财务管理基础斯坦利布洛克Chapter(2)

Chapter2ReviewofAccountingBYReneeGu2013.Fall3BasicFinancialStatementsAfinancialmanagermustunderstandthebasicconceptsofaccountinginordertousethetoolstheaccountantsprovide.Thesetoolsare:1.Incomestatement2.Balancesheet3.StatementofcashflowsI.INCOMESTATEMENT1.Buildingincomestatement2.ReturntocapitalandEPS3.limitationofincomestatement1.BuildingIncomeStatement•THEINCOMESTATEMENTisthemajordeviceformeasuringtheprofitabilityofafirmoveraperiodoftime.•TWOCHARACTERISTICS–PROFITABILITY–FLOWREPORTHOWTOCREATEANINCOMESTATEMENT?•Sales-CostofGoodsSold(COGS)=GrossProfit(GP)•GP-Expenses=EarningsBeforeInterestandTaxes(EBIT)orOperatingIncome(OI)•EBIT-Interest=EarningsBeforeTaxes(EBT)•EBT-Taxes=EarningsAfterTaxes(EAT)orNetIncome(NI)2.ReturntoCapitalandEPSTherearethreesourcesofcapitalforthebusinessfirmindicatedbytheincomestatement.Thesesourcesofcapitalare...BondholdersPreferredstockholdersCommonstockholdersBondholdersarepaidinterestexpense,beforetaxes..Preferredstockholdersarepaidpreferreddividends,aftertaxes.Commonstockholdersarepaidcommondividends,aftertaxes.(A)EPSIncomestatementsareusedtocalculateafirm'searningspershare(EPS).EPSisdefinedastheratioofEACtothenumberofsharesofcommonstockoutstanding.SensitivetothenumberofsharesoutstandingSensitivetotheearningsavailabletocommonstockholders(B)Statementofretainedearnings--Indicatesdispositionofearnings•Theprofitmaybepaidouttothecommonstockholdersintheformofdividendsorretainedinthecompanyforsubsequentreinvestment.•Thereinvestedfundstheoreticallybelongtothecommonstockholders,whohopetheywillprovidefutureearningsanddividends.StatementofRetainedEarningsFortheYearEndedDecember31,2001Retainedearnings,balance,January1,2001……$250,000Add:Earningsavailabletocommonstockholders,2001……100,000Deduct:Cashdividendsdeclaredin2001……50,000Retainedearnings,balance,December31,2001……300,000(C)P/ERatioTheP/EratioisTheratioofthemarketvalueofthefirm'sstocktoitsearningspershare.P/ERatio=Price/EarningsRatioP/ERatio=MarketPriceofStock/Earningspershare(EPS)Price-earningsratioisusedafterEPSiscalculatedtodeterminethevalueofthefirm'scommonstock.Price-earningsratioscanbeconfusing•AcompanyhasalowP/Edoesnotmeanit'sagoodvalue!•Conversely,notallcompanieswithahighP/Eareovervalued!(a)FuturegrowthexpectationssignificantlyaffecttheP/Eratio.•ThePintheP/Eratioisdeterminedatanygivenpointbythemarketvalueofthecompanyoritsshares.Builtintothismarketpricearethefutureexpectationsofthecompany'sgrowthP/EratioshigherthanthemarketaveragegenerallymeanthatafirmisexpectedtoprovidereturnsgreaterthanthemarketP/Eratiowiththesameorlessrisk.Probably--butnotcertainly(b)DifferentindustrieshavedifferentaverageP/Eratios(c)FactorsinP/ERatioSomefactorsthatinfluenceP/E:•Earningsandsalesgrowthofthefirm•Risk(volatilityinperformance)•Investmentreturns•Debt-equitystructureofthefirm•Dividendpaymentpolicy•Qualityofmanagement•Countingearningsapproach:aggressiveorconservative3.LimitationsoftheIncomeStatement•Incomegained/lostduringagivenperiodisafunctionofverifiabletransactions–Stockholders,hence,mayperceiveonlyamuchsmallergain/lossfromactualday-to-dayoperations•FlexibilityinreportingtransactionsmightresultindifferingmeasurementsofincomegainedfromsimilareventsattheendofatimeperiodII.BalanceSheetABalanceSheet(B/S)Indicateswhatthefirmownsandhowtheseassetsarefinancedintheformofliabilitiesorownershipinterest–Delineatesthefirm’sholdingsandobligations–ItemsarestatedonanoriginalcostbasisratherthanatcurrentmarketvalueP31Table2-4theincomestatementisrelatedtothebalancesheetNetWorth(BookValue)Networth/bookvalue=Stockholders’equity–preferredstockcomponentTotalassets…………………………$1,000,000Totalliabilities………………………300,000Stockholders’equity…………………700,000Preferredstockobligation……………50,000Networthassignedtocommon………650,000Commonsharesoutstanding…………100,000Networth,orbookvalue,pershare……$6.5TheoriginalcostpersharethenetworthpersharethemarketvaluebookvaluepershareofcommonstockBookvaluepershareisarrivedatbytakingthecostoftheasstsandsubtractingoutliabilitiesandpreferredstockanddividingbythenumberofcommonsharesoutstanding.Itisbasedonthehistoricalcostsoftheassets.Marketvaluepershareisbasedoncurrentassessedvalueofthefirminthemarketplace.marketvaluemaydifferwidelyfrombookvalue.marketvaluepershareHowtousetheP/B?•P/Bisausefulmeasureforcomparingfirmsthathavenegativeearning;thosebusinessescan'tbecomparedusingtheP/Eratio.TheP/Bratioiscalculatedasfollows:•P/Bratio=marketcapitalization/bookvalueofequity•Marketcapitalization=sharesoutstanding*marketpricepershare•Bookvalueofequity=bookvalueofassets-bookvalueofliabilities-preferredstock•P/B=marketcap/(BVofassets-BVofliabilities-preferredstock)Table2-5(P33)Inflationmayrestricttheusefulnessofthebalancesheetasnormallypresented•Thebalancesheetisbasedonhistoricalcosts.Whenpricesarerisingrapidly,historicalcostdatamaylosemuchoftheirmeaning–particularlyforplantandequipmentandinventory.III.STATEMENTOFCASHFLOWS3.1Howtounderstand“Cash”?Emphasizescriticalnatureofcashflowtotheoperationsofthefirm–Itrepresentscash/cashequivalentsitemseasilyconvertibletoca