Vous êtes sur la page 1sur 37

Financial Statement

Analysis
CHARLES H. GIBSON

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or
otherwise on a password-protected website for classroom use.
Chapter
5

Basics of Analysis

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for
use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for
classroom use.
Ratio Analysis
• Liquidity ratios
– Measures a firm’s ability to meet its current
obligations
• Borrowing capacity (leverage) ratios
– Measures the degree of protection for long-term
creditors
• Profitability ratios
– Measures the earning ability of a firm
• Cash flow ratios

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain
product or service or otherwise on a password-protected website for classroom use.
Ratio Analysis—Continued
• Interpreted in comparison with
– Prior ratios
– Competitor’s ratios
– Industry ratios
– Predetermined standards
• Trend and variability of a ratio are important
considerations

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain
product or service or otherwise on a password-protected website for classroom use.
Complexities and Context
• Use of average data from balance sheet
– Necessary when comparing with income statement
data
– Does not
• Eliminate seasonal or cyclical variations
• Reflect changes that occur unevenly throughout the year
• Analysis must be performed and understood
within the context of
– Native accounting principles
– Native business practices and culture

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain
product or service or otherwise on a password-protected website for classroom use.
Common-Size Analysis
• The use of percentages is usually preferable to
the use of absolute amounts
• Vertical analysis
– All amounts of a year expressed as a percentage of a
base amount of the same year (e.g., net sales
revenue, total assets)
• Horizontal analysis
– Amounts for comparative years are expressed as a
percentage of the base year amount

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain
product or service or otherwise on a password-protected website for classroom use.
Exhibit 5-1: Melcher Company—
Vertical Common Size

Each financial statement element is presented as a percentage of a


designated base which is sales revenue on the income statement
© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain
product or service or otherwise on a password-protected website for classroom use.
Exhibit 5-1: Melcher Company—
Horizontal Common Size

Each financial statement element is presented as a percentage of a


base amount from a selected year
© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain
product or service or otherwise on a password-protected website for classroom use.
Year-to-Year Change Analysis
• Use both absolute and percentages
• Guidelines
– 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
negative
– No percent change is computable when there is no
figure for the base year

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain
product or service or otherwise on a password-protected website for classroom use.
Industry Variations
• Financial components vary by type of industry
• Merchandising
– Inventory is a principal asset
– Sales may be primarily for cash or on credit
• Service
– Inventory is low or nonexistent
• Manufacturing
– Large inventory holdings
– Substantial investment in plant assets
– Cost of sales often represents the major expense
© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain
product or service or otherwise on a password-protected website for classroom use.
Descriptive Information
• Narrative data
– Annual report
– Trade periodicals
– Industry reviews
• Further explains the financial position of a firm
• Management Discussion and Analysis (MD&A)
provides an overview of the previous year and of
future goals and new projects

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain
product or service or otherwise on a password-protected website for classroom use.
Comparisons
• Provides context for analysis of ratios and
financial data
• Common types
– Trend analysis
– Standard Industrial Classification (SIC) Manual
• The U.S. Department of Labor provides Web site that details
the SIC manual
– North American Industry Classification System
(NAICS)
– Industry Averages and Comparison with Competitors

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain
product or service or otherwise on a password-protected website for classroom use.
Comparisons: Trend Analysis
• A study of the financial history of a firm
• It reveals whether the ratio is
– Falling
– Rising
– Relatively constant
• Highlight
– Effective management
– Evidence of problems

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain
product or service or otherwise on a password-protected website for classroom use.
Comparisons: SIC
• Classifies business by industry
• Defines industries in accordance with the
composition and structure of the economy
• Coding structure
– Two-digit major group number
– Three-digit industry group number
– Four-digit industry number

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain
product or service or otherwise on a password-protected website for classroom use.
Comparisons: NAICS
• Jointly created by the U.S., Canada, and Mexico
• Industry is defined by similar production
processes
• U.S. Census Bureau provides a Web site
(www.census.gov) that that details the NAICS
manual. Go on this site and under “business and
industry” click on NAICS

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain
product or service or otherwise on a password-protected website for classroom use.
Comparisons: Industry Averages
• Industry comparison complicated by highly
diversified companies
• Financial services
– Base their analysis on industry placement
– Provide composite industry data

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain
product or service or otherwise on a password-protected website for classroom use.
Financial Services’ Publications
Publication Publisher(s) Coverage Data Classification
The Department Economic Manufacturing, Income NAICS
of Commerce Surveys mining, and statement
Financial Report Division, Bureau trade and balance
of the Census corporations sheet data
and ratios
Annual Risk Manufacturing, Common- NAICS or SIC
Statement Management wholesaling, size financial
Studies Association retailing, statements
service, and 16
agriculture, and selected
construction ratios
Standard & Standard & North American Industry NAICS
Poor’s Industry Poor’s and global write-ups
Surveys industries and statistics

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain
product or service or otherwise on a password-protected website for classroom use.
Financial Services’ Publications—
Continued
Publication Publisher(s) Coverage Data Classification
Almanac of CCH, Inc. 200 industries Corporate NAICS
Business and tax return
Industrial data
Financial Ratios

Industry Norms Dun & 800 business Condensed SIC


and Key Bradstreet lines financial
Business Ratios statements;
ratios

Value Line The Standard 1 to 97 Longitudinal


Investment Edition and the industries; financial
Survey Small & 1 to 84 information
Mid-Cap Edition industries

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain
product or service or otherwise on a password-protected website for classroom use.
Comparisons: Caution in Using
Industry Averages
• Ratios are subject to variance from
– Differing data
– Inconsistent formula construction
– Optional (elective) accounting treatment
– Different fiscal year-ends
– Varying financial policies
– Inconsistent basis (before or after tax)

