Part I Balance Sheet
Basics of a Balance Sheet
1. What is a Balance Sheet? The balance sheet is an accounting statement that reflects the financial position of an enterprise at a specific date, such as assets, liabilities, and owner's equity. In layman's terms, 2, on the assets and liabilities, 3, how many assets the enterprise has, 4, what are the assets, 5, how many liabilities, 6, what are the liabilities, 7, how much are the net assets, 8, what is the composition of it, 9, are reflected clearly. The balance sheet is a good place to start in the study of financial statements because it reflects the financial structure and position of an organization. The balance sheet describes the financial position of the business at the point in time when it is issued, just as 13. we take a camera and press the shutter on a vehicle traveling at high speed, only 15. the "vehicle" here is the flow of money. We get a static picture, 16, it only describes the situation at the time, 17, that is, the information is time-sensitive.
18, the role of the balance sheet
A, reflecting the assets and their distribution
B, indicating the debts assumed by the enterprise and the time of repayment
C, reflecting the net assets and the reasons for their formation
D, reflecting the trend of the financial development of the enterprise
19, the format of balance sheets
At present, there are two main types of balance sheets. There are two main balance sheet formats in the world: one is the account form, and the other is the report form. China's accounting system provides the reference format is the account-based form, account-based balance sheet to disclose three major figures: first, how many assets at this time, second, how many liabilities at this time
how many liabilities at this time, and third, how much owner's equity at this time. (Accounting Constant: Assets = Liabilities + Owners' Equity)
20, the contents of the balance sheet (see the balance sheet)
Read the balance sheet of three steps:
The first step is to observe the total. Asset increase, it is possible that the increase in liabilities or increase in owner's equity; asset decrease, it is possible that the decrease in liabilities or decrease in owner's equity (i.e., assets = liabilities + owner's equity). The purpose is to grasp the direction of financial change.
The second step is to browse specific items. The method is to look up and down and left and right than, the purpose is to find the reason for the change, characterized by targeting. The third step is to use the relevant financial ratios to test the normal financial indicators of enterprises. The relevant financial ratios are gearing, current ratio, quick ratio.
1, gearing = total liabilities / total assets * 100%
This indicator shows how much of the assets of the enterprise is debt, but also can be used to check whether the financial situation of the enterprise is stable. From a financial point of view, it is generally believed that our idealized gearing ratio is about 40%.
2, current ratio = current assets / current liabilities * 100%
Financially speaking, the ideal value of this ratio is 2, that is, current assets and current liabilities should maintain a 2:1 relationship.
3, quick ratio = quick assets / current liabilities * 100% quick assets = current assets - inventory)
Generally speaking, the ideal value of the quick ratio is 1. If the quick ratio of an enterprise is greater than 1, it is usually considered that the short-term solvency of this enterprise is relatively strong; if the quick ratio of an enterprise is less than
1, it is usually considered that the short-term solvency of this enterprise is relatively weak. If the quick ratio is less than
1, it is usually considered that the enterprise's short-term solvency is weak.
Therefore, when an enterprise has a high gearing ratio, the financial structure may be unstable, and the most important factor in determining whether the financial structure of the enterprise is stable is the short-term solvency, so it is necessary to follow up on the check of the two elements: current ratio and quick ratio. With the help of these two indicators, it is possible to check whether the financial situation of the enterprise is stable.
Looking at the balance sheet from another perspective
i) First of all, it is important to understand a very important law, the law of 2+2. From an accounting perspective, 2+2=4 is a timeless law. It is a metaphorical way of telling managers, how to interpret the numbers in an accounting statement. In accounting statements, 2+2 is always equal to 4. But in the eyes of the reader, 2+2 is sometimes equal to 4 and sometimes equal to 5, for both assets and liabilities and owners' equity.
Secondly, it is important to understand that the basis of valuation of assets reflected in the balance sheet is the actual cost rather than the market value, and there is a gap between the cost and the market value, so you should pay attention to the main items.
1, pay attention to the quality of assets, with the 2 + 2 rule to re-look at the balance sheet when to pay attention to the quality of assets. From the point of view of China's enterprises, focus on the quality of assets is to focus on the balance sheet "water content".
2, focus on liabilities. Not all the liabilities of the enterprise can be reflected in the balance sheet, the balance sheet reflects the liabilities only now exist, or called the reality of the debt, and the potential risks and liabilities, in the balance sheet can not be reflected. Potential liabilities are reflected in the statement appendix to the balance sheet, which is explained in detail by the preparer.
