Chapter 2 (P82)
1. (1) Company A's claims (accounts receivable, notes receivable, other receivables, prepayments, etc.) are more than 75% of the total assets, which is too large, indicating that the company's money funds, inventories, investments, fixed assets, and intangibles are less than 25% of the total assets.
(2) The receivables from the parent company amount to more than 80% of the company's claims, accounting for 75%╳80%=60% of the company's total assets. Such a huge amount of related transaction claims is suspicious, and there may be transfer of funds, illegal occupation and manipulation of profits.
(3) The parent company has been seriously insolvent and is facing bankruptcy and liquidation, which means that the corresponding claims cannot be recovered or cannot be fully recovered, which will cause Company A to suffer from serious asset losses and will further lead to serious losses, cash flow difficulties, plummeting stock prices, and serious damage to the company's image.
2. Inventory backlog may be due to excessive purchases, or it may be due to overproduction and poor sales. Whichever the reason, in the near future, the company has no loss; even if it is poor sales, but can make the company's current assets to increase, giving a short-term solvency enhancement of the illusion; and a large number of costs to be asset, reducing the current costs, so that the current profit has a good performance.
In the long run, the inventory backlog will lead to increased capital utilization and storage costs; if the inventory backlog is a result of poor sales of finished goods, the consequences will be more serious, and inventory asset losses and losses will occur in the future.
3. 2005 Quality of long-term assets of Kelon Electric
(1) Fixed assets. Some of the equipment is seriously aging, indicating that the company in a longer period of time stagnant development, but also a lack of technological progress; molds are idle in large quantities, indicating that the management is not in place, is there a problem with the procurement or due to the transfer of production? Whatever the reason for the idle, should be disposed of in a timely manner to reduce losses. As for part of the company ceased operations, equipment failed to operate normally, may be related to the chairman of the board of directors of Gu accident, management vacuum. Fixed assets are the core assets of a company's operations, and poor quality fixed assets will have a negative impact on the company's future performance.
(2) Intangible assets. Trademark value may have been overvalued in the past. This also reflects that the company had management problems at that time. As we know, trademarks need to be accounted for only when they are purchased or accepted for investment. Therefore, the trademark value was overestimated in the past and is now depreciated, which will directly bring economic losses to the company.
The land use rights in the lawsuit are because the transferor did not pay its transferee, so the transferor may not have the right to transfer. This reflects the fact that all three parties involved in the transfer may have had management problems.
(3) Construction in progress. Construction in progress indicates that the work has not been completed. The fact that some of the equipment is obsolete without having been completed indicates that there are major loopholes in the company's management.
(4) Long-term investments. Long-term investment in the full amount of the provision for impairment, indicating that the company has completely lost control of the investment, the loss has been recognized. This may be the result of Chairman Gu's illegal operation.
The company has adopted the practice of asking an independent third party to conduct an asset evaluation for the provision of asset impairment loss, and the resulting impairment loss should be considered reasonable.
From the quality of Kelong's assets in 2005, there were quite a few problems, and Hisense has a lot of work to do after the acquisition.
Chapter 3
P98 Anticipated Liabilities and Subjective Judgment
1. When the product quality guarantee is accrued, it recognizes an anticipated liability and at the same time increases selling expenses. As a result, it affects selling expenses, operating profit, total profit, net profit, and earnings per share in its income statement; and it affects projected liabilities, total liabilities, surplus and undistributed earnings in its balance sheet.
2. Estimating quality assurance costs, need to be considered: based on industry experience and past data analysis to determine the portion of the occurrence of quality problems in the ratio of sales revenue, maintenance costs as a percentage of sales revenue, as well as the amount of sales revenue for the year. On the occurrence of quality problems can be subdivided into different types according to the severity of the problem, and accordingly analyze and determine the ratio of maintenance costs caused by each type of quality problems to sales revenue.
3. Gree Electric's projected liability at the beginning of 2005 was 339,900 yuan, and at the end of the year it was projected to be 325,200 yuan, with an actual accrual of -14,700 yuan in 2005. Qingdao Haier, Midea at the beginning and end of 2005 no projected liabilities. And Kelong accrued 90,578,200 Yuan in 2005. This shows that the quality of Kelong products is poor and there are big problems in product quality management. (It is unlikely to manipulate profit through projected liabilities because the company has already suffered serious losses)
4. At the end of 2006, Kelong's projected liabilities at the end of the year were 169,995,100 yuan, while its beginning of the year was 209,915,700 yuan, and the accrual for 2006 was -39,920,600 yuan.
