北大光华课件财务北大光华课件财务报表分析报表分析chap3Outlineoftodayslecture1.Atypicalincomestatement2.Definitionofaccountingperiod(会计期间）,Revenues,Expenses,CostofGoodsSold,Earnings,andNetIncome3.Cashaccounting（收付实现制）anditsinadequacies（不足）4.AccrualAccounting（权责发生制）anditsstrengths5.4.1Revenuerecognition,matchingprincipleandexpenserecognition（收入确认、配比原则和费用确认）6.4.2Adjustingjournalentries（调整会计分录）7.5. Expensing（费用化）versuscapitalization（资产化）ofexpenditures8.6. Relationsbetweenincomestatementandbalancesheet9.7. Timeseriesandcrosssectionanalysisofincomestatement10.8. Earningsmanagementexamples11.9. P/Eratio（市盈率）andearnings-basedmarketanomaliesDefinitionsRevenueRevenuesareinflowsofnetassets(assetslessliabilities)fromsellinggoodsorprovidingservicesGain/LossSometimesafirmengagesinunusual,non-operatingactivitiesandmakesorlosessomemoney.Assetsinflows/outflowsasaresultofsuchactivitiesarecalledgainsorlosses.ExpensesExpensesmeasuresthenetassetsthatafirmconsumesintheprocessofgeneratingrevenuesCostofGoodsSoldIfafirmbuyandsell,orproduceandsell,products,thenetassetsthatdirectlygointotheproductssold,arecalledcostofgoodssold.NetIncomeAlsocalledbottomline,itisthedifferencebetweenallrevenuesandgains,andallcostsofgoods,expensesandlosses.EarningsOnincomestatement,beforewereachbottomlinenetincome,someintermediarysumsarecalledearnings,suchasearningsfromcontinuingoperation.Ledger(T-Account)treatmentofincomestatementaccountsRevenuesGainsExpenses(inc.COGS)LossDividendsCashAccountingRevenues:recognizedatthetimethatcashisreceivedExpenses:recognizedatthetimethatcashisdisbursedNote:Cashreceivedfromanddisbursed（分发）toshareholdersandcreditors（债权人）isneitherrevenuesnorexpenses,anddoesnotenterincomestatementundercashaccountingAnexample:AtoyretailerstartsbusinessonNovember1,19x0,Hepaystwomonthsrentonhisstore,$2,000,onthatday,andalsopurchasesandpayfor$35,000toys.However,hesellsnothinginNovember.InDecember,hesellsallthetoyswithasalespriceof$40,000andcollects$5,000incashCashAccountingIncomeStatementNovemberDecemberRevenues$0$5,000LessExpensesandCOGS:CostofGoodsSold35,0000Rentalexpense2,0000NetIncome($37,000)$5,000ProblemswithCashAccounting1.Mismatchthecostofefforts(expenses)withtheoutputoftheefforts(revenues)2.Delayrecognitionofrevenues3.ProvideopportunitiestomanageearningsAccrualAccountingRevenuerecognition:followrealizationprinciple(实现原则）1)Afirmhasperformedall,ormostof,theservicesitexpectstoprovide2)Thefirmhasreceivedcashorsomeotherassetscapableofreasonablyprecisemeasurement,suchasaccountreceivablesAccrualAccountingExpenserecognition:a)Whenanassetisuseddirectlytogeneraterevenues,theusedassetbecomesexpense.E.g.,Amazon.comsoldbooks,thecosttopurchasethesoldbooksbecomeCOGS,apartofexpenses.Thisiscalledmatching principle（配比原则）ofaccounting.b)Whenanusedassetisindirectlyrelatedtothecurrent,andonlythecurrent,periodrevenues,wetreattheusedassetasexpense.E.g.,cashtopayforadvertisement,salaryfortheCEO.c)Whenanassetisusedtobenefitboththecurrentandthefutureperiod,thebenefit,nevertheless,notmattercurrentorfuture,ishardtoidentifyandmeasure,wetreattheusedassetasexpense.E.g.,cashusedtopayresearchanddevelopmentforpharmaceuticalcompanies.Thisisconservative