3. Focus on owners' equity. Capital employed should correspond to the registered capital of the enterprise,
When the registered capital of an enterprise is all in place, the equity, or capital employed, on the balance sheet should be the same as the registered capital of the enterprise. If the enterprise's registered capital is in place in stages, in this case, the table on the number of more, while the actual in place is relatively small, as a manager, in reading the table on this situation should be given attention. If the undistributed profit in the table is positive, it means that the enterprise has not arranged for distribution after making profit, and if it is negative, it means that the accumulated uncompensated losses. The balance sheet is a point in time and can only report on one result, if it is negative the amount of the world, then it shows that the business risk of this enterprise is very high.
As the assets in the balance sheet of the enterprise is containing water, so the new accounting system provides that eight assets should be prepared for impairment. That is: short-term investments, inventories, fixed assets, long-term investments, construction in progress, intangible assets, entrusted loans, accounts receivable and other receivables should be provided for bad debts.
Finally, it is important to understand that not all of the economic resources of the enterprise can be reflected in the balance sheet, such as the goodwill of the enterprise and the excellent level of management can not be reflected in the assets and liabilities. Part II Income Statement
Basics of the Income Statement
1) What is the Income Statement? Income statement is an accounting statement that reflects the realization of profit or loss of an enterprise in a certain period (monthly or yearly) in general terms. 2) It is an easy-to-read table that shows the formula "Revenue-Expense=Profit". In fact, the income statement is a video recording of a company's operations. 3) This video recording has a starting point and an ending point, and 4) the income statement describes the process from the starting point to the ending point. In this process to record is not 5) is not all the content, 6) to record is how much revenue and how much expense occurred during this period, 7) this period of time the business is a profit or loss, 8)
This is the basic content of the income statement to tell.
9) Format of the Income Statement
There are two basic formats of the income statement that are mainly used in countries around the world: the first format is the single-step income statement, and the second is the multi-step income statement. China's accounting system, how many steps of the income statement generally consists of four steps: the first step is to calculate the enterprise's profit from the main business (income from the main business - cost of the main business - main business taxes and surcharges); the second step is to calculate the operating profit (profit from the main business + profit from other businesses - operating expenses - administrative expenses - financial expenses); the third step is to calculate the total profit (operating profit + investment income + subsidies) Income + non-operating income - non-operating expenses); the fourth step is to calculate the presentation of net profit (total profit - income tax)
10) The role of the income statement
A. Reflects the results of the enterprise's operations in a certain period of time;
B. Helps to evaluate the enterprise's profitability;
C. Can help to determine the value of the enterprise;
D, Predicting the trend of future changes in a company's profitability.
Through the income statement to provide a comparative number of different periods (the number of the month, the cumulative number of the year), you can predict the trend of future changes in profitability and profitability of the enterprise, because the income statement is a comprehensive embodiment of business performance, but also the main basis for profit distribution. Therefore, the income statement is one of the main statements in the accounting statements.
The basic methods and techniques for reading the income statement
11) How to check the results of business operations. Includes three steps: one is to put after holding the results,
12) to see whether the enterprise earns money or loses money, 13) if it is a positive number, 14) said when the enterprise to make money; if it is a negative number, 15) shows that the enterprise loses money; two is the layered observation. Layered
The purpose of the observation is to make the business understand to where to make money. In the income statement, 16) the enterprise's main business profit and operating profit is the enterprise's daily operating activities income profit, 17) can best illustrate the size of the enterprise's profitability. If an enterprise in the main business profit or operating profit made money, 18) that the enterprise has a good profitability; if an enterprise does make money, 19) but not 20) is the main business profit, and 21) is obtained through uncontrollable matters or occasional transactions, 22) does not 23) can illustrate the size of the profitability of the enterprise. Third, project comparison. Project comparison is usually compared with two objectives 24): the first is compared with the previous year; the second is compared with the objectives set at the beginning of the year 25) (budgetary objectives
26)), 27) by comparing these two objectives 28), 29) to some extent to determine whether or not they are satisfied with the current year's performance.
30) To provide a perspective on the results of the business with the help of relevant financial ratios.
1) Gross Profit Margin
Gross Profit Margin = Gross Profit / Revenue * 100% (Gross Profit = Revenue - Cost of Business)
A company with a high or moderate gross profit margin is usually considered to be more competitive. That is to say, the gross profit margin is high, even if it is profiteering, as long as the market can accept it, the profitability and competitiveness of this commodity should be relatively strong. If an enterprise's commodity gross profit margin is very low, even to the extent of micro-profit, then the profitability of this commodity is relatively poor, the enterprise to make money is more difficult.
