash flows + the change in the present value of future cash flows
最新英文台湾中兴大学金融系王之彦老师的财务报表分析chap005精品资料
Equity Method Accounting
Equity method accounting—reports the parent’s investment in the subsidiary, and the parent’s share of the subsidiary’s results, as line items in the parent’s financial statements (referred to as one-line consolidation)
Investment 25,000 Equity earnings 25,000
(to record proportionate share of investee company earnings)
Cash 5,000 Investment 5,000
(to record receipt of dividends)
Intercorporate Investments
Equity Method Accounting
Investment account: ➢ Initially recorded at acquisition cost ➢ Increased by % share of investee earnings ➢ Decreased by dividends received
2,000,000 Beg.
Div. 20,000 100,000 Inc.
2,080,000 End.
Equity Investments
Important Points in Equity Method Accounting
The investment account represents the proportionate share of the stockholders’ equity of the investee company. Substantial assets and liabilities may, therefore, not be recorded on balance sheet unless the investee is consolidated. This can have important implications for the analysis of the investor company. Investment earnings (the proportionate share of the earnings of the investee company) should be distinguished from core operating earnings in the analysis of the earnings of the investor company. Investments accounted for under the equity method are reported at adjusted cost, not at market value. Substantial unrealized gains may, therefore, not be reflected in assets or stockholders’ equity.
Equity method accounting—reports the parent’s investment in the subsidiary, and the parent’s share of the subsidiary’s results, as line items in the parent’s financial statements (referred to as one-line consolidation)
Investment 25,000 Equity earnings 25,000
(to record proportionate share of investee company earnings)
Cash 5,000 Investment 5,000
(to record receipt of dividends)
Intercorporate Investments
Equity Method Accounting
Investment account: ➢ Initially recorded at acquisition cost ➢ Increased by % share of investee earnings ➢ Decreased by dividends received
2,000,000 Beg.
Div. 20,000 100,000 Inc.
2,080,000 End.
Equity Investments
Important Points in Equity Method Accounting
The investment account represents the proportionate share of the stockholders’ equity of the investee company. Substantial assets and liabilities may, therefore, not be recorded on balance sheet unless the investee is consolidated. This can have important implications for the analysis of the investor company. Investment earnings (the proportionate share of the earnings of the investee company) should be distinguished from core operating earnings in the analysis of the earnings of the investor company. Investments accounted for under the equity method are reported at adjusted cost, not at market value. Substantial unrealized gains may, therefore, not be reflected in assets or stockholders’ equity.
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
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
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 (台湾中兴大学)chap001
• Selling resources
Investing
Financing
Investing = Financing
Business Activities
Investing Activities
Planning Activities
Financial Activities
Operating Activities
Intrinsic Value
Accounting Analysis
Process to evaluate and adjust financial statements to better reflect economic reality
Comparability problems — across firms and across time Manager estimation error Distortion problems Earnings management Accounting Risk
Equity Analysis
Management & Control Types of Business Analysis
Labor Negotiations
Regulation
Director Oversight
Financial Management
External Auditing
Mergers, Acquisitions & Divestitures
Financial Analysis
Intrinsic Value
Dynamics of Business Activities
Business Activities
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
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Income InvestedcapI
Invested Capital Defined
• No universal measure of invested capital exists
• Different measures of invested capital reflect different financiers’ perspectives
•Riskier investments are expected to yield a higher ROI
•ROI impacts a company’s ability to succeed, attract financing, repay creditors,and reward owners
optimisticor pessimistic forecasts
• ROI aids in evaluating prior forecast performance
Return on Invested Capital
For Planning and Control
ROI assists managers with:
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
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
Assists in Forecasting Earnings
• ROI links past, current, and forecasted earnings with
invested capital
• ROI adds discipline
to forecasting
• ROI helps identify
Return on Invested Capital
Application of ROI
ROI is applicable to:
(1) evaluating managerial effective-
ness
(2) assessing profitability
(3) earnings forecasting
• Planning • Budgeting • Coordinating activities • Evaluating opportunities • Control
Components of ROI
Definition
Return on invested capital is defined as:
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
financing sources
Components of ROI
Total Assets
Some adjust this invested capital base for:
• ROI relates key summary measures: profits with financing
• ROI conveys return on invested capital from different financing perspectives
Return on Invested Capital
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
(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
• 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
• ROI depends on the skill, resourcefulness, ingenuity, and motivation of management
Return on Invested Capital
Measuring Profitability
• ROI is an indicator of company profitability
Invested Capital Defined
• No universal measure of invested capital exists
• Different measures of invested capital reflect different financiers’ perspectives
•Riskier investments are expected to yield a higher ROI
•ROI impacts a company’s ability to succeed, attract financing, repay creditors,and reward owners
optimisticor pessimistic forecasts
• ROI aids in evaluating prior forecast performance
Return on Invested Capital
For Planning and Control
ROI assists managers with:
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
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
Assists in Forecasting Earnings
• ROI links past, current, and forecasted earnings with
invested capital
• ROI adds discipline
to forecasting
• ROI helps identify
Return on Invested Capital
Application of ROI
ROI is applicable to:
(1) evaluating managerial effective-
ness
(2) assessing profitability
(3) earnings forecasting
• Planning • Budgeting • Coordinating activities • Evaluating opportunities • Control
Components of ROI
Definition
Return on invested capital is defined as:
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
financing sources
Components of ROI
Total Assets
Some adjust this invested capital base for:
• ROI relates key summary measures: profits with financing
• ROI conveys return on invested capital from different financing perspectives
Return on Invested Capital
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
(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
• 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
• ROI depends on the skill, resourcefulness, ingenuity, and motivation of management
Return on Invested Capital
Measuring Profitability
• ROI is an indicator of company profitability