Case 1: Pan Ocean Construction (P117)
1. Calculate its gearing ratio
Gearing ratio = 35,357,272,192.70/77,864,050,818.13 = 45.41%
2. Analyze its financing environment and business environment in relation to its financing behavior in the current year
Based on its cash flow statement, it can be seen that the company's net cash flow from financing activities for the year was negative, a large number of debts were repaid and the number of interest payments was relatively large, and only a not insignificant amount of cash was obtained through borrowing during the year. During the year, the company did not obtain cash from the non-public offering of shares, but only through the issuance of shares to the control company in exchange for four companies. The information shows that the four companies have good performance, which can be regarded as the holding company injecting quality assets into the listed company. (It cannot be said on this basis that the company does not have the ability to finance its debts. The holding company did not simply sell the four companies to the listed company, it was sold to control a greater share of the listed company)
Overall, the company is not short of cash, the integration of cash is very little, using a single financing method, the company also has a certain ability to debt financing. The operating situation is that the parent company's operating income has shrunk from last year and the parent company's profit is negative, but as far as the consolidated operating income and profit are concerned, the situation has improved, and it can be considered that the company's operating environment is improving.
3. Predicting future financial trends based on the balance sheet
The holding company has improved the quality of its operating and investment assets through the injection of high-quality assets, and we can expect that the company's financial position will have a better trend in the future, and the company's balance sheet ratio is not too high, and there is still a certain amount of room for financing in the future, which will improve the financial support for the company's development. The company's other accounts receivable are relatively high. The company's other accounts receivable amount is large, there may be intra-group fund transfer, borrowing and lending, hope that the future does not produce bad debts.
Case 2: Audit report of Dongsheng Technology (P117)
1. What are the possible reasons that lead to the insolvency of the enterprise?
Insolvency means that assets are smaller than liabilities, why are they small? There is a loss of assets, severe losses. From the information in its statement, there is a certain loss in business activities, positive investment income, huge non-operating expenses, and non-operating expenses are mainly losses on external guarantees. Therefore, the reason for insolvency is mainly due to operating losses, mismanagement, and imprudent external guarantees without fully estimating the risks.
2. What does it mean when operating funds are less than zero?
Operating capital is less than zero, that is, current assets are less than current liabilities, that is, long-term assets are greater than long-term funds, is a typical over-investment.
3. This case involves a number of business assets and liabilities, so use this as a basis for analyzing the future financial trends of the business.
It is understandable that the CPA is "unable to make a judgment" about the company's ability to continue as a going concern, and that the CPA is "unable to express an opinion" on its financial statements.
Because of the company's over-investment, coupled with its operating losses, it will certainly suffer from serious liquidity difficulties, and will face the risk of bankruptcy and merger once its capital chain breaks and it is unable to repay its debts as they fall due. It is hoped that the company will be able to turn the tide through a number of improvement measures including asset transfer, debt restructuring, and adjustment and expansion of its operating structure.
4. Please compare your prediction with the relevant information to be announced by Dongsheng Technology in the future to see if your prediction is accurate.
In 2008, the company's financial position was improved by a huge amount of non-operating income from the sale of Gaitanli's "White Plus Black" OTC business and related assets.
The company is still losing money, with the stock code ST Dongsheng.