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain
product or service or otherwise on a password-protected website for classroom use.
Relative Size of Firm
• Comparison of disparate size firms
– Capital market access
– Economy of scale (purchasing)
– Wider customer base
• Information
– Absolute numbers amplifies comparison difficulty
– Common-size analysis help to eliminate some of the
difficulty
• Percent of market helps to define relative size

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain
product or service or otherwise on a password-protected website for classroom use.
Ward’s Business Directory
• Covers domestic private and public companies
• Up to 20 items of information are provided for
each company listed
• Went digital in 2007 under Gale Directory
Library

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain
product or service or otherwise on a password-protected website for classroom use.
Standard & Poor’s Stock Reports
• Companies listed on various stock exchanges
– New York Stock Exchange
– American Stock Exchange
– NASDAQ stock market
– Regional exchanges
• Arranged Alphabetically by stock exchanges
– Contains brief analysis of companies regularly traded

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain
product or service or otherwise on a password-protected website for classroom use.
Standard & Poor’s Register Of
Corp., Directors, And Executives
• Contains 2-volumes
– Volume 1
• Alphabetical list of approximately 75,000 corporations
– Volume 2,
• Section 1 contains an alphabetical list of over 70,000
individuals serving as officers, directors, trustees, partners,
and so on
• Section 2 is divided into seven subsections providing
additional details

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain
product or service or otherwise on a password-protected website for classroom use.
Standard & Poor’s Analyst’s
Handbook
• Selected income statement and balance sheet
items
• Related ratios
• Applicable to Standard & Poor’s industry group
stock price indexes
• Brief monthly updates for selected industries
supplement the annual editions of the handbook

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain
product or service or otherwise on a password-protected website for classroom use.
Standard & Poor’s Standard
Corporation Descriptions
• U.S. corporations
– Background information
– Detailed financial statistics
• The contents and the index are updated
throughout the year

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain
product or service or otherwise on a password-protected website for classroom use.
Standard & Poor’s Security
Owner’s Stock Guide
• Covers 5,300 common and preferred stocks
• It contains trading activity, price range,
dividends, and so on, for companies traded on
– New York Stock Exchange
– American Stock Exchange
– Over the Counter
– Regional Exchanges

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain
product or service or otherwise on a password-protected website for classroom use.
Standard & Poor’s Statistical
Service
• Industry statistics on industries such as
– Agriculture
– Metals
– Building
– Transportation
• Additional statistics are included such as price
indexes and daily highs, lows, and closes for
stock

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain
product or service or otherwise on a password-protected website for classroom use.
Standard & Poor’s Net Advantage
• Available at many academic, public, and
corporate libraries, and information centers
• Other publication available with Net Advantage
– Standard & Poor’s Stock Reports
– Standard & Poor’s Register of Corporations, Directors
and Executives
– Stand and Poor’s Standard Corporation Descriptions

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain
product or service or otherwise on a password-protected website for classroom use.
Mergent and Standard & Poor’s
Dividend Record
• Provide a dividend record of payments on
virtually all publicly owned American and some
foreign companies

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain
product or service or otherwise on a password-protected website for classroom use.
D&B® Million Dollar Directory®
• Companies must meet at least one of two
inclusion requirements
– $9 million or more in sales volume
– 180 or more employees if company is a headquarters
single location, 900 or more if employees if company
is a branch
• Company listings in Volumes
– Alphabetical
– Geographically
– SIC

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain
product or service or otherwise on a password-protected website for classroom use.
Directory Of Corporate Affiliates™
• Gives an in-depth view of companies and their
divisions, subsidiaries, and affiliates
• Contains an alphabetical index, geographical
index, and SIC classifications
• The parent company listing consists of address,
telephone number, stock ticker symbol, stock
exchange(s), approximate sales, number of
employees, type of business, and top corporate
officers

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain
product or service or otherwise on a password-protected website for classroom use.
Thomas Register Of American
Manufacturers
• Comprehensive reference
– Products and services
– Company profiles
– Catalog file

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain
product or service or otherwise on a password-protected website for classroom use.
Mergent Industrial Manual and
News Reports
• Published in two volumes
• Covers 2000 industrial corporations listed
– On New York and American Stock Exchanges and
other selected exchanges
• Provides information such as history, business,
properties, subsidiaries, financial statements,
and SIC codes

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain
product or service or otherwise on a password-protected website for classroom use.
D&B Reference Book of Corporate
Managements
• Contains profile information on over 200,000
principal corporate officers in over 12,000
companies
• This information includes
– Year of birth
– Education
– Military service
– Present business position
– Previous positions

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain
product or service or otherwise on a password-protected website for classroom use.
Compact Disclosure
• Database of textual and financial information on
about 12,000 public companies
• Taken from reports filed with the SEC
• Contents
– Major financial statements
– Financial ratios
– Institutional holdings
– Insider ownership
– President’s letter
– Financial notes
© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain
product or service or otherwise on a password-protected website for classroom use.
Lexis-Nexis
• Provides accounting, legal, newspaper, and
periodical information
• Includes financial statements from annual
reports for thousands of publicly traded
companies

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain
product or service or otherwise on a password-protected website for classroom use.
The Users of Financial Statements
• Management
– Analyze information from the perspective of both
investors and creditors
• Investors
– Analysis of past and present information to project the
future prospects of the entity
• Creditors
– Short-term creditor focus on current resources
– Long-term creditors consider the future prospects of
the firm

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain
product or service or otherwise on a password-protected website for classroom use.