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Financial cost management notes
Financial cost is a flow concept in financial accounting. It is manifested as an adverse change in resources, that is, the cost will cause a reduction in corporate income, which is specifically manifested as an outflow or increase in corporate assets.
Edited at 2021-06-16 09:36:04
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Financial cost management notes
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financial cost management
Financial Management
1. Fundamental
Enterprise organizational form and financial management content
Financial management: the various investment and financing decisions an organization makes with the goal of creating wealth
Advantages and Disadvantages of Corporate Enterprises
Financial management content
invest
long
short term
raise funds
short term
long
Goals and requirements based on stakeholders
financial management goals
profit maximization goal
Not considering the value of time
Does not take into account the amount of capital invested
Failure to consider the risks involved
Earnings per share maximization goal
Not considering the value of time
Failure to consider the risks involved
The goal of maximizing shareholder wealth (perspective of this book)
Theoretical basis: The purpose of shareholders establishing a company is to increase wealth
Measurement = Market value added of shareholders’ equity = Market value of shareholders’ equity – Shareholders’ invested capital
Other expressions
Maximize stock price
The goal is to maximize the price per share, reflecting the relationship between capital and profits
This target is affected by expected earnings per share, reflecting the size and timing of earnings per share.
This target is subject to enterprise risk and reflects earnings per share risk
Question: Transactions between companies and shareholders also affect stock prices, but not shareholder wealth. (For example, the stock price drops when dividends are distributed)
Maximize Enterprise Value
Enterprise value = Debt market value Equity market value =Market value of debt (capital invested by shareholders Equity market value added)
Stakeholder requirements
broad sense Capital market stakeholders (shareholders and creditors) Product market stakeholders (major customers, suppliers suppliers, host communities and trade union organizations) Internal stakeholders of the enterprise (operators and other staff)
Main stakeholders: shareholders, creditors and operators
Other corporate cash flows persons with potential claims
narrow sense
contract stakeholders
Customers, suppliers and employees
non-contractual stakeholders
General consumers, community residents, Others with indirect interests in the company group
Core concepts and basic theories
Core idea
time value of money
Risk and reward
There are only high risks and high returns and low risks and low returns. rewarding investment opportunities
basic concept
cash flow theory
The most basic theory
value appraisal theory
core
portfolio theory
Returns and risks of security portfolios
capital structure theory
The relationship between capital structure and financial risk, capital cost and company value
Financial instruments and financial markets
Types of financial instruments
Definition: A contract that forms a financial asset of one party and a financial liability or equity instrument of another party
feature
Duration: There is a specified repayment period (except for stocks)
Liquidity: The ability to convert into cash when necessary without loss
Risk: There is a possibility of loss of principal and scheduled income
Profitability: able to bring value added
type
Fixed income securities
Calculated according to fixed formula or fixed income amount
fixed rate bonds, floating interest rate bonds, preferred stocks, perpetual bond
equity securities
specific company entitled share
Relevant to the issuer’s financial condition High degree of correlation, common stocks
Derivative securities
Depends on underlying financial instruments
Convertible bonds, options and warrants
Types of financial markets
the term
Money market ≤ 1 year
Short-term Treasury bonds (called Treasury bills in the UK and the US), negotiable certificates of deposit, Commercial paper, bank acceptance bill, etc.
Capital Market＞1 year
Bank medium and long-term deposit and loan market and securities market
stocks, corporate bonds, long term government bonds and bank long-term loans, etc.
Security attributes
debt market
equity market
No initial issue
primary market
Secondary market
trading program
floor trading market
Securities exchange. Have a fixed place, a fixed place Fixed trading hours and standardized trading rules
OTC market
There is no fixed location, and traders holding securities conduct separate
Function
basic skills
Financial intermediation
risk allocation function
Additional features
price discovery function
mediating economic functions
Information cost saving function
capital market efficiency
significance
efficient capital market
Refers to the fact that prices in the capital market can simultaneously and completely reflect all available information.
External signs: 1. Each investor receives the same amount and quality of information at the same time; 2. Prices can quickly change based on relevant information, rather than being unresponsive or slow to respond.
Basic conditions: 1. Assume that all investors are rational; 2. Independent rational deviations. Not all investors are required to be rational, irrational behaviors can offset each other; 3. Arbitrage. It is not required that all irrational expectations will cancel each other out. Professional investors will rationally reallocate asset portfolios and conduct arbitrage transactions. The arbitrage activities of professional investors can control the speculation of amateur investors and keep the market efficient.
