Data analysis of financial statements
Financial statement analysis plays a vital role in understanding the financial situation, operating performance and cash flow of an enterprise, evaluating its solvency, profitability and operational ability, and helping to make economic decisions. However, due to various factors, financial statement analysis and its analysis methods. There are some limitations. Correctly understand the limitations of financial statement analysis, reduce the impact of limitations, and foster strengths and avoid weaknesses in decision-making. It is a realistic problem that can't be ignored. The following is my financial statement data analysis paper, I hope it will help you.
I. Overview of financial statement analysis
The analysis of enterprise financial statements refers to taking financial statements and other materials as the basis and starting point. By adopting special methods, this paper systematically analyzes and evaluates the past and present operating results, financial status and changes of enterprises, with the purpose of understanding the past operating performance of enterprises, measuring the current financial status of enterprises and predicting the future development trend of enterprises, and helping enterprise interest groups to improve their decision-making. The most basic function of financial analysis is to process, sort out, compare, analyze and convert a large number of financial statement data into information useful for specific decisions, focusing on the explanation and evaluation of whether the financial situation of the enterprise is sound and whether the operating results are excellent, so as to reduce the uncertainty of decision-making.
Second, the financial statements themselves have limitations
1. The information resources reflected in the financial statements are incomplete.
the financial statements do not disclose all the information of the company. Only the economic sources that can be used and can be measured in money are included in the financial statements of enterprises. In reality, enterprises have many economic resources, either because of objective conditions or accounting practices, which are not reflected in the statements. For example, a large number of off-balance-sheet assets of some enterprises cannot be reflected in the statements. Therefore, the report only reflects a part of the economic resources of the enterprise.
2. inadaptability of financial statements to future decision-making value.
Because accounting statements are prepared according to the historical cost principle, many data do not represent their current cost or realized value. During the period of inflation, some data will be affected by price changes. Because the currency value is assumed to be constant, the monetary data at different times are simply added, which makes it impossible to truly reflect the financial situation and operating results of enterprises, and sometimes it is difficult to have substantial reference value for the economic decision-making of report users.
3. Financial statements lack data reflecting long-term information.
because the financial statements are reported by annual installments, only short-term information is reported, and information reflecting long-term potential cannot be provided.
4. The data of financial statements are influenced by accounting estimates.
some data in accounting statements are not very accurate, and some project data are estimated and measured by accountants according to experience and actual situation. For example, the proportion of bad debt provision, the net salvage value rate of fixed assets, etc.
5. The data of financial statements are influenced by the management's choice of accounting policies.
the multiple choices of accounting policies and accounting treatment methods make the similar report data of different enterprises lack comparability. According to "Accounting Standards for Business Enterprises", there are different options for enterprise inventory pricing method and fixed assets depreciation method. Even if the actual operations of the two enterprises are exactly the same, the conclusions of the financial analysis of the two enterprises may be different.
Third, the impact of objective factors on the analysis of financial statements
1. The impact of the reliability of financial statements on the analysis of financial statements.
in many cases, for various purposes, enterprises need to show good financial status and operating results to the outside world. Once the actual business situation is difficult to achieve the goal, enterprises will take the initiative to choose accounting methods that are conducive to improving profits, or take other means to whitewash accounting statements. For example, in order to improve the profit level, some enterprises often overestimate the cost of products in process at the end of the period and underestimate the cost of finished goods in storage. As a result of human manipulation, the report information obtained by information users is far from the actual situation of enterprises, thus misleading information users and making financial statement analysis meaningless.
2. The influence of financial statement analyst's professional quality level on financial statement analysis.
analysis and evaluation of enterprise financial statements are usually done by report analysts. However, different financial analysts have different understanding of financial statements, their ability to interpret and judge financial statements, and the depth and breadth of mastering financial analysis theories and methods, and often have different results in understanding financial analysis and calculation indicators. If the analyst does not fully understand the calculation process of each index and the relationship between each index, it is difficult to fully grasp the economic meaning explained by each index only by looking at the calculation results.
fourth, the financial statement analysis method has limitations
1. Limitations of the ratio analysis method.
the calculation of ratio indicators is generally based on financial statements based on historical costs and historical data, which greatly reduces the relevance between information provided by ratio indicators and decision-making. Weakened its ability to provide effective services for enterprise decision-making. Moreover, the ratio analysis is aimed at a single index, and the comprehensive degree is low. In some cases, satisfactory conclusions cannot be drawn.
2. Limitations of trend analysis.
trend analysis refers to providing analysts with information about the changing trend of the enterprise's financial situation compared with the indicators of the enterprise in different periods, and providing a basis for financial prediction and decision-making. However, the data on which the trend analysis method is based, mainly the data of financial statements, have certain limitations; In addition, due to the influence of inflation or various accidental factors and the change of accounting conversion methods. So that the financial statements in different periods may not be comparable.
3. Limitations of comparative analysis.
comparative analysis refers to the comparative analysis of economic indicators. Methods to determine the differences and trends between indicators. However, due to the differences in the price level in different regions and the different business relationships among enterprises in different regions, it will inevitably lead to the differences in the index level of different enterprises, thus making it lack of comparability.
