某咨询分析方法ratioanalysis230664.pptx

《某咨询分析方法ratioanalysis230664.pptx》由会员分享，可在线阅读，更多相关《某咨询分析方法ratioanalysis230664.pptx（48页珍藏版）》请在淘文阁 - 分享文档赚钱的网站上搜索。

1、 Author:Collins QianRatio AnalysisMarch 19981Ratio AnalysisBOS Agenda Using ratiosTypes of key ratiosprofitabilityturnoverleverageliquiditycoverageReturn on EquityRatio exercisesForecasting exerciseAbbreviationsKey takeaways2Ratio AnalysisBOS Analyzing Ratios Ratios in isolation are meaningless.A co

2、mpanys ratios must be examined over time and/or against its competitors ratios.Historical comparisonCompetitive comparisonCompare present ratios with same companys historical ratiosIn stable situations,historical ratios may be used to project future performanceCompare a companys ratios with similar

3、firms ratios or with industry averages at the same point in timeLook for trendsLook at relative performance3Ratio AnalysisBOS The Art of Ratio Analysis Which ratios are most important in a given situation?What items should be included/excluded in calculating the ratios?How much influence does manage

4、ment have over the ratios?What do the ratios say about the firms strategy?Ratio analysis is an art as well as a science.4Ratio AnalysisBOS The Need for Judgment Potential ProblemManagement can substantially influence financials in the short termImplicationsNeed to use judgment to understand financia

5、lsRatio analysis requires keen judgment.Financial statement data is historical,not pro formaCross-company comparisons are meaningless if adjustments are not made for different accounting conventionsThe timing of the reporting period influences funds flows and requirementsNeed to understand that hist

6、ory does NOT necessarily predict futureNeed to be very sensitive about industry-specific seasonality and cyclicalityNeed to standardize across companies to adjust for different accounting methods5Ratio AnalysisBOS Agenda Using ratiosTypes of key ratiosprofitabilityturnoverleverageliquiditycoverageRe

7、turn on EquityRatio exercisesForecasting exerciseAbbreviationsKey takeaways6Ratio AnalysisBOS Types of RatiosRatios help us understand how well a company is performing.Specifically,how much return is it generating with what level of risk?How well does the company manage costs relative to revenues?Re

8、turnRiskCoverageInterest chargeFixed charge coverageLiquidityCurrent ratioQuick ratioLeverageAsset to equityDebt to equityDebt to total capitalTurnover ReceivablesInventoryPayablesAssetProfitabilityOperating marginROSGross marginHow effective is the company in managing its resources?What are the res

9、pective claims of debt and equity owners?How risky is the business?Is the company able to meet its short-term obligations?Is the company able to meet its long-term obligations?7Ratio AnalysisBOS Profitability Ratios-Definitions*This is not a profitability ratio,but it does impact ROSProfitability ra

10、tios use line items from the income statement.RatiosDefinitionsGross profit margin(or gross margin)Sales-cost of goods soldSalesOperating profit margin(or operating margin)Earnings before interest and taxesSalesReturn on sales(ROS)Profit after taxSalesEffective tax rate*TaxesProfit before tax8Ratio

11、AnalysisBOS Profitability Ratios-Description Profitability(or margin)ratios are a function of both the industry and a companys position within the industryboundaries are set by the operating characteristics of the industrywithin these boundaries profitability ratios are determined by a players relat

12、ive positionBain typically uses gross profit and operating profit to measure profitabilityROS can be altered by non-operating activities,such as sources of financing or tax rate manipulationsExtraordinary items,because they are for unusual events,such as discontinued items or asset sales,are exclude

13、d when we analyze the performance of the base businessProfitability ratios measure a firms ability to manage costs relative to revenues.9Ratio AnalysisBOS Profitability Ratios-Over Time Gross profit margin should stay constant or increase because cost of goods sold should be a constant percent of sa

14、les or should decrease as company gets price increases and/or volume discounts Operating margin should increase as fixed administrative and sales costs are spread over a greater number of unitsEffective tax rate should stay constant or decrease since a larger firm is able to take advantage of more t

15、ax sheltersAs a company grows,its return on sales should increase.Higher return on sales 10Ratio AnalysisBOS Profitability Ratios-Market Leader Gross profit margin should be higher since a market leader can typically charge more for its goods and/or receive the greatest volume discounts from supplie

16、rsOperating profit margin should be significantly higher,because higher volume means fixed costs are spread over more units and because the gross profit margin is higherThere should be no significant difference in the effective tax rateReturn on sales should be significantly higher because the opera

17、ting margin should be significantly higherThe market leader in an industry should have the best profitability ratios.This is consistent with the ROS/RMS concept which says that companies with high relative market share have high returns on sales11Ratio AnalysisBOS Turnover Ratios-DefinitionsNote:Ave

