Basics of AnalysisCOPYRIGHT 2007 Thomson South-Western, a part of the Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.Chapter 51Ratio AnalysisLiquidityMeasures a firms ability to meet its current obligationsLeverage (borrowing capacity)Measures the degree of protector for long-term creditorsProfitabilityMeasures the earning ability of a firmInvestor-focusedCash flowIndicate liquidity, borrowing capacity, and profitability2Ratio AnalysisInterpreted in comparison withPrior ratiosCompetitor ratiosIndustry ratiosPredetermined standards3Complexities and ContextUse of average data from balance sheet accountsNecessary when comparing against income statement dataDoes notEliminate cyclical or seasonal variationsCapture changes that occur unevenly throughout the yearAnalysis must be performed and understood within the context ofNative accounting principlesNative business practices and culture4Common-Size AnalysisThe use of percentages is usually preferable to the use of absolute amountsVertical analysisAll amounts of a year expressed as a percentage of a base amount (e.g., net sales revenue, total assets)Horizontal analysisAmounts for comparative years are expressed as a percentage of the base year amount5Vertical AnalysisEach financial statement element is presented as a percentage of a designated base.6Horizontal AnalysisEach financial statement element is presented as a percentage of a base amount from a selected year.7Year-to-Year Change AnalysisUse both absolute and percentagesGuidelines:When an item has value in the base year and none in the next period, the decrease is 100%A meaningful percent change cannot be computed when one number is positive and the other number is negativeA percent change is incomputable when there is no figure for the base year.8Industry VariationsFinancial components vary by type of industryMerchandisingInventory is a principal assetSales may be primarily for cash or on creditServiceInventory is low or nonexistentManufacturingLarge inventory holdingsSubstantial investment in plant assets9Descriptive InformationNarrative dataAnnual reportTrade periodicalsIndustry reviewsFurther explains the financial position of a firm10ComparisonsProvides context for analysis of ratios and financial dataCommon typesTrend analysisSIC: Standard Industrial ClassificationNAICS: North American Industry Classification SystemIndustry averages; competitor comparisons11Comparisons: Trend AnalysisA study of the financial history of a firmLongitudinal ratio comparisonFallingRisingRelatively constantHighlightEffective managementEvidence of problems12Comparisons: SICClassifies business by industryDefines industries in accordance with the composition and structure of the economyCoding structureDivisionMajor groupIndustry groupIndustryReported in SEC registrant filings13Comparisons: NAICSJoint creation of NAFTA partners: Canada, U.S., and MexicoIndustry is defined by similar production processesCoding structureSectorSub-sectorIndustry groupNAICS industryNational industry14Comparisons: IndustryIndustry comparison complicated by highly diversified companiesFinancial servicesBase their analysis on industry placementProvide composite industry data15Financial Services PublicationsPublicationServiceCoverageDataClassificationThe Department of Commerce Financial ReportEconomic Surveys Division, Bureau of the CensusManufacturing, mining, and trade corporationsIncome statement and balance sheet data and ratiosNAICSAnnual Statement StudiesRisk Management AssociationManufacturing, wholesaling, retailing, service, agriculture, and constructionCommon-size financial statements and ratiosNAICS and SICStandard & Poors Industry SurveysStandard & Poors50 North American and global industriesIndustry write-ups and statisticsNAICSAlmanac of Business and Industrial Financial RatiosCCH, Inc.192 industriesCorporate tax return dataNAICS16Financial Services Publications (contd)PublicationServiceCoverageDataClassificationIndustry Norms and Key Business RatiosDun & Bradstreet800 business lines; 5 segmentsCondensed financial statements; ratiosSICvariousValue Line Investment Service98 industriesLongitudinal financial information17Comparisons: CautionRatios are subject to variance from:Differing dataInconsistent formula constructionOptional (elective) accounting treatmentDifferent fiscal year-endsVarying financial policiesInconsistent basis (before or after tax)18Relative Size of FirmComparison of disparate size firmsCapital market accessEconomy of scale (purchasing)Wider customer baseInformationAbsolute: amplifies comparison difficultyCommon-size: eliminates some of the difficultyPercent of market helps to define relative size19Other Resources: Wards Business DirectoryDomestic and public companies8-volume setV1, 2, 3Alphabetical listingV4State and ZIP codeV5SIC codeV6-7State then SIC codeV8NAICS code then revenue20Other Resources: Standard & Poors Stock ReportsCompanies listed on various stock exchangesAlphabetical by exchangeNYSEAmerican Stock ExchangeNASDAQ stock marketRegional exchanges21Other Resources: Standard & Poors Register Of Corporations, Directors, And Executives3-volumesV1Alphabetical by firm nameV21Alphabetical listing of key individualsV22Industries in 7 subsections22Other Resources: Standard & Poors Analysts HandbookSelected income statement and balance sheet itemsRelated ratiosApplicable to Standard & Poors industry group stock price indexes23Other Resources: Standard & Poors Corporation RecordsU.S. corporationsBackground informationDetailed financial statistics24Other Resources: Americas Corporate Families: The Billion Dollar DirectoryCorporate family listingsAlphabeticalGeographicalSICCross-reference divisions, subsidiaries, and ultimate parent companies25Other Resources: D&B Million Dollar DirectoryCompany listingsAlphabeticalGeographicallySIC26Other Resources: Directory Of Corporate AffiliatesCorporate informationDivisionsSubsidiariesAffiliatesIndexesAlphabeticalGeographicalSIC27Other Resources: Thomas Register Of American ManufacturersComprehensive referenceProductsServicesCompany profilesCatalog file28Other Resources: Mergent Industrial ManualNew York and American Stock ExchangesHistoryBusinessPropertiesSubsidiariesFinancial statementsSIC codes29Other Resources: Security Owners Stock GuidePublished by Standard & PoorsSurvey of 5,300 stocksTrading activityPrice rangeDividendsetc.30Other Resources: Standard & Poors Statistical ServiceIndustry statisticsAgricultureMetalsBuildingTransportationetc.31Other Resources: Dividend RecordsMergent Dividend RecordStandard & Poors Annual Dividend RecordProvide dividend records of virtually publicly owned American and some foreign companies32Other Resources: D&B Reference Book of Corporate ManagementsPrinciple corporate officersYear of birthEducationMilitary servicePresent business positionPrevious positions33Other Resources: Compact DisclosureDatabase of textual and financial informationAnnual and periodic reports filed with the SECContentsMajor financial statementsFinancial ratiosInstitutional holdingsInsider ownershipPresidents letterFinancial notes34Other Resources: Lexis-NexisAccounting, legal, newspaper, and periodical informationFinancial statements from annual reports35The Users of Financial StatementsManagementAnalyze information from the perspective of both investors and creditorsInvestorsAnalysis of past and present information to project the future prospects of the entityCreditorsShort-term: focus is on current resourcesLong-term: consider the future prospects of the firm36谢谢 谢！谢！ 放映结束 感谢各位的批评指导！让我们共同进步