Significance to financial management: It has important guiding significance for financing decisions.
Managers cannot increase stock value by changing accounting methods
Managers cannot profit from financial speculation
It’s good to keep an eye on your own company’s share price
Stock prices contain sufficient information Different categories
inefficient market
No information
Strategy for excess returns: 1. Technical analysis of historical information, 2 Make public information available for valuation model or fundamental analysis; 3Insider information for insider trading
weak form efficient market
Only historical information
Strategies for excess returns: 1. Disclose information for valuation model or fundamental analysis; 2Insider information for insider trading
semi-strong form efficient market
History Public Information
Strategies for excess returns: 1 Insider information for insider trading
strong form efficient market
History Public Internal Information
Efficient capital market test
weak form efficient market
Testing methods: random walk, filtering test
semi-strong form efficient market
Testing method: event study; the average performance of investment funds does not exceed the overall market return rate
strong form efficient market
Test method: Insider trading
2. Statement analysis and financial forecasting Basics, once solved calculation problems alone
Analysis purposes and methods
Purpose and Dimensions
The purpose is to convert financial statement data into useful information to help information users improve decision-making
Dimensions
Strategic Analysis
Profit drivers and operating risks and qualitatively assess the company's profitability. Macro analysis, industry analysis and company competitive strategy analysis
accounting analysis
The extent to which accounting reflects its economic business Including: Evaluating the flexibility and appropriateness of company accounting, correcting accounting data, etc.
financial analysis Highlights of this book
Use financial data to evaluate the company's current and past performance, Including ratio analysis and cash flow analysis, etc.
Prospect analysis
Predict the future of your business. Including: financial statement forecasts and company valuations, etc.
method
comparative analysis
object
Compare with plans, past performance, and industry levels to determine the company's strengths and weaknesses.
content
The total amount of accounting elements
Mainly used for time series analysis, sometimes used for peer comparison, and can also For comparison with plan or budget
structure percentage
Used for projects with unreasonable proportions to reveal the direction of further analysis
Financial Ratios
Financial ratios are relative numbers, excluding the impact of scale, and have good comparability.
factor analysis Quantitatively determine the degree of influence of each factor on the indicator
Serial substitution method steps
Determine the analysis object, that is, determine the financial indicators that need to be analyzed, and compare their actual amounts with standard amounts
Determine the driving factors of the financial indicator, that is, establish a functional relationship model between the financial indicator and each driving factor based on the formation process of the financial indicator.
Determine the alternative order of driving factors (in the order of questions asked in the exam, in order of importance in the real thing)
Calculate in sequence the impact of each driver's deviation from the standard on financial indicators
Simplified Gap Analysis
When "addition" or "subtraction" is formed between factors, the difference analysis method cannot be used
limitation
Financial statement information disclosure issues
Not disclosing all company information
Disclosed financial information contains accounting estimation errors
Various accounting policy choices made by management may lead to reduced information comparability.
Reliability of financial statement information issues
Basis for comparison of financial statement information issues
ratio analysis
Indicator calculation rules
Mother-child rate: The first mentioned in the indicator name is the denominator, and the last mentioned is the numerator. For example, in the asset-liability ratio, assets are the denominator and liabilities are the numerator;
Numerator ratio is mostly used as a short-term liquidity indicator. What is mentioned previously in the indicator name is the numerator. For example, in a cash flow ratio, net cash flow from operating activities is the numerator.