principle（稳健原则）ofaccounting.AccrualAccountingIncomeStatementNovemberDecemberRevenues$0$40,000LessExpensesandCOGS:CostofGoodsSold035,000Rentalexpense1,0001,000NetIncome(1,000)4,000AdjustingJournalEntriesUnderAccrualAccountingUnderaccrualaccounting,somejournalentriesarenotexplicitlyrelatedtoatransaction.Wemaketheseentries,adjustingjournalentries,mostlikelyattheendofanaccountingperiod.Therearefourtypesofadjustingentries:1.Unearnedrevenue(客户预付款）2.AccruedRevenue（应计收入）3.Prepaidexpense（预付费用）4.Accruedexpense（应计费用）UnearnedRevenueExample:SupposeyouaretheaccountantofGuanghuaandGuanghuaspolicyistoproportionatelyreturnstudenttuitionswheneverastudentchoosestoquitschool(notabadact,BillGatesquittedHarvard).SoonSeptember1,2002,youpaid$80,000toGuanghuafortwo-yeartuitions.ReceivecashrecognizerevenueUnearnedRevenueOnSep.1,2002,althoughGuanghuareceivedthecash,toit,thecashreceivedisunearnedrevenue.Thatis,Guanghuahasnotprovidedyoueducationalserviceyet.Guanghuasjournalentry:Dr.Cash$80,000Cr.UnearnedRevenue(liability)$80,000OnDec.31,2002,afteryouhavespenthalfayearatGuanghuatoenjoyitssuperbservice,Guanghuahasearnedone-fourthofthetuitions.Journalentry:Dr.UnearnedRevenue$20,000Cr.Revenue$20,000AccruedRevenueExample:IfyouareamanufactureofcarsandIboughtacarfromyouonNov.12,2002for$3,000,butweagreethatIpayyounextyear.YouhaveearnedthemoneybecauseItookthecar.Butyouhavenotreceivedthecash.Still,itisyourmoneyandyourrevenue.Dr.AccountReceivable$3,000Cr.Revenue$3,000RecognizerevenueReceivecashPrepaidexpenseExample,backtotheGuanghuacase,fromyourpointofview,the$80,000isprepaidexpense.Thatis,ifonSep.2,2002,youwanttoquitschool,youwillgetmoneyback(ifyouwanttotrythis,pleasedosobeforeoraftermycourse).Thatis,youstillownthemoney.PaycashrecognizeexpensePrepaidexpenseOnSep.1,2002,youraccount:Dr.Prepaidtuitions$80,000Cr.Cash$80,000OnDec.31,2002,youDr.Tuitionexpense$20,000Cr.Prepaidexpense$20,000Ifyouquitschoolonthisday,youget$60,000backfromtheschool.AccruedExpenseExample,youworkedforyourcompanyinDecember2002,andyourcompanywillpayyoursalaryof$3,000ofDecemberinJanuary2003.Buttothecompany,expensehasincurredin2002,althoughcashisnotpaidinDecemberof2002.SothecompanyDr.Expense$3,000Cr.Salarypayable$3,000recognizeexpensepaycashTheFinalStagesoftheAccountingProcess(refertoapremieronaccountinghandout)OnDec.31oftheyear,theaccountantsfinishedalljournalentries,postedtoledger(T-accounts),calculatedthebalance（余额）ofeveryledgeraccount,anddidatrialbalance.Nowshe/hedoesadjustedjournalentries,andthenpoststoledgeragain,anddoesanadjustedtrialbalance.Whatshe/hehasinhandsnowisalistofaccounts.Next:1)Prepareincomestatement2)Closeincomestatementaccountstoretainedearningsaccount3)Preparebalancesheet4)Q.E.DExpensingvs.CapitalizationofExpenditures1.Afirmpaysemployeesalaries,wesaythefirmexpenseemployeesalary2.Expensedexpendituresgotoincomestatement3.Expensedexpenditureshelpgeneraterevenuesincurrentperiod4.Ifafirmexpensestheexpenditure,currentearningswillbelowerbythatamount1.Afirmbuyabuilding,wesaythefirmcapitalizethebuildingasasset.2.Capitalizedexpendituresgotobalancesheet3.Capitalizedexpenditureshelpgeneraterevenuesincurrentandfutureperiods4.Ifafirmcapitalizestheexpenditure,currentearningswillnotbeloweredbythatamountExpensingvs.CapitalizationofExpendituresButlifeisnotsosimpleandstraightforward.Sometimesitisdifficulttodeterminewhethertheexpendituresbenefitfutureperiods,andifitbenefitsfutureperiods,itisdifficulttodeterminewhichfutureperiodwillbenefit.Therefore,firmsexpensesomeexpendituresthatmayotherwisebecapitalized.ThisisaconservativetreatmentoftheexpendituresbyGAAP.1.Marketingexpenditures2.ResearchandDevelopment3.StockoptionsTheWorldcomscandalJune26,2002,Worldcomreportsitoverstatedearningsby$3.8billioninthepastfewyears.Itquicklyaskedforchapter11protectionWhatdidtheydo?Capitalizeexpendituresthatshouldhavebeenexpensed.Thatis,$3.8billionshouldnotbeonbalancesheet,butgothroughincomestatementasexpense.In2001,thecompanyreportsearningsof1.4billion,whichshouldhavebeenalossyear.Therelationbetweenbalancesheetandincomestatement1.Assets=Liabilities+Equity2.Equity=Contributedcapital（股本）+RetainedEarnings(RE)3.Ending（期末余额）RE=Beginning（期初余额）RE+NetIncomeDividends4.NetIncome=RevenuesExpenses5.A=L+Contributedcapital+BeginningRE+(RevenuesExpenses)Dividends6.Therefore,revenuesincreaseassetsandequity7.expensesdecreasesassetsandequityTimeSeriesanalysisofcommon-sizeincomestatementCrosssectionanalysis（横向分析）ofcommon-sizeincomestatementGrowthanalysisofincomestatementAfewitemsonI/Sexplained1.Costofrevenues=Costofgoodssold(COGS)2.SalesandMarketing3.Selling,generalandadministrative4.Productdevelopment5.Depreciationandamortization6.Operatingincomeorincomefromoperation7.Extraordinaryitem:unusualandinfrequent8.NetIncome9.Earningspershare-primary10.Earningspershare-diluted11.Earningspershare-endofyearnumberofshares,oraveragenumberofshares?12.ProFormaearnings=AsifearningsAOL2000AOL2000EarningsManagement-WhyFormanagers:earnings-basedbonusForshareholders:earnings-basedbondcovenantForthecompany:BetterIPOprice（新股上市发行价）AvoidgovernmentregulationAvoidpayingemployeehighsalariesEarningsManagement-HowAccelerateordelayrevenuesAccelerateordelayexpensesTakeone-timegainsorcharges:bigbathEarningsmanagementWhogain,wholose?EnroncaseWorldcomcasePrice-to-earningsratioP/EP/EisareadyyardstickforvaluationUsecomparablefirmsP/EtopriceIPOstocksP/Eisaroughindicatorofrelativeover-valuationorunder-valuationAverageP/EratioofallstocksonamarketindicatesthelevelofvaluationofthemarketP/EanomalyHighP/Estocks(glamour stocks, growth stocks)earnlowerreturnintheone-year-aheadperiod;lowP/Estocks(value stocks)earnhigherstockreturnsinthesameperiod.Thereturndifferentialisnotexplainedbyrisk.FamaandFrenchJournalofFinance1992,thenumbersaremonthlyreturninpercentageHighP/E23456789LowP/E0.930.941.031.181.221.331.421.461.471.74Caveats（提醒）inusingP/Einvaluation1.NegativeearningscannotbeusedincomputingP/E2.Earningscontaintransitory(临时的）items,orone-timeitemsthatdriveP/Eupordowntemporarily3.P/Eratioismeaningfulonlywhenearningscomefromnormal,repetitiveoperation4.Ininvestingcommunity,peopleusedifferentearningstocomputeP/E,lagearnings,leadearnings,averageearningsInvestingMotto“FinancialStatementislikebikini,whatitrevealsisinteresting,butwhatitconcealsitvital.”BurtonG.Malkiel