Financial Terms: Financial Evaluation

Summary of financial evaluation

The financial evaluation of enterprises starts with analyzing the financial risks of enterprises, and appraise the factors such as capital risks, operational risks, market risks and investment risks faced by enterprises, so as to monitor and evaluate the risks of enterprises, and formulate corresponding and feasible risk control strategies according to their causes and processes, so as to reduce or even eliminate risks and make enterprises healthy and lasting development.

Financial evaluation is based on the market price from the perspective of enterprises. According to the current fiscal and tax system and the current price system, it analyzes and calculates the financial benefits and expenses directly generated by the project, compiling the financial statements, calculating the financial evaluation indicators, inspecting the financial status of the project's profitability, solvency and foreign exchange balance, so as to identify the financial feasibility of the project.

Purpose of financial evaluation

1, from the perspective of enterprises or projects, analyze the investment effect and evaluate the profitability of the project after its completion and operation.

2, determine the source of funds needed for a project and make capital planning.

3. Estimate the loan repayment ability of the project;

4, to provide the basis for coordinating the interests of enterprises and national interests.

Main contents of financial evaluation

1. Financial forecast

(1) financial prediction is that financial workers predict the future financial situation of enterprises based on mathematical statistics and subjective judgment according to the financial activities of enterprises in the past period.

(2) the purpose of forecasting is to embody the foregoing nature of financial management, that is, to help financial personnel to understand and control future uncertainties, to minimize ignorance of the future, to keep the expected objectives of financial plans consistent with the possible changes in the surrounding environment and economic conditions, and to have a clear idea of the effectiveness of the implementation of the financial plan.

(3) financial forecasting generally follows the following principles:

Continuity principle.

Financial forecasts must be continuous, that is, prediction must be based on past and present financial data to infer future financial position.

The key factor principle.

When making financial forecasts, you should concentrate on the main projects first, without having to stick to everything in order to save time and cost.

Objectivity principle.

Financial prediction is only based on objectivity, and it is possible to draw a correct conclusion.

Scientific principles.

On the one hand, we should use scientific methods (Mathematical Statistics) when we make financial forecasts; on the other hand, we should be good at finding and forecasting.

Economic principles.

Financial prediction is economical, because financial prediction involves the issue of cost and benefit.

Therefore, we should try our best to use the lowest forecast cost to achieve a satisfactory prediction quality.

2. Compile capital plan and plan.

3. Calculate and analyze Finance

Financial evaluation index

The financial evaluation indexes include sales profit rate, total assets return rate, capital yield ratio, capital maintenance and increment ratio, asset liability ratio, liquidity ratio, quick ratio, accounts receivable turnover rate, stock turnover rate, etc.

Calculation formula of financial evaluation index

1, sales profit ratio = total profit / product sales net income x 100% sales net income, refer to deduction of sales discount,

2, total assets return ratio = (total profit + interest expense) / average assets total x 100%;

Average total assets = (total assets at the beginning of the period + total assets of the period) 2

3, capital gains ratio = net profit / paid capital * 100% net profit should be calculated after tax profit.

4, capital preservation and appreciation ratio = total non owner's equity / initial owner's equity total * 100%

100% for capital preservation, more than 100% for capital gains, less than 100% for capital depreciation.

5, asset liability ratio = Total Liabilities / total assets * 100%

6, current ratio = current assets / current liabilities * 100% (supplementary indicators)

7, quick ratio = quick assets / current liabilities * 100%

Quick assets = current assets - inventory

8, accounts receivable turnover = credit net / average receivables balance * 100% because credit sale information is not a commercial secret, so it can be converted to net sales of credit.

9, accounts receivable recovery = current accounts receivable recovery / (initial + current accounts receivable) x 100%;

The average accounts receivable balance = (initial accounts receivable balance + non accounts receivable balance) 2

10, inventory turnover = product sales cost / average inventory cost * 100% (refer to finished products)

Average inventory cost = (initial inventory cost + period stock cost) 2