Things to note when calculating indicators
The numerator and denominator are taken from 2 of the three main tables. There are three types of points on the balance sheet
Average at the beginning and end of the period
Averages at multiple points in time, quarterly average, monthly average
Use ending amount (simplified approach)
Calculate according to the requirements of the question. If there is no requirement, in principle, it will be calculated according to Average calculation, combined with data availability calculation
Special indicators
Cash flow ratio = net cash flow from operating activities/current liabilities
The total liabilities in the denominator are generally used as the ending number rather than the average number. Because what actually needs to be repaid is the ending balance
Cash flow to debt ratio = net cash flow from operating activities/total liabilities
The total liabilities in the denominator are generally used as the ending number rather than the average number. Because what actually needs to be repaid is the ending balance
short term solvency ratio
long term solvency ratio
Operational capability indicators
profitability indicator
market price ratio
Identify the impact of business occurrence on indicators
The numerator and denominator change at the same time, bringing it into digital calculations
The correlation between indicators
Write down the calculation formula
DuPont System of Analysis
Net interest rate on equity = net profit / disassembly of owners’ equity
= Net profit margin (business strategy) × Equity multiplier (financial policy)
Net interest rate on equity = Operating net interest rate × Asset turnover rate × Equity multiplier
Profitability, operating ability, solvency
business strategy
Net profit on total assets rate (reverse collocation)
According to the external environment and its own strategic choices based on resources
Only the level of operating net profit margin is combined You can't tell whether your performance is good or bad, and treat it as It can be related to the asset turnover rate To examine corporate business strategies. real What is important is that the two work together return on assets
financial policy
Equity Multiplier (Inverse Match)
When the rate of return on assets remains unchanged Under the circumstances, increasing financial leverage can improve High net interest rate on equity, but at the same time Will increase financial risk
Breakdown of drivers
Analysis method: factor analysis method
Limitations of the Traditional DuPont Analysis System
"Total assets" and "net profit" used to calculate the net interest rate on total assets do not match
Total assets are enjoyed by all asset providers, while net profits belong exclusively to shareholders
No distinction between operations and finance Resulting in the creation of an administrator reporting system
profit
No distinction between profit and loss from operating activities and profits and losses from financial activities
For most companies, financial activity is net raising. Financing activities do not generate net profits but incur net expenses
assets
There is no distinction between financial assets and economic operating assets
From a financial management perspective, financial assets are assets that have not yet been put into practice. assets from international operating activities
Liabilities
There is no distinction between financial liabilities and economic operating liabilities
The cost of liabilities (interest expenses) is simply the cost of financial liabilities, and operating liabilities are interest-free liabilities. Operating liabilities have no fixed costs and no leverage. Dividing financial liabilities by shareholders' equity can provide a more realistic financial leverage.
financial reporting system for management
basic framework
general idea
Distinguish between operating activities and financial activities
Corporate events
Business activities
Firms operate in product and factor markets
Sales of goods and provision of services and other business activities
Investment activities in productive assets related to business activities
financial activities
conducted in the capital market
Fundraising activities and utilization of excess funds
balance sheet for management
Distinguish between operating assets and financial assets, operating liabilities and financial liabilities, and the owners’ equity remains unchanged.
Distinguish between operating assets and financial assets
Monetary funds themselves are financial assets, but some monetary funds are necessary for business activities. 3 processing methods, the exam clearly indicates which one to use
List all monetary funds as operating assets. (Textbook processing)
Based on the historical average "monetary funds/sales revenue" percentage of the industry or company and the sales volume of the current period, the amount of monetary funds required for operating activities is estimated, and the excess is classified as financial assets.
List them all as financial assets
For projects with investment in their names, only long-term equity investments are operating assets, while the others are financial assets. Other equity instrument investments, investment real estate, short-term equity investments, etc. are all financial assets and other receivables (dividends receivable from short-term equity investments)
Related to interest is finance, and interest receivable and dividends receivable among other receivables
Those with the word "finance" in their name belong to finance
Distinguish between operating liabilities and financial liabilities
Interest-bearing liabilities are financial liabilities
Financial liabilities that are easily confused and require separate memory
Non-current liabilities due within one year
Interest payable and dividends payable among other payables
Lease liabilities arising from leases
preferred stock
Income statement for management
Distinguish between operating profit and loss and financial profit and loss
Financial gains and losses refer to the difference between the interest on financial liabilities and the income from financial assets, that is, the interest expenses after deducting interest income, income from changes in the fair value of financial assets, etc.
Operating profits and losses refer to current profits and losses other than financial profits and losses.
