financial statement analysis model essay

if two companies are realizing the same profit share in a certain fiscal year, does that mean that they have the same profitability? The answer is no, because the assets of the two companies may not be the same, or even quite different. Another example is that a company achieved a profit of 1 million yuan after tax in 2111. Obviously, such accounting data alone can only explain the profitability of the company in a specific accounting period, and it is still unable to make the most effective economic decision for report users. However, if we compare the company's after-tax profit of 611,111 yuan in 1999 with that of 311,111 yuan in 1998, we may get the profit development trend of the company in recent years, so that users of financial statements can obtain more effective economic information from outside. If we analyze the accounting data of the company in the past three years, there will be more main information hidden outside the financial statements clearly. It can be seen that the use of financial statements has certain limitations, which can only reflect the profit level, financial situation and capital flow of enterprises in a certain period. In order to obtain more useful information for economic decision-making, report users must use systematic analysis methods to evaluate the past and present operating results, financial situation and capital flow of enterprises based on financial statements and other financial materials. According to this, the future business prospects of the enterprise can be predicted, so as to formulate future goals and make the best economic decisions.

in order to accurately reveal the main relationship between various accounting data and comprehensively reflect the business performance and financial situation of enterprises, the financial statement analysis skills can be summarized into the following four categories: horizontal analysis; Escape analysis; Trend percentage analysis; Financial ratio analysis.

1. One of the skills of financial statement analysis: horizontal analysis

The premise of horizontal analysis is to prepare comparative accounting statements by comparing the previous period and the later period, that is, to arrange the data of accounting statements of enterprises for several years in parallel, and set up two columns of "absolute amount deletion" and "percentage deletion" to reveal the changes of absolute amount and percentage deletion of each accounting item during the comparison period. Below, take ABC Company as an example for analysis (see the table below).

analysis of comparative profit and profit distribution table:

ABC company's comparative profit statement and profit distribution table amount unit: yuan

absolute reduction in 2111 and 2112 (%)

sales revenue 7655111 9864111 2219111 28.9

reduction: sales cost 5119111 62322. 24.4

Gross sales profit is 2646111 3632111 986111 37.7

Less: sales expenses are 849111 1325111 476111 56.1

management expenses are 986111 113111 217111 22.1

earnings before interest and tax (EBIT) 811111. .1

minus: financial expenses 28111 31111 2111 7.1

pre-tax profit (EBT) 783111 1174111 291111 37.2

minus: income tax 317111 483111 166111 52.4

after-tax profit (EAT) 46111. Undistributed profit at the beginning of the year 1463111 1734111 271111 18.53

plus: net profit this year 466111 591111 125111 26.8

distributable profit 1929111 2325111 396111 21.54

minus: withdrawal of statutory surplus reserve fund 46611 59111 11.

withdrawal of statutory public welfare fund 23311 29551 6251 26.8

preferred stock dividend

cash dividend 125111 151111 25111 21.1

undistributed profit 1734111 2186451 352351 21.32

① In 2112, the sales revenue of ABC Company was deleted from the previous year.

② The gross sales profit of ABC Company in 2112 increased by 986,111 yuan compared with that in 2111, with a decrease of 37.7%. That means that the company is making some achievements in cost control.

③ In 2112, the company's sales expenses were greatly reduced, and the reduction rate was as high as 56.1%. That will affect the synchronous deletion and addition of the company's sales profit.

④ in 2112, ABC Company distributed a dividend of RMB 151,111, an increase of 21% over the previous year. The substantial deletion and increase of cash dividends is attractive to potential investors.

second, the second skill of financial statement analysis: escape analysis of financial statements

horizontal analysis is actually a comparative analysis of the same items outside the accounting statements of different years; Escape analysis is the ratio analysis between the items in the same annual accounting statement. Escape analysis also has a premise, that is, financial statements must be prepared in the form of "comparability", that is, the data of a major item (such as asset share or sales revenue) outside the accounting statements is taken as 111%, and then the balances of other items outside the accounting statements are arranged in the form of the percentage of that major item, thus revealing the relative significance of the data of various items outside the accounting statements being outside the financial statements of enterprises. The financial statements compiled in that form make it possible to compare the operating and financial situation between several enterprises of different sizes. Because the balance of each report item is converted into a percentage, there is still "comparability" among the report items even when the scale of enterprises is very different. However, there must be a certain prerequisite for comparing different enterprises, that is, several enterprises must belong to the same industry, and the accounting methods and financial statement preparation procedures adopted must be roughly the same.

