金融學(xué)第二版講義大綱及課后習(xí)題答案詳解第三章

1、CHAPTER 3INTERPRETING AND FORECASTING FINANCIAL STATEMENTSObjectives· To contrast the economic and accounting models of the firm.· To show how accounting information can be useful to the financial decision maker when used with care.· To understand the purpose and process of financial

2、planning.· To understand why firms need working capital and how to manage it so as to maximize shareholder value. Outline3.1Functions of Financial Statements3.2Review of Financial Statements3.3Market Values Versus Book Values3.4Accounting versus Economic Measures of Income3.5Returns to Sharehol

3、ders versus Return on Book Equity3.6Analysis Using Financial Ratios3.7The Financial Planning Process3.8Constructing a Financial Planning Model3.9Growth and the Need for External Financing3.10Working Capital Management3.11Liquidity and Cash BudgetingSummaryFinancial statements serve three important e

4、conomic functions:· They provide information to the owners and creditors of the firm about the companys current status and past financial performance.· They provide a convenient way for owners and creditors to set performance targets and impose restrictions on the managers of the firm.

5、83; They provide convenient templates for financial planning.The basic accounting statements reviewed are the income statement, the balance sheet, and the statement of cash flows. The income statement reports the results of operations over the period, and is based on the model of revenues minus cost

6、s (including depreciation and taxes) equals net income or earnings. The balance sheet shows the assets (both current and long-term (fixed) assets) on the one hand, and the claims against these (i.e., the liabilities and equity), on the other. The statement of cash flows gives a summary of cash flows

7、 from operating, investing, and financing activities for the period.A firms accounting balance sheet differs from an economic balance sheet because:· It omits some economically significant assets and liabilities and · It does not report all assets and liabilities at their current market va

8、lues.Analysts use financial ratios as one mode of analysis to better understand the companys strengths and weaknesses, whether its fortunes are improving, and what its prospects are. These ratios are often compared with the ratios of a comparable set of companies and to ratios of recent past periods

9、. The five types of ratios are profitability, turnover, financial leverage, liquidity, and market value ratios. Finally, it is helpful to organize the analysis of these ratios in a way that reveals the logical connections among them and their relation to the underlying operations of the firm.The pur

10、pose of financial planning is to assemble the firms separate divisional plans into a consistent whole, to establish concrete targets for measuring success, and to create incentives for achieving the firms goals. The tangible outcome of the financial planning process is a set of “blueprints” in the f

11、orm of projected financial statements and budgets. The longer the time horizon, the less detailed the financial planIn the short run, financial planning is concerned primarily with the management of working capital. The need for working capital arises because for many firms, cash needed to conduct i

12、ts production and selling activities starts to flow out before cash flows in. The longer this time lag, which is called the length of the cash flow cycle, the more the amount of working capital the firm needs. A firms need for working capital is measured as the sum of cash equivalents, prepaid expen

13、ses, receivables, and inventories minus the sum of customer advances, payables, and accrued expenses. The main principle behind the efficient management of a firms working capital is to minimize the amount of the firms investment in low-earning current assets such as receivables and inventories and

14、maximize the use of low-cost financing through current liabilities such as customer advances and accounts payable. Cash management is important because even a profitable firm can go bankrupt if it becomes illiquid.Solutions to Problems at End of ChapterProblems 3.1 through 3.8 are based on the follo

15、wing information:The Ruffy Stuffed Toy Companys balance sheet at the end of 19x7 was as follows:AssetsCash27,300Accounts Receivable35,000Inventory57,000Total Current Assets119,300Property, Plant, and EquipmentEquipment25,000Less Accumulated Depreciation<2,500>Net Equipment22,500Furniture16,000

16、Less Accumulated Depreciation<2,000>Net Furniture14,000Total Prop, Plant, Equip36,500Total Assets155,800Liabilities and Shareholders EquityPayables Accounts Payable65,000 Salary Payable3,000 Utilities Payable1,500Loans (Long-term debt)25,000Total Liabilities94,500Common Stock45,000Retained Ear

17、nings16,300Total Shareholders Equity61,300Total Liabilities & Shareholders Equity155,800During 19x8, the Ruffy Stuffed Toy Company recorded the following transactions:a.b. Early in the year, purchased a new toy stuffing machine for $9,000 cash and signed a 3-year note for the balance of $12,000.