18、rage=(Year Beginning+Year End)/2*Sales is often a good proxy*Cost of goods sold is often a good proxy*Typically we use 365 days(i.e.,1 year)for the periodTurnover ratios use a combination of income statement and balance sheet items.RatiosDefinitionsReceivables turnoverCredit sales in period*Accounts

19、 receivable average balanceInventory turnoverCost of goods sold in periodAverage inventory in periodPayables turnoverPurchases on account*Accounts payable average balanceAsset turnoverSales in periodAverage assetsAny turnover ratio can be expressed as a period ratio which measures the number of days

20、 in the cycleDays in period*Turnover ratioPeriod ratio=12Ratio AnalysisBOS Turnover Ratios-Transaction Cycle*Accounts payable,inventory,and accounts receivable are the major components of working capitalIt is critical for a firm to manage its payables,inventory,and receivables.*Cash inflowCash colle

21、cted for sales madeCash outflowRaw materials purchasedCash disbursed for raw materials purchasedFinished goods inventorySales madeAccounts receivable periodAccounts payable periodXXX13Ratio AnalysisBOS Turnover Ratios-Description Turnover ratios measures how many times per year a given resource is c

22、onsumedPeriod ratios measure the number of days that is takes for a given resource to“turn over”Managements objective is to stretch out the accounts payable period(i.e.,have low accounts payable turnover)and shorten the periods for accounts receivable and inventory(i.e.,have high accounts receivable

23、 and inventory turnover)Turnover ratios measure how well a firm is managing its resources.14Ratio AnalysisBOS Turnover Ratios-Tradeoffs Ratio ImprovementsDecrease the receivables collection periodi.e.,collect the accounts receivable fasterDecrease the inventory holding periodi.e.,sell completed prod

24、ucts fasterIncrease the account payable periodi.e.,take longer to pay suppliersStrategic TradeoffIf the receivables collection period is too short,customers may buy at a competitor that has more generous credit terms.(Often this period is dictated by industry norms)If the inventory holding period is

25、 too short the company may not have enough inventory to fill a big order.Also,the company may not be able to outlast a strike,either at its own facility or at one of its primary suppliers facilitiesIf the accounts payable period is too long,suppliers could raise their prices,charge interest(often at

26、 very high rates),or even refuse to supply the firm on credit.Also,workers may get restless if they have to wait longer to receive their paychecks.Managing turnover ratios means managing strategic trade-offs.15Ratio AnalysisBOS Leverage Ratios-Definitions*All three ratios here are called“leverage”ra

27、tios by different people,so be sure to understand which ratio is being used when someone is talking about leverageLeverage ratios use line items from the balance sheet.Ratios*DefinitionsDuPont leverage ratioAssetsEquityDebt to equity ratioLong-term debtEquityDebt to total capitalor debt to total ass

28、ets ratioTotal liabilitiesDebt+equityTotal liabilitiesAssets=16Ratio AnalysisBOS Leverage Ratios-Description Money can be raised from debt sources(banks,bond markets)or equity sources(stockholders)Leverage ratios reflect both the financing policies of the firm and the riskiness of the businessIn ord

29、er to analyze a firms leverage ratios,one needs to understand the definitions of debt and equityLeverage ratios measure the respective claims of debt and equity holders.17Ratio AnalysisBOS Debt Versus Equity Contractual payments over the life of the loanInvestor legally guaranteed full return of pri

30、nciple plus interestnothing above thatIn case of liquidation,debtor has preferential claim on proceeds from sale of assetsNo guaranteed payments from common stockInvestor“owns”part of firmright to appreciation of firms valueIn case of liquidation,equity owner takes what is left(may be nothing)Debt a

31、nd equity have very different characteristics.Debt=anything that contractually requires payments to be made before the equity holders have access to the firms earningsEquity=the value of the firm left over after all the debt holders have been paidLower risk to investor;investor demands lower returnH

32、igher risk to investor;investor demands higher return18Ratio AnalysisBOS Debt Questions-Debt and Equity Debt in Leverage RatiosBain typically looks only at long-term debt(debt with a term of 1 year or more)Accountants measure debt as short-term debt plus long term debtEquity in Leverage RatiosBain t

33、ypically uses the market value of equity(I.e.,the share price multiplied by the number of shares).Others may use the book value of equity,which is the amount shown on the balance sheet19Ratio AnalysisBOS Debt Questions Accounts payable?Short-term debt?Long-term debt?Cancelable leases?Noncancelable l

34、eases?Preferred stock?Common stock?Deferred tax?Would you define the following as debt?20Ratio AnalysisBOS Debt Answers Accounts payableShort-term debtLong-term debtCancelable leasesNoncancelable leasesSome items are clearly debt,others are clearly not debt,still others are debatable.Not debt.It is