2) net sales rate
Net sales rate = net profit / main business income * 100%
Net sales rate indicates that every 100 yuan of sales of goods, or every 100 yuan of operating income,
can bring the enterprise how much net profit, this indicator can also explain the level of profitability of the level of profitability of the enterprise, or this industry is profitable. This indicator can also indicate the level of profitability of the enterprise, or the level of profitability of the industry.
3) Net Asset Interest Rate
Net Asset Interest Rate = Net Profit / Total Assets * 100%
The Net Asset Interest Rate indicator illustrates how much money an enterprise can earn per $100 of occupied assets. High net asset interest rate indicates that the economic efficiency of the enterprise is good, and vice versa indicates that the economic efficiency of the enterprise is poor, of course, good efficiency indicates that the level of management is high, and bad efficiency may be the level of management there are certain problems. Therefore, through the net asset interest rate, you can see the high and low level of corporate management.
4) Net Worth Compensation Ratio
Net Worth Compensation Ratio = Net Profit / Average Shareholders' Equity * 100%
The basic content of Net Worth Compensation Ratio is that every $100 of assets deposited by the investor in the enterprise, how much return can be given to him, i.e., the rate of return. A high rate of return on net worth gives the investor a high rate of return on his investment; a low rate of this ratio gives the investor a low rate of return on his investment.
5) Price-earnings ratio
Price-earnings ratio = current price of a stock/earnings per share
Price-earnings ratio refers to how many times the current price of a stock is the net profit per share, a multiplier relationship, which is indicative of how the profitability factor supports the price of the stock. For example, a company's current value of a stock is $ 10, each share can net earnings of $ 1, with the number of net profit divided by the total number of shares of net earnings of $ 1, the result of the calculation is 10:1, the concept of 10:1 can be understood in this way, if each share can net earnings of $ 1, this kind of stock can be in the market to support the share price of $ 10, so it can be regarded as both a multiplier relationship, but also as a $ 1 of earnings How much stock price can be supported.
32) Be concerned about the impact of human factors on the statement, 33) Correctly understand the profit in the statement.
A, cost carry forward method
B, depreciation calculation method
C, eight provisions for impairment D, the provision
E, amortization of expenses
F, interest on borrowings
Part III Fundamentals of the Statement of Profit and Loss
What is the Statement of Profit and Loss? Profit Distribution Statement is an accounting statement reflecting the distribution of realized net profit or loss making up of an enterprise in a certain period of time, and is a schedule to the Income Statement, which explains the direction of the distribution of net profit reflected in the Income Statement.
The role of the income statement
Reflects the sources of profits available for distribution during the year
Explains the direction of distribution of profits during the year
Captures the amount of undistributed profits at the end of the year
The basic content of the income statement
There are three sources of profits available for distribution by an enterprise: the first one is the net profit; the second is the undistributed profit at the beginning of the year; and the third one is the surplus. the first is net profit; the second is the undistributed profit at the beginning of the year; and the third is the transfer of surplus reserves.
If an enterprise earns net profit, can the enterprise distribute the profit of the enterprise? China's Company Law has provisions, if the enterprise has a net profit, in accordance with the 10% of the proportion of the statutory surplus reserve, and then 5 to 10% of the proportion of the public welfare, and then the rest can be decided by the investor should be how to distribute. Then the investor has the right to decide that this money is not allocated, stay in the enterprise to grow the strength of the enterprise, the investor has the right to take it as the distribution of profits to the content of the
arrangement.
If the profit of the enterprise is zero, can the profit of the enterprise be distributed? If the net profit of the enterprise is zero, it is also possible to distribute the profits of the enterprise. Because profit does not only mean what is earned this year, but also the number of surpluses earned in previous years, so you can use the balance of previous years to participate in the current year's profit distribution.