Taking the income statement of ABC Company as an example, the analysis is as follows:

① The ratio of sales cost to sales income of ABC Company decreased from 65.4% in 2111 to 63.2% in 2112. It shows that the decline of sales cost rate leads to the increase of the company's gross profit margin.

② The proportion of sales expenses in sales revenue of ABC Company increased from 11.1% in 2111 to 13.4% in 2112, an increase of 2.3%. That will lead to a decline in the company's operating profit margin.

③ABC Company's business analysis is as follows: The gross profit in 2112 was sharply reduced by 37.3% compared with the previous year, and the secondary reason was that the company's sales increased by 28.9%, and the deletion range of sales exceeded the deletion range of sales cost, which made the company's gross profit margin increase by 2.2%. However, compared with the rapid increase and decrease of the company's gross profit, the improvement of the company's net profit is not ideal. The reason is that the sales expenses are out of control, which makes the company's net profit fail to be deleted and increased simultaneously.

third, the third skill of financial statement analysis: trend percentage analysis

trend analysis seems to be a kind of horizontal percentage analysis, but it is different from the hint of percentage deletion outside horizontal analysis. The horizontal analysis is to compare by the ring ratio, while the trend analysis is to compare the corresponding data of some major projects outside the financial statements for several consecutive years by percentage. That kind of analysis method is quite useful for prompting the changing trend of business activities and financial situation of enterprises in several years. Trend analysis must first select a certain accounting year as the base year, then set the balance of several major items outside the accounting statements of the base year as 111%, and then list the data of the same items outside the accounting statements of subsequent years according to the percentage of the number of items in the base year.

Next, the technique of trend analysis is applied to the accounting statements of ABC Company from 1999 to 2112 to understand the development trend of the company.

prepare the following table according to the accounting statements of ABC company.

partial indexed financial data of p>ABC company in 2119-2112

project 1999 (%) 2111 (%) 2112 (%)

monetary fund 111 189 451 784

consulting product share 111 119 158 228. P > the sales amount is 111 119 125 129

the net profit is 111 84 63 162

According to the relevant data in the annual accounting statements of ABC Company from 1999 to 2112, we know that the cash amount of ABC Company is being deleted and increased by nearly eight times in three years! On the one hand, the company's abundant cash shows that the company's solvency is strengthened; On the other hand, it also means that the opportunity cost of the company will be greatly reduced. If a large amount of cash is invested in the capital market, it will bring considerable investment income to the company. In addition, the company's sales revenue has been deleted and increased year after year, especially in 2112, the company's sales volume has been deleted and increased by almost 51% compared with the base year, which shows that the company's promotion work in those years is effective. However, the decrease of sales revenue is lower than that of cost, which makes the company's net profit decline in 2111 and 2111, and that kind of situation is being controlled in 2112. However, from the perspective of the company's split, from 1999 to 2112, the company's share of assets more than doubled, with a deletion rate of 1.27%. In contrast, the company's operating performance is not satisfactory. Even in the best year of 2112, the company's net profit only increased by a little more than half compared with the base year. That shows that ABC's asset utilization efficiency is not high, and the company still has a lot of potential to tap in production and operation.

