Analysis of Financial Statements参考.ppt

* * * * * * * * * Reducing Accounts Receivable and the Days Sales Outstanding Reducing A/R will have no effect on sales Initially shows up as addition to cash. 4-* Effect of Reducing Receivables on Balance Sheet and Stock Price Added Cash $ 261 Debt $1,545 A/R 617 Other CA 1,802 Net FA 817 Equity 1,952 Total Assets $3,497 Total LE $3,497 What could be done with the new cash? How might stock price and risk be affected? 4-* Potential Uses of Freed Up Cash Repurchase stock Expand business Reduce debt All these actions would likely improve the stock price. 4-* Potential Problems and Limitations of Financial Ratio Analysis Comparison with industry averages is difficult for a conglomerate firm that operates in many different divisions. Different operating and accounting practices can distort comparisons. Sometimes it is hard to tell if a ratio is “good” or “bad.” Difficult to tell whether a company is, on balance, in a strong or weak position. 4-* More Issues Regarding Ratios “Average” performance is not necessarily good, perhaps the firm should aim higher. Seasonal factors can distort ratios. “Window dressing” techniques can make statements and ratios look better than they actually are. Inflation has distorted many firms’ balance sheets, so analyses must be interpreted with judgment. 4-* Consider Qualitative Factors When Evaluating a Company’s Future Financial Performance Are the firm’s revenues tied to one key customer, product, or supplier? What percentage of the firm’s business is generated overseas? Firm’s competitive environment Future prospects Legal and regulatory environment 4-* * * * * * * * * * * * * * * * * * * * * * * * * * * ? 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, or duplicated, or posted to a publicly accessible website, in whole or in part. ? 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, or duplicated, or posted to a publicly accessible website, in whole or in pa