basic formula
Net operating profit after tax - interest expense after tax = net profit
EBIT (earnings before interest and taxes)
(EBIT-I) × (1-T) = Net profit
EBIT×(1-T)-I×(1-T)=Net profit
direct method
Net operating profit after tax = operating profit before tax * (1-income tax rate)
indirect method
Net operating profit after tax = Net profit After tax interest expense
Net operating profit after tax = Net profit I*(1 T)
Before tax: I= Interest on financial liabilities - Gains on financial assets Loss on financial assets , = Financial expenses - Gains and losses from changes in fair value of financial assets Impairment losses on financial assets - Investment income from financial assets
T, Applicable tax rate method: The applicable tax rate for each subject is determined according to the question. Simplified approach, average tax rate method = income tax/total profit
Analysis system
subtopic
cash flow statement for management
Distinguish between operating cash flow and financial cash flow
Operating current cash flow
Operating cash flow represents all the results of a company's operating activities. Abbreviation entity cash flow
It refers to the business activities of an enterprise such as selling goods or providing services and related productive assets. Cash flows from investing activities
Determination of cash flow
residual flow method (Analysis from the source of entity cash flow)
Concept of the textbook "Enterprise Value Assessment": Entity cash flow is the remainder of the company's total cash inflow after deducting costs and necessary investments. It is what the company can provide to all investors (including equity investors and debt investors) within a certain period of time. after tax cash flow
Formula: Business Entity Cash Flow = = operating net profit after tax, depreciation and amortization - increase in operating working capital - capital expenditures = Gross operating cash flow - increase in operating working capital - capital expenditures = Net operating cash flow - capital expenditures Or simplified formula = operating net profit after tax, depreciation and amortization - increase in operating working capital - capital expenditures =Net operating profit after tax Increase in net operating assets
Capital expenditure = increase in operating long-term assets, depreciation and amortization
If the entity's cash flows are positive
① Pay interest to creditors (note that for enterprises, net interest cash outflow is after-tax interest expense); ② Repay debt principal to creditors and pay off part of the debt; ③ Pay dividends to shareholders; ④ Repurchase stocks from shareholders; ⑤Purchase financial assets
If the entity's cash flow is negative, the business needs to raise cash
① Sell financial assets; ② Borrow new liabilities; ③ Issue new shares
financing cash flow method (Analysis from the direction of entity cash flow)
Entity cash flow = equity cash flow debt cash flow
financing cash flow
Cash flows generated from financing activities and investment activities in financial markets
Financing cash flow method (analyzing the destination of entity cash flow)
Entity cash flow = equity cash flow debt cash flow
Debt cash flow = after-tax interest - principal of newly borrowed debt (or principal repayment of debt) = After-tax interest - Increase in net debt Simplified formula: Debt cash flow = after-tax interest - increase in net debt
Equity cash flow = entity cash flow - debt cash flow = Dividend - Stock issuance (or stock buyback) = Dividends - Net increase in equity capital Simplified formula: Equity cash flow = Net profit - Increase in owner’s equity
① Debt cash flow - is the cash flow generated from transactions with creditors, including interest payments interest, repayment or borrowing of liabilities, and purchase or sale of financial assets
② Equity cash flow - is the cash flow generated from transactions with shareholders, including dividends allocation, share issuance and repurchase, etc.
Prediction steps and methods
The meaning of financial forecasts
Financial forecasting in a narrow sense only refers to estimating the company's future financing needs, while financial forecasting in a broad sense includes the preparation of all expected financial statements.
In a broad sense, it also involves corporate statement forecasting, which is discussed in Chapter 8 Corporate Value Assessment.
method of prediction
percentage of sales method
Fundamental
Principle: Use accounting equations to determine financing needs
Specific method: You can use unified financial statement data to predict (assets = liabilities owner's equity), or you can use adjusted financial statement data to predict (net operating assets = net liabilities owner's equity)
Assumptions
regression analysis
Use information technology forecasting methods
Calculation of Growth Rate and Capital Requirements
3. Basis of Valuation
interest rate
time value of money
Risk and reward
risk
General concepts
Uncertainty about expected results
feature
Uncertainty about negative effects
Uncertain “opportunities” for positive effects
Risk implications of financial management
Risks associated with returns
Risks and rewards of individual investments
How to measure risk
Coefficient of variation =σ/kmean
Risk measurement with probabilities
Need to be multiplied by the relevant probability
Risk measurement given historical sample situations
The default probability is 1
4. capital cost
Concept and use
Estimate of cost of debt capital
Estimate of cost of common equity capital
Estimates of Hybrid Financing Capital Costs
Estimate of weighted average cost of capital
5. Project investment cost budget
Types of investment projects and evaluation procedures
Project evaluation methods
Project cash flow estimates
Estimate of project discount rate
Sensitivity analysis of projects
6. Bond stock value valuation
bond value estimate
common stock valuation
Valuation of Hybrid Financing Instruments
7. Option Valuation
Options concepts, types and investment strategies
Financial option valuation
8. Business Valuation
The purpose and object of value assessment
Enterprise Value Assessment Methods
9. Capital Structure
theory
Strategic analysis
Measurement of Leverage Factor
10. long term financing
long term debt financing
common stock financing
hybrid financing
Lease Financing
11. Dividend distributions, stock splits and stock buybacks
