分类: 投资

Reading Financial Report






Balance Sheet

– Asset
– Liability
Take note that liability consists all the outstanding loan obligations of a business.

  • Current liabilities
    • Accounts payable
    • Sales tax collected
    • Accrued payroll taxes
    • Credit Card payable
  • Long-term liabilities
    • Loans payable
    • Bonds payable

    Equity

    Equity meant to be the capital of a business. It is the major source of money to support and sustain a business operation. When you look at the equity account, check the number of stocks, common and preferred, that were issued. In the equity account, you will be able to see the real value of a business in terms of ownership . When you see a high equity balance, it can be a good indicator that the business is able to sustain and grow. The opposite means it is in trouble of closing down its operation.

    • Equity Accounts
      • Common Stock
      • Preferred stock
      • Retained Earnings

    Shareholders’ Equity

    A firm’s total  assets minus its total liabilities. Equivalently, it is share capital plus retained earnings minus treasury shares. Shareholders’ equity represents the amount by which a company is financed through common and preferred shares.

    Shareholders’ equity comes from two main sources. The first and original source is the money that was originally invested in the company, along with any additional investments made thereafter. The second comes from retained earnings which the company is able to accumulate over time through its operations. In most cases, the retained earnings portion is the largest component.

    Assets – Liabilities = Net Worth

    Net worth is the total assets minus total liabilities of an individual or entity. Net worth may also be referred to as book value or owner’s (stockholders) equity. In other words, net worth is the accounting value of an individual or entity if all assets were sold and liabilities were paid in full on a specific date.

    Differentiating profit types

    Gross profit

    A company’s revenue minus its cost of goods sold. Gross profit is a company’s residual profit after selling a product or service and deducting the cost associated with its production and sale.

    When analysing a company, gross profit is very important because it indicates how efficiently management uses labor and supplies in the production process. More specifically, it can be used to calculate gross profit margin. Keep in mind that gross profit varies significantly from industry to industry. For example, take a look at the following situation to see how gross profit indicates a company’s efficiency.

    Operation profit

    The profit earned from a firm’s normal core business operations. This value does not include any profit earned from the firm’s investments (such as earnings from firms in which the company has partial interest) and the effects of interest and taxes.
    Also known as “earnings before interest and tax” (EBIT)

    Net profit

    Net profit, also referred to as the bottom linenet income, or net earnings is a measure of the profitability of a venture after accounting for all costs

    A company’s total earnings (or profit). Net income is calculated by taking revenues and adjusting for the cost of doing business, depreciation, interest, taxes and other expenses.This number is found on a company’s income statement and is an important measure of how profitable the company is over a period of time. The measure is also used to calculate earnings per share.

    Income Statement

    • Sales or revenues
    • Cost of Goods Sold
    • Expense
    • Net income or loss

    Multi step Format

    • Gross Profit
    • Income from operations
    • EBITDA (Operation Profit)
    • No-Operation incoming
    • Net income or Net Loss = Shareholders’ equity

    EPS(Earning Per Share)

    The portion of a company’s profit allocated to each outstanding share of common stock. Earnings per share serves as an indicator of a company’s profitability.Earnings per share is generally considered to be the single most important variable in determining a share’s price. It is also a major component used to calculate the price-to-earnings valuation ratio.

    (Net Income – dividends ) / Outstanding Share

    Cash Flows

    • Operating activities
      • Revenue the company takes in through sales of its products or services
    • Investing activities
      • purchase or sale of the company’s investments
    • Financing activities
      • raising cash through long term debt or by issuing new stock

    Analyzing The Numbers

    PE Ratio

    EPS

    Dividend Payout Ratio

    ROS

    ROA

    ROE

    Margin

    Liquidity

    A liquidity ratio (Current Ratio)  that measures a company’s ability to pay short-term obligations.
    Current Ratio = Current asset / Current liabilities

    The ratio is mainly used to give an idea of the company’s ability to pay back its short-term liabilities (debt and payables) with its short-term assets (cash, inventory, receivables). The higher the current ratio, the more capable the company is of paying its obligations. A ratio under 1 suggests that the company would be unable to pay off its obligations if they came due at that point. While this shows the company is not in good financial health, it does not necessarily mean that it will go bankrupt – as there are many ways to access financing – but it is definitely not a good sign.

    The current ratio can give a sense of the efficiency of a company’s operating cycle or its ability to turn its product into cash. Companies that have trouble getting paid on their receivables or have long inventory turnover can run into liquidity problems because they are unable to alleviate their obligations. Because business operations differ in each industry, it is always more useful to compare companies within the same industry.

    This ratio is similar to the acid-test ratio except that the acid-test ratio does not include inventory and prepaids as assets that can be liquidated. The components of current ratio (current assets and current liabilities) can be used to derive working capital (difference between current assets and current liabilities). Working capital is frequently used to derive the working capital ratio, which is working capital as a ratio of sales

    Quick Ratio

    An indicator of a company’s short-term liquidity. The quick ratio measures a company’s ability to meet its short-term obligations with its most liquid assets. The higher the quick ratio, the better the position of the company.
    Also known as the “acid-test ratio” or the “quick assets ratio”.
    The quick ratio is more conservative than the current ratio, a more well-known liquidity measure, because it excludes inventory from current assets. Inventory is excluded because some companies have difficulty turning their inventory into cash. In the event that short-term obligations need to be paid off immediately, there are situations in which the current ratio would overestimate a company’s short-term financial strength.




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