Reference Answers to Post-Course Exercises in 4 Chapters of Financial Statement Analysis
Chapter 4 (P152)
Case Study 1:
1. Calculate the Gross Profit Margin and Core Profit Margin of Panhai Construction in 2007
(1) Calculate on a consolidated basis
Consolidated Gross Profit Margin = (Operating Revenue Operating Costs)/Operating Income
=1716621574.39/4162671982.25
=41.24%
Consolidated Core Profit Margin = (Operating Income - Operating Costs - Operating Taxes and Surcharges)/Operating Income
Consolidated Core Profit Margin = (Operating Income - Operating Costs - Operating Taxes and Surcharges) /Operating Income -period expenses)/operating income
=1019216813.03/4162671982.25
=24.48%
(2) Calculated on the basis of the parent company's statement
Parent company's gross profit margin = (3103673- 935817.16)/3103673
= 2167855.84/3103673
= 69.85%
Parent company core margin = -45608727.53/3103673
= - 14.7%
2. Reasons for the big change in Pan Ocean Construction's performance in '07 and '06
(1) Pan Ocean Construction's gross profit margin, core profit margin, operating profit margin, and net profit margin in 2006:
Calculated on a consolidated basis:
Consolidated Gross Profit Margin = 455546718.75/1340514764.03
= 33.98%
Consolidated core margin = 325979636.26/1340514764.03
= 24.32%
Consolidated operating margin = 358728011.7/1340514764.03
= 26.76%
Consolidated net margin = 258434634.69/1340514764.03
= 19.28%
Based on the parent company's statements:
Gross margin of the parent company = 3288165.92/7329577.22
= 44.86%
Core margin of the parent company = -9195948.22/7329577.22
= -125.46%
Operating margin of the parent company = 119610924.72/7329577.22
= 1631.89%
Net margin of the parent company = 129448096.66/7329577.22
= 1766.11%
(2) Operating profit margin and net interest margin for 2007
Calculated on a consolidated basis:
Consolidated operating profit margin = 1015989591.83/4162671982.25
= 24.41%
Consolidated net margin = net profit/operating income = 650709444.55/4162671982.25
= 15.63%
Calculated on the basis of the parent company's statement:
Parent company's operating profit margin = -55210771.25/ 3103673
= -1778.88%
Parent company net margin = -54949517.19/3103673
= -1770.47%
(3) 2006 vs. 2007 Comparison
Consolidated Statement Comparison:
2006 2007
Gross Profit Margin 33.98% 41.24%
Core Profit Margin 24.32% 24.48%
Operating Profit Margin 26.76% 24.41%
Net Profit Margin 19.28% 15.63%
From the consolidated statements, the level of gross profit margin rose significantly in '07 compared to '06, and the operating income increased exponentially, which may be related to the real estate market condition or the asset injection of the controlling shareholders; although the level of gross profit margin rose significantly, the level of its core profit margin was still roughly the same in comparison of the two years due to the large increase in the items of operating taxes and surcharges, selling expenses, and administrative expenses; and After considering the investment income, the level of operating profit margin declined, which was because there was more investment income in 2006 (investments in subsidiaries were accounted for under the equity method), while the investment income in 2007 was negative (investments in subsidiaries were accounted for under the cost method according to the new standard and retrospective adjustments were implemented to write back the investment income of the previous years); after considering non-operating income and expenses, the level of net profit margin declined even more, which was This is because there were more net non-operating income and expenses in FY06, whereas in FY07 they were essentially flat.
Comparison of parent company statements:
2006 2007
Gross margin 44.86% 69.85%
Core margin -125.46% -14.7%
Operating profit margin 1631.89% -1778.88%
Net margin 1766.11% -1770.47%
From the parent company's statement, the gross profit margin in FY07 increased significantly compared to FY06, but there was a big drop in operating income; the gross profit margin was positive, while the core profit margin was negative, mainly because of the administrative expenses expenses Huge (there is no description of administrative expenses in the notes to the statement), of course, the core profit margin in 2007, although still negative, but there has been a big improvement; operating profit margin and net profit margin in 06 is huge because in 06 there is a huge amount of investment income (change in the accounting method) and a large amount of net non-operating income and expenditure, while in 07, the investment income is negative, the net non-operating income and expenditure is small.
3. Predict the future profit growth of Pan Ocean Construction (should be combined with the balance sheet)
Whether from the consolidated statement or the parent company statement, the main points of profit growth are: first, to expand the operating income, the sale of inventory, there is a great potential in this regard, there is a huge amount of inventory in the statement; secondly, to control the cost of all costs, especially management costs and selling expenses, and to strengthen tax planning; thirdly, to control all costs, especially management costs and selling expenses, and to strengthen tax planning; thirdly, to control all costs, especially management costs and selling expenses, and to strengthen tax planning. And strengthen the tax planning; Third, strengthen the management of receivables and prepayments to avoid bad debts; Fourth, improve the status of investment income, from the statement of the company did not invest in financial assets, then the status of investment income is mainly determined by the long-term equity investment, so it is necessary to strengthen the management of subsidiaries and equity participation in the company, to improve the efficiency of the investment; Fifth, to strengthen the management of investment real estate investment, and the sale of investment real estate in due course.