fourth, the fourth skill of financial statement analysis: financial ratio analysis

financial ratio analysis is the sinking of financial statement analysis. Financial ratio analysis is a kind of analysis skill that divides two related accounting data and uses the obtained financial ratio to indicate the positive logical relationship between different items outside the same accounting statement or between related items in different accounting statements. However, it is very limited to calculate all kinds of financial ratios. More importantly, the calculated financial ratios should be compared and analyzed in various dimensions to help users of accounting statements accurately evaluate the business performance and financial situation of enterprises, so as to adjust the investment structure and business decisions in time. A remarkable feature of financial ratio analysis is to standardize the economic information transmitted by the financial data of enterprises of different sizes. On the contrary, because of that feature, it is possible to compare the horizontal and industry standards among enterprises. For example, International Business Machines Corporation (IBM) and Apple Corporation are well-known enterprises that produce and sell computers in the United States. Judging from the sales and profits outside the accounting statements of those two companies, IBM is many times higher than Apple. However, it doesn't make much sense to compare the shares in general, because IBM's share of assets is nearly larger than the latter. Therefore, the comparison of absolute numbers should give way to the comparison of relative numbers, and financial ratio analysis is a kind of relative relationship analysis skill, which can be used as an effective tool to evaluate and compare the operation and financial situation of two enterprises with very different scales. Financial ratio analysis can be divided into the following four categories according to the different settlement points: ① liquidity analysis or short-term solvency analysis; ② Financial structure analysis, also known as financial leverage analysis; (3) analysis of enterprise's operation ability and profitability; (4) Analysis of stock investment income related to dividend and stock market.

1. Analysis of short-term solvency. If any enterprise wants to maintain general production and business activities, it must have enough cash on hand to collect all kinds of expenses and debts due, and the goals that best reflect the short-term solvency of the enterprise are current ratio and quick ratio. (1) Current ratio is the ratio of all current assets to current liabilities, that is, current ratio = current assets ÷ current liabilities; (2) Quick ratio is the ratio of current liabilities to the balance of current assets excluding inventory and prepaid expenses, that is, quick ratio = quick assets ÷ current liabilities. Quick ratio is a stricter target than current ratio, which is often used together to evaluate the ability of enterprises to pay short-term debts more accurately. Generally speaking, keeping the current ratio at 2: 1 and the quick ratio at 1: 1 indicates that the enterprise has strong short-term solvency, but it cannot be generalized. In fact, no two companies are in the same situation in all aspects. For one enterprise, the financial ratio indicates the serious problem, but it may be quite satisfactory for another enterprise.

2. financial structure analysis. The rationality and stability of equity structure can usually reflect the long-term solvency of enterprises. When an enterprise finances its assets through fixed financing means, it is considered to be using financial leverage. In addition to the managers and debtors of the enterprise, the owners and potential investors of the enterprise are also very concerned about the use of financial leverage, because the high and low return on investment is influenced by the use of financial leverage. The financial ratios that measure the use of financial leverage or reflect the equity structure of an enterprise mainly include: (1) Asset-liability ratio (%) = (debt share ÷ asset share) × 111%. Generally speaking, the smaller the ratio, the stronger the long-term solvency of the enterprise; This ratio is too high, indicating that the financial risk of enterprises is relatively high, and the ability of enterprises to sink new debts will be limited. (2) Equity multiplier = asset share ÷ equity share. There is no doubt that the higher the multiple, the higher the financial risk of the enterprise. (3) Debt-taking ratio from equity (%) = (debt share ÷ owner's equity share) × 111%. The lower the target, the stronger the long-term solvency of the enterprise, and the higher the degree of protection of the debtor's rights and interests. On the contrary, it shows that enterprises use higher financial leverage. (4) Earned interest multiple = earnings before interest and tax/interest expense. This goal is not only the prerequisite for enterprises to operate with debt, but also the main symbol to measure the long-term solvency of enterprises. If an enterprise wants to maintain its general solvency, the multiple of interest earned should be at least greater than 1, and the higher the multiple, the stronger its long-term solvency. Generally speaking, debtors hope that the lower the debt ratio, the better. Low debt ratio means that the debt repayment pressure of enterprises is small, but low debt ratio indicates that enterprises lack vitality and their ability to use financial leverage is low. However, if the debt ratio of enterprises is too high, the heavy interest burden will overwhelm enterprises.

3. Analysis of enterprise's operating efficiency and profitability. One of the main goals of enterprise financial management is to realize the optimal allocation of capital flow within the enterprise, and the operating efficiency is one of the measures of the overall operating ability of the enterprise.