35、part of working capital,and is“secured”by the inventory and receivables that it is used to financeDebt,if it used to finance capital expansions of the companyNot debt,if it used to finance working capitalDebt.Not debt.Because they are cancelable,they are not contractual obligationsDebt.Because they

36、are non-cancelable,they are contractual obligations.(For all publicly traded US companies,the present value of all the noncancelable lease payments must be disclosed in balance sheet footnotes.)Debatable Argument for equity-contractual obligations to pay dividends on preferred stock are met after de

37、btholders claims are metArgument for debt-there is a contractual obligation to pay dividends on preferred stock before common stock dividend payments can be madeNot debt.It is equityCommon stockDebt,but debatable.Often considered debt given long-term natureDeferred taxPreferred stock21Ratio Analysis

38、BOS Liquidity and Coverage Ratios-DefinitionsLiquidity ratios use line items from the balance sheet.Coverage ratios use line items from the income statement.RatiosDefinitionsCurrent ratioCurrent assetsCurrent liabilitiesQuick ratio(acid test)Cash+marketable securities+receivablesCurrent liabilitiesI

39、nterest coverage ratioEarnings before interest and taxesInterest expenseFixed charge coverageEarnings before interest and taxesAll essential payments(including lease payments)Liquidity:Coverage:22Ratio AnalysisBOS Liquidity and Coverage Ratios-Description Acceptable values for these ratios differ by

40、 industry.However,when the current ratio or coverage ratios fall below 1 that means the firm is unable to meet its obligationsIt is a useful exercise to calculate how much revenue could drop(or costs rise)before coverage would drop below 1Liquidity ratios measure the firms ability to meet its short-

41、term obligations.Coverage ratios measure the firms ability to meet its long-term obligations.23Ratio AnalysisBOS Agenda Using ratiosTypes of key ratiosprofitabilityturnoverleverageliquiditycoverageReturn on EquityRatio exercisesForecasting exerciseAbbreviationsKey takeaways24Ratio AnalysisBOS Return

42、 on Equity Return on equity is defined as profit after tax(earnings)divided by equity.It relates economic outputs(profit)to inputs(equity).It tells us the amount of profits the company earned on each dollar the stockholders invested in the firm.It is important to note that not all of the earnings ar

43、e paid to the stockholders when they are earned.8Only some portion of the earnings will be returned now in the form of dividends.The remainder(retained earnings)will be re-invested in the company to finance growth8The size of the divided is decided by the board of directors;an individual stockholder

44、 has no influence over when he/she actually receives the return that he/she has earnedIt is a combination of profitability,turnover,and leverage ratiosReturn on equity,ROE,is the acid test of success for a business.25Ratio AnalysisBOS DuPont Formula By separating ROE into its components,one can gain

45、 insight into how to improve the performance of a business.ROE=Profit after taxEquityROE=Profit after taxSalesSalesAssetsAssetsEquityXXReturn on AssetsLeverageROSAsset turnoverThis is known as the DuPont formulaROE=Profitability X Turnover X Leverage26Ratio AnalysisBOS Agenda Using ratiosTypes of ke

46、y ratiosprofitabilityturnoverleverageliquiditycoverageReturn on EquityRatio exercisesForecasting exerciseAbbreviationsKey takeaways27Ratio AnalysisBOS Unidentified Industries Exercise The objective of this exercise is to test your understanding of financial ratios.Exercise:The balance sheets(in perc

47、entage form)and selected ratios for six industries are given on the following page.Please match each of the six industries to the financial informationCoal miningGrocery storesHotels and motelsLegal servicesPackaged softwarePotato chips and snacks 28Ratio AnalysisBOS Unidentified Industries Exercise

48、-DataIndustry Balance Sheet(%)ABCDEF*Ratios do not tie to balance sheet items because they were calculated using a slightly different data set.*This is NOT inventory turns.Inventory turns would be COGS to inventory.*Sales to assetsSource:Industry Norms Key Business Ratios,Dun&BradstreetCashAccounts

49、receivableNotes receivableInventoryOther currentTotal current assetsFixed assetsOther non-current assetsTotal assetsAccounts payableBank loansNotes payableOther current liabilitiesTotal current liabilitiesOther long-term liabilitiesDeferred creditsNet worthTotal liabilities&net worthRatios*Quick rat

50、io(times)Current ratio(times)Total liabilities to net worth(%)Collection period(days)Sales to inventory(times)*Assets turns*(times)Gross margin(%)Return on sales(%)Return on assets(%)Return on equity(%)9.8%4.00.61.44.620.465.114.5 100.0%3.60.12.411.817.944.60.337.2 100.0%0.7x1.2x127%9.1 days78.5x0.7