Dividend Theory and Dividend Policy
Dividend classification, payment procedures and distribution policies
Stock splits and buybacks
12. working capital management
management strategy
cash management
Accounts receivable management
Inventory management
short term debt management
cost management
Product costing
Classification of costs
Collection and distribution
Basic methods for calculating finished goods
standard costing
Standard costing and formulation
Standard cost variance analysis
activity-based costing
Concepts and features
calculate
manage
management accounting
Cost-volume-profit analysis
General relationship between cost, volume and profit
Breakeven analysis
Poly analysis
profit sensitivity analysis
short term business decisions
Overview
production decisions
pricing decisions
Total budget
Overview
Preparation method
operating budget method
Preparation of financial budget
Responsible Accounting
Enterprise organizational structure and division of responsibility centers
Cost Center
Profit Center
investment center
Responsibility Center Performance Report
Performance evaluation of central enterprises
Financial performance evaluation and non-financial performance evaluation
key performance indicator approach
Economic value added
balanced scorecard
ratio analysis
Indicator calculation rules
Mother-child rate: The first mentioned in the indicator name is the denominator, and the last mentioned is the numerator. For example, in the asset-liability ratio, assets are the denominator and liabilities are the numerator;
Numerator ratio is mostly used as a short-term liquidity indicator. What is mentioned previously in the indicator name is the numerator. For example, in a cash flow ratio, net cash flow from operating activities is the numerator.
Things to note when calculating indicators
The numerator and denominator are taken from 2 of the three main tables. There are three types of points on the balance sheet
Average at the beginning and end of the period
Averages at multiple points in time, quarterly average, monthly average
Use ending amount (simplified approach)
Calculate according to the requirements of the question. If there is no requirement, in principle, it will be calculated according to Average calculation, combined with data availability calculation
Special indicators
Cash flow ratio = net cash flow from operating activities/current liabilities
The total liabilities in the denominator are generally used as the ending number rather than the average number. Because what actually needs to be repaid is the ending balance
Cash flow to debt ratio = net cash flow from operating activities/total liabilities
The total liabilities in the denominator are generally used as the ending number rather than the average number. Because what actually needs to be repaid is the ending balance
short term solvency ratio
for current liabilities
absolute number
Working capital = current assets – current liabilities = long-term capital - long-term assets
relative number
Numerator ratio indicator = XX/current liabilities
current ratio
Analysis standards - Different industries are not comparable, and industries with short business cycles have lower standards. The higher the better, you need to look at the internal structure
Factors affecting credibility
Inventory turnover rate, accounts receivable turnover rate
Relationship with working capital allocation ratio The working capital allocation ratio and the current ratio change in the same direction.
current assets Sources of funds
Current liabilities
Current liabilities/current assets=1/current ratio
working capital
Working capital/current assets = working capital allocation ratio
quick ratio
Analysis standards: vary widely across industries
Factors affecting credibility: Liquidity of accounts receivable
cash ratio
Cash refers to monetary funds
More stable, cash itself can directly repay debts
cash flow ratio
Analysis is more convincing
Other factors off-balance sheet factors
Enhance short-term debt service off-balance sheet factors of capability
Available bank loan indicators
Non-current assets that can be quickly converted into cash
reputation for solvency
Reduce short-term debt service off-balance sheet factors of capability
Contingent liabilities related to guarantees
long term solvency ratio
Ability to repay capital
mother-child rate
Broadly speaking: Asset-liability ratio = total liabilities/total assets
In a narrow sense: long-term capital liability ratio = non-current liabilities/(non-current liabilities owner’s equity); reflects the ratio of long-term capital institutions
Record separately
Equity ratio = Total liabilities/Shareholders’ equity
Equity multiplier = assets/owners’ equity
Relationship with asset-liability ratio
The other two forms of expression of the asset-liability ratio have the same nature as the asset-liability ratio. A high ratio indicates that the company's financial leverage is high. In the same direction
Equity multiplier =Assets/Owner’s equity =Assets/(Assets-Liabilities) =1/(1-Asset-liability ratio) =(Owner’s equity Liabilities)/Owner’s equity =1 Equity ratio
molecular ratio
Cash flow to debt ratio = net cash flow from operating activities/total liabilities
Interest payment ability
Counted separately
Interest coverage ratio = Profit before interest and tax/Interest expense
Cash flow interest coverage ratio = net operating cash flow/interest expense
Profit before interest and taxes = financial expenses, interest expenses, income tax expenses, net profit; Interest expense = interest expense on finance expenses capitalized interest
Other factors affecting long-term solvency (off-balance sheet factors)
pending litigation
Liability guarantee
operating capacity ratio
Features
Number of turnovers of XX (turnover rate of XX) = turnover amount/number of XX
Parent-child ratio, so-and-so is the parent, turnover is usually operating income, inventory is special ((when evaluating the performance of inventory management)) available operating costs
XX turnover days = 365/number of turnovers
Ratio of so-and-so and income = so-and-so number/operating income
Issues that should be noted
Accounts receivable turnover ratio
Accounts receivable are actually "notes receivable" and "accounts receivable", which are referred to here as "accounts receivable", and the relevant ratios are also called accordingly.