V. Limitations of commonly used financial statement analysis indicators
1. Current ratio.
The current ratio is the ratio of current assets divided by current liabilities. The higher the ratio, the higher the degree of current assets exceeding current liabilities, that is, the higher the safety of short-term liabilities of enterprises. But this effectiveness is very limited. First of all. A considerable part of current assets is not solvent, for example, the liquidity of inventory is weak. Secondly, there are still some items in current assets that cannot be realized, such as prepaid accounts and prepaid expenses. Although they are regarded as a kind of current assets in nature, in fact, they do not have the ability to realize payment. Furthermore, the limitation of the financial ratio index's own structure determines the limitation of its effectiveness. For example, the high turnover ratio itself means that enterprises have low utilization rate of assets, idle assets, low income and lax management; At the same time, it also shows the conservatism of enterprise management concept. Did not make full use of the current short-term financing capacity of enterprises.
2. Quick ratio.
quick ratio is the ratio of quick assets divided by current liabilities, which is an auxiliary indicator of current ratio. An important factor affecting the credibility of quick ratio is the liquidity of accounts receivable. When quick assets contain a lot of bad accounts receivable. It is inevitable that enterprises cannot accurately judge their short-term debt repayment ability, and many enterprises have seized this weakness to whitewash statements and mislead information users.
3. Earnings per share.
earnings per share = net profit this year/total number of common shares at the end of the year, which indicates the profit of common shares in this year and is an important ratio indicator to measure the profitability of the company. When calculating this ratio, the numerator is the net profit of this year, the denominator is the total number of ordinary shares at the end of the year, one is the period indicator and the other is the time point indicator, so the calculation caliber of numerator and denominator is not completely consistent. At the same time, when calculating earnings per share, the number of common shares is a concept of "share". Different companies' shares are not equal in economy, and they contain different net assets and market prices. That is, the amount of investment in exchange for earnings per share is different, which limits the horizontal comparison between different companies.
4. net assets per share.
net assets per share = net assets at the end of the period/number of ordinary shares at the end of the period, indicating the shareholders' equity or book equity represented by each share of `common shares' issued outside. In investment analysis, this indicator can only be used in a limited way, because it is measured by historical cost, which neither reflects the realized value of net assets nor the output capacity of net assets.
5. Return on equity.
the return on equity is a return on investment, which should be compared with the net assets used by the enterprise for operation in a certain period. However, the net assets of an enterprise used for operation in a certain period of time are constantly changing. In order to improve the accuracy of the calculation results, it seems more reasonable to use the average of the net assets at the beginning and the end of the period as the denominator, compared with the current net profit of the numerator. On the other hand, the "net assets at the end of the period" project has excluded the amount of cash dividends distributed to shareholders, which leads to differences in the calculation caliber of "return on net assets" of companies adopting different dividend policies.
6. Cash flow ratio indicator.
What can really be used to repay debts is cash flow, and the comparison between cash flow and debts can better reflect the ability of enterprises to repay debts. But the ratio is too high, probably because enterprises have too much cash. The reason why it has not been well used in business. What needs more attention is that. The measure of the company's solvency here is "net operating cash flow". However, any cash source of the company, whether it is the cash flow of business activities, investment activities or financing activities, can be used to repay the debts of the enterprise. So ... If the cash flow of operating activities used by molecules is changed to the sum of three net cash flows. It would be better to calculate the cash flow ratio.
VI. Suggestions on improving the limitations of financial statement analysis
1 Strengthen the use of notes information in financial statements.
Notes to financial statements are supplementary explanations and detailed explanations for the contents and items that cannot or are difficult to fully express in the financial statements themselves. In the analysis of enterprise finance. We should make full use of the information in financial statements and notes to the statements and contact other relevant information. Careful and in-depth analysis and research can improve the understanding of the overall situation of the enterprise and evaluate the financial situation and operating performance of the enterprise more accurately.
2. Improve the comprehensive ability and quality of financial statement analysts.
no matter which analysis method of financial statements is adopted. The analyst's judgment is particularly important to draw a correct analysis conclusion. At ordinary times, it is necessary to strengthen the training of financial statement analysts, improve the comprehensive quality of analysts, improve their ability to interpret and judge report indicators, and make them have knowledge of accounting, finance, marketing, strategic management and enterprise management at the same time. Mastering modern analytical methods and tools, establishing correct analytical concepts in practice, and gradually cultivating and improving their ability to judge the analyzed problems, as well as their ability to collect and master comprehensive data, will greatly provide true and reliable basis for enterprise management and decision-making.
3. Combination of quantitative analysis and qualitative analysis.
modern enterprises are faced with complex and changeable external environment, which is sometimes difficult to quantify, but it will have an important impact on the financial statements and operating results of enterprises. Therefore, while making quantitative analysis, we need to make qualitative judgment. On the basis of qualitative judgment, we should make further quantitative analysis and judgment, give full play to people's rich experience and precise calculation of quantity, and optimize the report analysis.
4. combine dynamic analysis with static analysis.
The production, operation and financial activities of an enterprise are a dynamic development process. Therefore, we should pay attention to dynamic analysis, and on the basis of understanding the past situation, it is helpful to analyze the possible results of the current situation to properly predict the future of the enterprise. ;