Kế toán, kiểm toán - Chapter 6: Analysis of basic financial statements

Chapter 6 Analysis of basic financial statements1 2004 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting for Business - A non-accountant’s guide 2/e by ObjectivesExplain the importance of comparisons and trends in financial statement analysis.Calculate the ratios related to the profitability and financial stability of a business, from a given set of financial statements.2 2004 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting for Business - A non-accountant’s guide 2/e by Objectives (continued) Analyse a given set of financial statements in terms of:Managerial performanceEarning capacityFinancial riskShareholder return.Prepare a report evaluating a business’s results and future prospects3 2004 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting for Business - A non-accountant’s guide 2/e by Comparisons and trends in financial statement analysisMost businesses analyse their performancefor the year by using the ratio analysis approach.Presents results are compared with:results obtained from previous years activitiesindustry averagesresults from creditorsabsolute standards.4 2004 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting for Business - A non-accountant’s guide 2/e by Calculating ratiosProfitability ratios help management to evaluate profitable the activities of the business have been.Financial stability ratios show either short term or long term positions.5 2004 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting for Business - A non-accountant’s guide 2/e by Calculating ratios (continued)The main groups of ratios are:Liquidity (short term)Activity (short term, and profitability)Leverage (long term)Profitability (profitability)Market related (profitability)6 2004 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting for Business - A non-accountant’s guide 2/e by Liquidity ratios (short-term stability)Working capital ratio = Current assets Current liabilitiesQuick assets ratio = Current assets - Inventory Current liabilities - Overdraft7 2004 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting for Business - A non-accountant’s guide 2/e by Activity ratiosInventory turnover = Cost of goods sold Average inventoryAccounts receivable turnover = Credit sales Average accounts receivableAverage collections period =Average accounts receivable Average daily credit sales8 2004 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting for Business - A non-accountant’s guide 2/e by Activity ratios (continued)Total assets turnover = Sales Average total assetsFixed assets turnover = Sales Average fixed assets9 2004 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting for Business - A non-accountant’s guide 2/e by Leverage ratios Debt to assets ratio= Total debt X 100 (gearing ratio) Total assets 1 Earnings coverage ratio = Long-term debt X 100 Shareholders’ funds 1 10 2004 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting for Business - A non-accountant’s guide 2/e by Profitability ratiosNet profit margin ratio = NPAT* X 100 Sales 1Return of shareholders funds =Net profit after tax X 100 Shareholders funds 1 Gross profit ratio = Gross profit X 100 Sales 1 * Net Profit After Tax11 2004 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting for Business - A non-accountant’s guide 2/e by Profitability ratios (continued)Operating expense ratio =Operating expenses X 100 Sales 1 Return on total assets =Net profit after tax X 100 Total assets 1 12 2004 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting for Business - A non-accountant’s guide 2/e by Market related or performance-related ratiosEarnings per ordinary shareNet profit after tax – preference dividends/no. of ordinary shares on issuePrice earnings ratioShare market price / earnings per shareDividend yield ratioDividend per share / share market price13 2004 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting for Business - A non-accountant’s guide 2/e by Market related or performance-related ratios (continued)Insert example 1 and solution page 86 and 8714 2004 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting for Business - A non-accountant’s guide 2/e by Market related or performance-related ratios (continued)15 2004 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting for Business - A non-accountant’s guide 2/e by Market related or performance-related ratios (continued)16 2004 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting for Business - A non-accountant’s guide 2/e by Market related or performance-related ratios (continued)17 2004 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting for Business - A non-accountant’s guide 2/e by Market related or performance-related ratios (continued)18 2004 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting for Business - A non-accountant’s guide 2/e by Market related or performance-related ratios (continued)19 2004 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting for Business - A non-accountant’s guide 2/e by Market related or performance-related ratios (continued)20 2004 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting for Business - A non-accountant’s guide 2/e by Market related or performance-related ratios (continued)21 2004 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting for Business - A non-accountant’s guide 2/e by Market related or performance-related ratios (continued)22 2004 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting for Business - A non-accountant’s guide 2/e by Analysing and preparing a reportA report should include a title stating what the report is, who prepared it and whom prepared it. It must contain the following conclusions:solvency of the businessinventory is turning over adequatelyaccount receivable turnover analysisselling price decisionsshort and long term profitability decisionsmanagement analysisinvestor summary.23 2004 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting for Business - A non-accountant’s guide 2/e by