Case Study 2: Corporate Profit from Penalty Decision
Case Content Omitted
Discuss: What is the impact of the disclosures involved in this case on the financial position of the company, especially its profit position?
There is some uncertainty in the implementation of the Angola project. Once it is implemented, Hangxiao Steel Structure will need to make huge investment and huge fund raising, because the contract amount of the project is RMB 31.34 billion, while its annual income from main business in 2005 is only RMB 1.516 billion. As for the impact of the project's implementation on corporate profits, it's hard to tell from the available case information, as there are many variables in offshore projects, but of course it will generally result in a huge increase in corporate profits.
Financial Statement Analysis, Chapter 5, Post-Course Exercise Questions and Case Study Questions Reference Answers
Information: Chapter 1 of this book, the cash flow statement of Pan Ocean Construction
Exercise and Analysis Requirements:
1. Observe the difference in the amount of operating income and cash received from the sale of goods and services in the current year, and reveal the probable reasons for the difference.
Cash inflow rate from sales = cash received from sales of goods and services/operating income is an important indicator for financial analysis in combination with the income statement and cash flow statement. According to the 2007 annual statement of Pan Ocean Construction, the value of this indicator is calculated:
Consolidated sales cash inflow rate = 4320957269.97/4162671982.25 = 1. 04
Parent company sales cash inflow rate = 3274111.60/3103673 = 1.05
In order to understand the indicator, first of all, it is necessary to figure out the difference between operating income and sales of goods and services, and to understand the difference between operating income and sales of goods. need to clarify the relationship between operating income and cash received from sales of goods and services.
Cash received from sales of goods and services = operating income for the period + VAT sales tax for the period - VAT sales tax on products used in construction projects + (opening balance of accounts receivable - closing balance of accounts receivable - bad debts written off during the period + bad debts written off during the period) + (bad debts written off during the period) + (cash received during the period - cash received during the period) Bad debts written off in the current period + bad debts received in the current period that have been written off in the previous period) + (opening balance of notes receivable - closing balance of notes receivable) + (closing balance of accounts receivable - opening balance of accounts receivable in advance)
Note: The balances here are the balances of accounts, not the balances of the items in the balance sheet. Accounts receivable in the balance sheet is the amount after deducting the provision for bad debts.
So, the reasons for the difference between cash received from the sale of goods and provision of services and operating income are as follows: (1) the size of the VAT sales tax for the current period; (2) the size of the VAT sales tax calculated on the products received for construction in progress; (3) the size of the change in the increase or decrease in accounts receivable for the current period; (4) the size of the bad debts written off in the current period; (5) the size of the bad debts received in the current period which have been written off in the previous period; (5) the size of the bad debts received in the previous period; (6) the size of the notes receivable for the current period. (6) the size of the increase or decrease in the change in notes receivable during the period; (7) the size of the increase or decrease in the change in accounts receivable in advance during the period; and so on.
2. What are the characteristics of the firm's cash flows from investing activities for the year?
The enterprise's net cash flow from investing activities for the year, both parent and consolidated numbers are negative, indicating that the parent company and its enterprise group were in the stage of investment and expansion in that year; the parent company only has a small cash inflow, which is the recovery of investment and is an internal transaction; the consolidated statement of cash inflow is even less, arising from the disposal of long term assets; the parent statement and the consolidated statement of cash outflows are larger, mainly for external investments, and a portion for the acquisition of long-term assets.
3. What can be learned about the business activities and the financing environment from the firm's financing behavior during the year?
The net cash flows from financing activities on both the parent company's statement and the consolidated statement are negative, mainly in the form of cash outflows; the cash outflows are mainly used for debt repayment and the distribution of dividends or interest; the cash inflows from the parent company and the subsidiaries are relatively small, and there are only bank borrowings. From the enterprise's fundraising behavior during the year, the enterprise's cash flow from operating activities was sufficient and did not require additional fundraising, despite the enterprise's expansion in foreign investment. However, the amount of debt repayment during the year is huge, there is the end of the year to focus on debt repayment, the suspicion of whitewashing statements.