18、c. Had cash sales of $115,000 and sales on credit of $316,000.d. Purchased raw materials from suppliers for $207,000.e. Made payments of $225,000 to its raw materials suppliers.f. Paid rent expenses totaling $43,000.g. Paid insurance expenses totaling $23,000.h. Paid utility bills totaling $7,500; $

19、1,500 of this amount reversed the existing payable from 19x7.i. Paid wages and salaries totaling $79,000; $3,000 of this amount reversed the payable from 19x7.j. Paid other miscellaneous operating expenses totaling $4,000.k. Collected $270,000 from its customers who made purchases on credit.l. The i

20、nterest rate on the Loan Payable is 10% per year. Interest was paid on 12/31/19x8.Other information:1. The equipment has been estimated to have a useful life of 20 years, with no salvage value. Two years have been depreciated through 19x7.2. The existing furniture has been estimated to have a useful

21、 life of 8 years (no salvage value), of which one year has been depreciated through 19x7.3. The new stuffing machine has been estimated to have a useful life of 7 years, and will probably have no salvage value.4. The tax rate is 35%, and assume that taxes are paid on 12/31/19x8.5. Dividend payout, i

22、f possible, will be 10% of net income.6. Cost of Goods Sold for the years sales were $250,000.7. Ending Balance in accounts receivable =Beginning Balance - cash received from credit customers + sales on credit8.Ending Balance in accounts payable =Beginning Balance + purchases cash payments to suppli

23、ers9. Ending Balance in Inventory =Beginning Balance + purchases of raw material cost of goods sold10.The companys stock price at market close on 12/31/19x8 was 4 5/8. It has 20,000 shares outstanding.3.1Construct the balance sheet for the Ruffy Stuffed Toy Company as of 12/31/19x8.3.2Construct the

24、income statement for operations during the year 19x8.3.3Construct a cash flow statement for the year 19x8.3.4Calculate the following Profitability Ratios:Return on Sales, Return on Assets, Return on Equity3.5Calculate the following Asset Turnover Ratios:Receivables turnover, Inventory turnover, Asse

25、t turnover3.6Calculate the following Financial Leverage and Liquidity Ratios:debt, times interest earned, current ratio, quick (acid) test3.7What is the Ruffys book value per share at the end of 19x8?3.8Calculate the firms price-to-earnings ratio and the ratio of its market share price to its book v

26、alue per share.SOLUTION:BALANCE SHEETS19x719x8AssetsCash27,30010,896.25Accounts Receivable35,00081,000Inventory57,00014,000Total Current Assets119,300105,896.25Property, Plant, and EquipmentEquipment25,00025,000Less Accumulated Depreciation(2500)(3,750)Net Equipment22,50021,250Furniture16,00016,000L

27、ess Accumulated Depreciation(2000)(4,000)Net Furniture1400012,000Machine21,000Less Accumulated Depreciation(3,000)Net Machine18,000Total Prop, Plant, Equip36,50051,250Total Assets155,800157,146.25Liabilities and Shareholders EquityPayables Accounts Payable65,00047,000 Salary Payable3,0000 Utilities

28、Payable1,5000Note payable012000Loans (Long-term Debt)25,00025,000Total Liabilities94,50084,000Common Stock45,00045,000Retained Earnings16,30028,146.25Total Shareholders Equity61,30073,146.25Total Liabilities and Shareholders Equity155,800157,146.25INCOME STATEMENTSales Revenue431,000COGS250,000Gross

29、 Margin181,000ExpensesWages and Salaries Expense76,000Rent Expense43,000Insurance Expense23,000Utility Expense6,000Miscellaneous Operating Expense4,000Depreciation Expense6,250181,000158,250Income Before Interest and Tax22,750Interest Expense2,500Taxable Income20,250Taxes (0.35)7,087.50Net Income13,