The issue of credit sales ratio of operating income
When calculating, strictly speaking, credit sales should be used instead of operating income. However, external analysts cannot obtain data on credit sales and have to use marketing directly. Business income calculation.
Reliability issues of year-end balance of accounts receivable
You can use the average at the beginning and end of the year, or use the average at multiple points in time. , to reduce the impact of seasonality, chance or human factors
Impairment provisions for accounts receivable
Use accounts receivable without provision for bad debts
The shorter the receivables turnover days, the better.
Accounts receivable analysis should be linked to sales analysis and cash analysis
Inventory turnover
Use "operating income" (in short-term solvency analysis, when breaking down total asset turnover); Use "cost of operations" (when assessing the performance of inventory management) as turnover
Inventory turnover days are not as short as possible
Attention should be paid to the relationship between payables, inventory and accounts receivable (or operating income)
Pay attention to the proportional relationship between finished products, semi-finished products, raw materials, work in progress and low-value consumables that constitute inventory
Drivers of asset turnover
For driver analysis, you can usually use the "Asset Turnover Days" or "Assets to Income Ratio" indicators, but not "Number of asset turnovers".
relational formula
Total asset turnover days =∑ Each asset turnover days
Ratio of total assets to operating income =∑ Ratio of various assets to operating income
profitability ratio
Operating net profit margin = net profit ÷ operating income × 100%
Changes in operating net profit margin are determined by various items in the income statement Analysis of amount changes and structural changes caused by changes in the amount of items dynamic analysis
Net asset interest rate = net profit ÷ total assets × 100%
DuPont System of Analysis
Net interest rate on equity = Net profit ÷ Shareholders’ equity × 100%
DuPont System of Analysis
market price ratio
Unique to listed companies
Number of shares outstanding
Common stock (included)
Preferred shares (removed)
market price
Indicator calculation
net income
Number of shares: Earnings per share = Net profit of ordinary shareholders ÷ Weighted average number of ordinary shares outstanding
The numerator of should be the net profit distributable to ordinary shareholders, That is, the preferred stock dividends declared or accumulated during the year are deducted from the net profit.
Note that the weighted average number of common shares outstanding during the period is used
Changes in the number of shares that cause changes in total owners' equity (issuance of additional shares, repurchase of shares, etc.) are required Calculate the weighted average based on the actual increase in months
Changes in the number of shares that do not cause changes in the total owner's equity (such as the issuance of stock dividends, stock splits, etc.) It is not necessary to calculate the weight according to the actual increase in months.
Market price: Price-to-earnings ratio = Market price per share / Earnings per share
Net assets
Net assets per share (book value per share) = common stockholders’ equity ÷ number of outstanding common shares
The numerator should be subtracted from total stockholders' equity by preferred stock equity, Includes liquidation value of preferred stock and all dividends in arrears
Price-to-book ratio (price-to-book ratio) = market price per share / net assets per share
operating income
Operating income per share = operating income ÷ weighted average number of common shares outstanding
Price-to-sales ratio = Market price per share ÷ Operating income per share
Issues that should be paid attention to when analyzing indicators
The price-to-earnings ratio reflects investors' expectations of the company's future prospects.
The market-to-price ratio indicator will be further used in Chapter 8 Evaluating the Relative Value Approach to Determining Business Value
Net profit for the year - dividends = new retained earnings for the year
Dividend payout ratio = dividend/net profit
Profit retention rate = retained earnings / net profit
Identify the impact of business occurrence on indicators
The numerator and denominator change at the same time, bringing it into digital calculations
The correlation between indicators
Write down the calculation formula