If the balance of previous years is also insufficient, how to distribute? If the listed company or joint-stock companies, shareholders to the end of the year to see not a penny of dividends, then investors can be on the development of the enterprise's lack of confidence, so in order to support the confidence of investors, the state regulations, when the enterprise does not make money when you can take the accumulation of public funds for profit distribution. The main embodiment of accumulation is the previously withdrawn surplus. There are three sources of profit available for distribution: net profit, undistributed profit at the beginning of the year, and transfer of surplus. Although there are three sources in the statement, in real life, it is rare to see all three at the same time. If it is a profitable enterprise, then the source of profits available for distribution is two: one is the net profit in the income statement; the other is to participate in this year's profit distribution of the beginning of the undistributed profits. If the enterprise has not earned a penny this year, then it can also distribute profits. Here there are two main sources of profits available for distribution: one is the beginning of the year undistributed profits; the other is the previous withdrawal of surplus reserves. With the surplus to investors in the distribution of profits, must pay attention to the provisions of the state: if the enterprise with the surplus to investors in the distribution of profits, the remaining surplus can not be less than 25% of the registered capital. That is to say that enterprises use this money, the bottom line can not be less than 25% of the registered capital, if less than 25%, this distribution is illegal. So when an enterprise does not earn money and to support the confidence of investors, to them when the distribution of profits, you can use surplus reserves, but the proportion of the distribution should be in accordance with the provisions of the state, and the surplus reserve balance should be in line with the provisions of the state.
a) Items and Ratios of Profit Distribution
i. Withdrawal of Statutory Surplus Reserve (10% of net profit to be withdrawn from the statutory surplus reserve)
ii. Withdrawal of Statutory Public Welfare Funds (5% to 10% of net profit to be withdrawn from the statutory public welfare funds)
iii. Preferred Dividends Payable (preferential dividend right)
iv. iv. Withdrawal of any surplus reserves
Financial
Distribution of profits in accordance with the proposal
v. Dividends payable to common shares
Operator
Submission of profit distribution proposal
Board of Directors
Review, submission to the shareholders' meeting
Final review, and final decision on distribution vi. Dividends on common stock converted to capital stock
How to read the profit distribution statement
As a business manager, you should pay attention to two aspects when reading the profit distribution statement:
b) Grasp the sources of profit available for distribution
In the profit distribution statement, there are three sources of profit available for distribution: net profit, undistributed profit at the beginning of the year, and surplus. The reliability of these three sources should be reviewed when reading the income statement. The method of review is:
i. The net profit in the income statement should be equal to the net profit in the income statement. ii. ii.The undistributed profit at the beginning of the year should be the undistributed profit at the end of the previous year.
iii. For the portion of surplus surplus participating in profit distribution, special attention should be paid to its compliance with the relevant regulations of the company.
c) Attention to the destination of profit distribution
For managers at all levels of the company, special attention should be paid to the legality of profit distribution. First, it should be in accordance with the provisions of the national law, that is, the "Chinese People's *** and the State Company Law";
Secondly, it should be in accordance with the family law, that is, the relevant provisions of the company, in particular, the right to distribution of profits; Thirdly, when reading the profit distribution table, first of all, we should check the enterprise shareholders' general meeting of the approval of the profit distribution plan and the profit distribution reflected in the profit table whether the content of the distribution of profits is the same. For example, in the profit distribution plan, what proportion and amount of profit should be distributed to the preferred shareholders; what proportion and amount should be withdrawn from any surplus reserve; what proportion of profit should be withdrawn from common shareholders; and how much should be withdrawn to increase the registered capital of the enterprise. The proportion and amount of each figure in the profit distribution table should be consistent with the profit distribution plan considered and approved by the shareholders' representative meeting. (i.e., the source should be reliable and the destination should be legal)
Part IV How to Overall Evaluation of the Financial Condition of an Enterprise
Overall evaluation of the financial condition of an enterprise is to truly perceive the actual situation of the financial condition of the enterprise, including evaluation of the results of the business process, including evaluation of data reflected in the balance sheet at a certain point in time, that is, there is an understanding of the figures of the time, but also an understanding of the figures of the period. In other words, there is an understanding of both the point-in-time figures and the period figures. Generally speaking, you can evaluate the financial position of an enterprise from the following four aspects:
1, the evaluation of enterprise profitability (the main evaluation of the indicators 2, target 3,: gross profit margin, net sales rate, net asset margin, net worth of compensation, 4, these indicators 5, target 6, the calculation of the same as the 7, the same as the statement of profitability, 8, .)