30、162.50Dividends (0.1)1,316.25Income after Dividends11,846.25CASH FLOW STATEMENTNet Income13162.5+Dep6,250 - A/R increase3500081000(46,000)+ Inventory decrease570001400043,000 - A/P decrease6950047000(22,500)Total Cash Flow from Operations-6087.5- Investment in PPE-21000Total cash from investing acti

31、vities-21000- Dividends-1316.25+ Increase in Notes Payable+12000Total cash from financing activities+10683.75Change in Cash Flow-16403.75RATIOS:ROS 227504310000.0528ROA 22750156473.130.1454ROE 13162.567223.130.1958Receivables431000580007.4310TurnoverInventory Turnover250000355007.0423Asset Turnover4

32、31000156473.132.7545Debt84000157146.250.5345Times Interest Earned2275025009.1000Current105896.25470002.2531Quick91,896.25470001.9552P/E4.6250.65817.0278Mkt to Book4.6253.65731.26463.9You have the following information taken from the 1996 financial statements of Computronics Corporation and Digitek C

33、orporation: (All figures are in $ millions except per share amounts.) ComputronixDigitekNet income 153.7 239.0Dividend payout ratio 40% 20%EBIT 317.6 403.1Interest expense 54.7 4.8Average assets 2,457.9 3,459.7Sales 3,379.3 4,537.0Average shareholders equity 1,113.3 2,347.3Market price of the common

34、 stock: at beginning of year$15$38 at end of year$12$40Shares of common stock outstanding200 million100 millionCompare and contrast the financial performance of the two companies using the financial ratios discussed in this chapter.SOLUTION:To compute total shareholder returns we need to first compu

35、te dividends per share and then follow the definitionchange in share price plus dividend divided by beginning share price:For Computronix the dividend per share is (.4 x $153.7 million) /200 million shares = $.3074, and total shareholder return is: ($12 - $15 + .3074) /$15 = -17.95% For Digitek the

36、dividend per share is (.2 x $239 million) /100 million shares = $.478,and total shareholder return is: ($40 - $38 + .478) /$38 = 6.52% Ratios:FirmComputronixDigitekTotal Shareholder Return -17.95% 6.52% ROE13.8%10.2%ROA12.9%11.7%ROS9.4%8.9%ATO1.371.31Times InterestEarned 5.80683.979Debt/Equity1.210.

37、47· Digitek offered a higher return to its shareholders than did Computronix: 6.52% vs. -17.95%, despite the fact that Computronix had a higher ROE, a higher ROA, a higher ROS, and a higher ATO.· Average liabilities for Computronix were $1,344.6 million and for Digitek $1,112.4 million.

38、83; Times interest earned was 5.806 for Computronix and 83.979 for Digitek.· Computronix had a higher debt/equity ratio (liabilities / equity).3.10Refer to the following financial statements:INCOME STATEMENT20x620x720x8eSales$1,200,000$1,500,000COGS750,000937,500Gross Margin450,000562,500Operat

39、ing Expenses Advertising Expense50,00062,500 Rent Expense72,00090,000 Salesperson Commission Expense48,00060,000 Utilities Expense15,00018,750EBIT265,000331,250Interest Expense106,000113,000Taxable Income159,000218,250Taxes (35%)55,65076,388Net Income103,350141,863Dividends (40% payout)41,34056,745C

40、hange in Retained Earnings62,01085,118BALANCE SHEETAssets Cash$300,000$375,000 Receivables200,000250,000 Inventory700,000875,000 Property, Plant, Equipment1,800,0002,250,000Total Assets$3,000,000$3,750,000Liabilities and Shareholders EquityLiabilities Payables$300,000$375,000 Short-term debt (10% in

41、terest)500,000989,882 Long-term debt (7% interest)800,000900,000Shareholders Equity Common Stock1,100,0001,100,000 Retained Earnings300,000385,118Total Liabilities and Equity$3,000,000$3,750,000a.Determine which items varied in constant proportion to sales between 20x6 and 20x7.b.Determine the rate

