DuPont analysis

Wall Score

There is no theoretical support, just the result of simple induction based on facts and phenomena.

Any experience standard is applicable within a certain industry Since empirical standards are established within a certain period of time, the standards will also change with the economic environment and technological changes.

It is the average level (better level) of a certain financial indicator of all enterprises in the industry.

Advantages: easy to compare, highly comparable to each other

Note: Although companies are highly comparable, it is difficult to find two companies with exactly the same business operations.

Consider when using: Whether to adjust accounting policy differences between different companies

Refers to the actual value of the enterprise in a certain period in the past. Optional: historical average, best value.

Very comparable

Notice: 1. Even if the comparison results surpass history, it does not mean that the company is in a good operating environment, because as the company progresses, the industry environment also changes, which in turn reduces the company's competitiveness in the industry. 2. When an enterprise reorganizes its business operations, comparability decreases and the original financial data cannot be used. 3. There is no historical benchmark for newly established enterprises.

It is an ideal standard proposed by financial analysts based on the company's historical financial data and real economic conditions.

Generally use "financial budget" as target baseline

Notice: 1. Corporate budgets are internal information and are not disclosed to the public. External financial personnel cannot obtain or use it. 2. Corporate budgets contain subjective human factors and are difficult to adjust as the economic environment changes. There are problems with objectivity and reliability.

Purpose: Used by internal analysts for evaluation and assessment.

The main source of differences in information supply. (The information disclosed has richer connotations)

Investor demand information: mainly related to corporate value assessment (The main factor affecting corporate value is "future business capability")

Investors also need to pay attention to: investment risks and information focusing on corporate financial security

Creditors pay attention to: the company's ability to repay principal and interest in the future

Creditors are more concerned about: the stability of corporate earnings and the safety of operations

Focus on analyzing the company's "solvency" as well as the company's "credit" and "default risk"

Internal managers of enterprises are both demanders and suppliers of financial information.

Therefore, managers' financial analysis is more accurate and detailed than the analysis results of external stakeholders of the enterprise.

As a social public management department, the government’s main source of revenue is “taxation”

Mainly require financial information related to value-added tax, income tax, etc.

Suppliers pay attention to: financial information related to the company’s “credit risk” and “solvency”

(No default risk compared to creditors)

External submission information

Internal reporting information

Audit Report

market information

macroeconomic information

Corporate governance opinions

Information from outside the company is "public information"

Some of the information within the enterprise is public and some is non-public

Non-public information: corporate cost structure, corporate budget, period expense structure, etc.

Based on actual transactions or events, ensure that accounting information is true, reliable and complete.

The information provided by the enterprise should be relevant to the user's economic decision-making and help the user to evaluate or predict the enterprise's past, present, and future situations.

Clear and easy to understand and use

Vertical comparability: same company in different periods Consistent accounting policies and shall not be changed at will

Horizontally comparable: different companies in the same period

Comparable to each other

It means that enterprises should conduct accounting recognition, measurement, and reporting based on the economic substance of transactions or events, not only based on the legal form of transactions or events.

Such as: financial leasing (financial leased fixed assets are accounted as self-owned fixed assets)

Reflect all significant transactions or events relevant to the financial statements (taking into account the "cost-benefit principle")

Assets or earnings should not be overstated and liabilities or expenses understated

For example: provision for impairment of assets, provision of depreciation for assets using the accelerated depreciation method, reasonable estimation of possible product after-sales warranty expenses

Transactions or events that have already occurred in the enterprise shall be confirmed, measured and reported in a timely manner and shall not be advanced or delayed.

“Timeliness” constrains relevance and reliability