9, the evaluation of the operational capacity of the enterprise is often referred to as turnover capacity (the main evaluation indicators 10, indicators
11,: inventory turnover, accounts receivable turnover, turnover of current assets, asset turnover)
12, the solvency of the enterprise (financial security evaluation)
A, profitability security (check whether the profitability is safe, B, the generally used) A, profitability security (check whether the profitability is safe, B, generally used margin of safety ratio index
C, the standard, D, the higher the safer)
E, capital structure (the study of the capital structure of the index F, the standard G, is the balance sheet ratio, H, the lower the more stable)
I, debt servicing security (the ideal value of the current ratio is 2, the ideal value of the quick ratio is 1, and the interest earned times, J, the larger the number of the greater the ability to pay)
13, the evaluation of enterprise development capacity
In the specific evaluation of the financial situation of enterprises should look at how the future financial situation of enterprises, to understand the trend of changes in the development of enterprises, can not only stay in the evaluation of the historical situation, because such an evaluation is incomplete. The evaluation of an enterprise's ability to develop has the following main aspects:
Business development (sales growth)
The evaluation of business development is based on the enterprise's past information to speculate on the future of the enterprise. If a business is thriving, then its sales should be on an upward trend. The annual sales growth of a business can be calculated, for example, if the business grows by 10% in year 1, 20% in year 2 and 30% in year 3? This amount of growth indicates that the business has better prospects for growth.
Quality of Earnings (Operating Cash Index)
If a company's earnings are 2% in year 1, 3% in year 2, and 3.5% in year 3? Then the business results are on an upward trend year after year but it is not enough to focus on the results of the business, you also need to focus on how the quality of the results of the business. The quality of a business's earnings can be measured by the operating cash index. If the enterprise's operating cash index is closer to 1, the amount of profit is upward trend, and every year in the direction of good development, then the enterprise's profit quality is high; on the contrary, the enterprise's profit quality is low.
Value preservation and appreciation (value preservation and appreciation rate)
Investors put their money into the enterprise is to make money, the enterprise from the beginning of the year to the end of the year of operation, whether the capital preservation and increase in value, which is very concerned about the investors,. In practice, the value-added measurement index is the capital preservation and value-added rate. Its specific calculation method is: capital preservation and appreciation rate = the end of the owner's equity / the beginning of the owner's equity
The last item of the balance sheet is the owner's equity, or shareholders' equity, the end of the balance sheet has two numbers: one is the beginning of the year, and the other is the end of the year. Generally speaking, if the capital appreciation rate is equal to 1, that the enterprise from the beginning of the year to the end of the year did not make money and did not lose money, the capital is only preservation of value; if the capital appreciation rate is less than 1, that the enterprise from the beginning of the year to
the end of the year, the loss of capital, capital impairment; if the capital appreciation rate is greater than 1, that the number of the beginning of the year than the end of the year, generally speaking, this time, the enterprise's capital in the value-added. (Note: the capital appreciation rate is greater than 1, the enterprise's capital does not necessarily increase in value. Because there are two ways to increase the ownership interest of the enterprise: to make money to increase capital and investor capital. If it is through investors to increase ownership interest, the capital appreciation rate is questionable.)
Enterprise value (P/E ratio)
If the enterprise has the ability to develop, it means that the enterprise is more and more valuable, that is, the value of the enterprise in the value of the appreciation. For the value of the enterprise can be calculated using the price-earnings ratio indicator:
Price-earnings ratio = the current price of the stock/earnings per share
Attachment: the formula for the calculation of the various indicators
Asset-liability ratio = total liabilities/total assets * 100%
Current ratio = current assets / current liabilities
Quick ratio = quick assets / current liabilities
Gross Profit Margin = Gross Profit/Income from Main Business*100% (Gross Profit = Income from Main Business - Costs of Main Business) (Note: Income from Main Business is taken as Income from Main Business less Discounts)
Net Profit Margin on Sales = Net Profit/Income from Main Business*100%
Net Profit Margin on Assets = Net Profit/Total Assets*100%
Return on Net Worth = Net Income/Average Shareholders' Equity*100%
Price-Earnings Ratio = Present Price of Stock/Earnings Per Share (Multiple Relationship)
Inventory Turnover = Cost of Goods Sold/Average Inventory Occupancy
Accounts Receivable Turnover = Net Sales Revenue/Average Balance of Accounts Receivable
Current Asset Turnover = Revenues from Main Operations/Average Current Assets
Asset Turnover = Revenue from Main Business / Average Total Assets
Margin of Safety = (Revenue from Main Business - Revenue from Main Business at Capital Preservation Point)/Revenue from Main Business * 100%
Interest Earned Multiple = EBITDA/Interest Expense
EBITDA = Net Profit + Interest Expense