42、of growth in sales that was achieved from 20x6 to 20x7.c.What was the firms return on equity for 20x7? Can you calculate it for 20x6?d.What was the firms external (additional) funding requirement determined to be for 20x7? How was the funding obtained?e.Prepare pro forma statements for 20x8 with the

43、 following assumptions:· Rate of growth in sales = 15% · The firm intends to pay down $100,000 of its short-term debt on Jan. 1, 20x8.· Interest rates on debt are as stated in the balance sheet, and are applied to the· the start-of-year (20x8) balances for short-term and long-ter

44、m debt. Remember that the firm intends to pay down part of the short-term loan on 1/1/20x8.· The firms dividend payout in 20x8 will be reduced to 30%.1. How much additional funding will the firm need for 20x8?2. The firm will close 40% of any additional funding gap by issuing new stock. It will

45、 then use up to $100,000 of long-term debt, with the remainder coming from 9% short-term borrowing. Complete the pro forma balance sheet for 20x8. 3. What would be the firms forecasted return on equity for 20x8?f.Suppose the firm anticipates an increase in the corporate tax rate to 38%. Determine th

46、e amount of additional funding that would be required if this change comes to pass.SOLUTION:a. INCOME STATEMENT20x620x720x620x7Sales$1,200,000$1,500,000100.0%100.0%COGS750,000937,50062.5%62.5%Gross Margin450,000562,50037.5%37.5%Operating Expenses Advertising Expense50,00062,5004.2%4.2% Rent Expense7

47、2,00090,0006.0%6.0% Salesperson Commission Expense48,00060,0004.0%4.0% Utilities Expense15,00018,7501.3%1.3%EBIT265,000331,25022.1%22.1%Interest Expense106,000113,0008.8%7.5%Taxable Income159,000218,25013.3%14.6%Taxes (35%)55,65076,3884.6%5.1%Net Income103,350141,8638.6%9.5%Dividends (40% payout)41,

48、34056,7453.4%3.8%Change in Retained Earnings62,01085,1185.2%5.7%BALANCE SHEET20x620x720x620x7Assets Cash$300,000$375,00025.0%25.0% Receivables200,000250,00016.7%16.7% Inventory700,000875,00058.3%58.3% Property, Plant, Equipment1,800,0002,250,000150.0%150.0%Total Assets$3,000,000$3,750,000250.0%250.0

49、%Liabilities and Shareholders EquityLiabilities Payables$300,000$375,00025.0%25.0% Short-term debt (10% interest)500,000989,88241.7%66.0% Long-term debt (7% interest)800,000900,00066.7%60.0%Shareholders Equity Common Stock1,100,0001,100,00091.7%73.3% Retained Earnings300,000385,11825.0%25.7%Total Li

50、abilities and Equity$3,000,000$3,750,000250.0%250.0%b. (1,500,000 1,200,000)/1,200,000 = .25 or 25%c. 9.83% = (141,863/(1,400,000 + 1,485,118)/2). Since the denominator is the average of the period beginning and ending shareholders equity, 20x5 ending shareholders equity would be needed to calculate

51、 ROE for 20x6. The retained earnings in 20x5 can be calculated:RE19x5= 300,000 - 62,010 = 237,990. Assuming no additional stock was issued in 20x6, hence, Common Stock19x5 = 1,100,000. ROE = (103,350/(1,337,990 + 1,400,000)/2) = 7.55%d. $589,882. $489,882 was acquired from short-term debt and the re

52、maining $100,000 from long-term debt.e.INCOME STATEMENT20x8eSales$1,725,000COGS1,078,125Gross Margin646,875Operating Expenses Advertising Expense$ 72,450 Rent Expense103,500 Salesperson Commission Expense69,000 Utilities Expense22,425EBIT379,500Interest Expense151,9881Taxable Income227,512Taxes (35%)79,629Net Income147,883Dividends (30% payout)44,365Change in Retained Earnings103,