How To Read Financial Statements Efficiently

With the disclosure of annual reports, a large amount of hidden information is hidden in the financial statements of listed companies.

As we all know, financial analysis should start with three tables, namely profit statement, cash flow statement and balance sheet.

Whether it is a top researcher or a grassroots researcher of a large brokerage firm, it is necessary to look at these three tables.

As long as you master these major indicators, I believe you will become a financial expert.

(1) income statement

1. market sales rate: relative to P / E ratio, the index is

The ratio of the market value of a stock to the sales revenue of the company.

A private equity tracking model was used to study the relationship between the price earnings ratio and the market share ratio of the listed companies, and the market sales rate is more reliable than the P / E ratio.

According to foreign statistics, under normal circumstances, the sales rate equal to 1 is the most appropriate.

In this index, sales revenue is the most important. If an enterprise's sales revenue continues to grow and its profit does not increase, the value of the enterprise will be reassessed.

Under normal circumstances, enterprises first appear to improve their income and then increase profits. Therefore, income is more real than profit, and the ratio of market to sales is more effective than price earnings ratio, and income reflects faster than profit.

I have different opinions on this point, because it is not very difficult for enterprises and audit institutions to help enterprises to confirm sales revenue or even make a fictitious sales revenue in advance. If the company's fraud can be excluded, the conclusion of its model may be established.

2. gross margin: sales gross profit excluding sales revenue.

To track the changes in gross margin, we must look at the historical situation. The phenomenon of excessive gross margin will not last.

Therefore, if an enterprise has stable performance under the condition of low gross profit margin, the increase in profits will be very obvious once the price rises.

Conversely, if the gross profit margin is too high, the business performance has stabilized, and the industry with stable gross margins will be sought after by investors.

3. three fee manipulation: the so-called three charges, that is, sales costs, management costs and financial costs (three fees can also be referred to as the period cost), theoretically speaking, the sales cost is very difficult to manipulate, and the management cost can manipulate the most tricky.

For example, some companies plan to raise greening fees and welfare costs, some companies account for bad debts, and some companies make provision for impairment of assets, all of which will be included in management fees.

So there's a lot of it.

However, most of these provisions do not affect tax payment.

These are the means of fraud and concealment of profits by listed companies.

In addition, from the company that has published annual reports, such as the calculation of the real estate company, the Steel Corp's plan and so on.

Of course, if in turn, it can also become a means of deliberately increasing profits.

For example, Steel Corp's assets are impaired and bad debts are charged.

But if the asset suddenly becomes valuable after a certain period of time and the company rushes back to the cost, the current profit will also increase substantially.

In addition, depreciation is also a way to manipulate profits.

In short, the three costs are endless, and a good company will generally maintain relatively stable three charges.

In normal enterprises, the three expenses are directly proportional to the sales revenue and the proportion will be lower. (it is not clear enough. It should be proportional to the cost of the period and sales revenue and keep increasing at a reasonable rate.

While the enterprise is expanding, the three costs have not increased synchronously, that is, the result of enterprises tapping the potential, such enterprises are valuable.

4. net profit at the end of the year (this is the author's coined words, not in Accounting): the main business income minus the main business cost, the main business profits.

The main business profit is reduced by three and the operating profit is obtained.

Business profits are increased and other income is added and reduced, and the profit before tax is obtained.

Net profit is derived from pre tax profits minus income tax.

Net profit minus minority shareholders' equity is attributable to the ultimate net profit of the parent company (this indicator plus the initial distributable profit balance) is the ultimate drop to the end of the company's distributive profit balance.

The balance sheet is the table of assets and liabilities, including two parts, the first part is assets, and the second part is liabilities.

Among them, assets are current assets and non current assets, liabilities are also divided into current liabilities and non current liabilities.

There are six indicators in the balance sheet that need attention.

1. asset liability ratio: total liabilities divided by total assets.

Under normal circumstances, the asset liability ratio of enterprises can not be too high (or not too low!), generally 50% (in practice, we generally limit 50%-70%, if it is higher than 100% should be vigilant) about more appropriate.

That is to say, the net assets of an enterprise are 100 million yuan, so it has 100 million yuan of foreign liabilities at the same time, which is equivalent to the use of 200 million yuan assets.

Of course, this should be determined according to the different circumstances of the enterprise.

2. net assets yield: the ratio of net profit to net assets, it reflects the ability of an enterprise to make money by using net assets.

The return on net assets must be greater than at least 20% of the bank loan interest rate.

However, the private equity proposal is concerned with the total asset yield, which is the value of the net profit divided by the total assets, which more accurately reflects the ability of the enterprise to use all the assets.

If the rate of return on the net assets exceeds the rate of the bank's loan at the same time, it will certainly be beneficial to it.

In addition, if the debt ratio of some enterprises reaches 99%, its net assets return rate is very high, and the net assets of the enterprises are negative.

(Supplement), the net assets yield must be compared with the history of the company in the same period, and compared with the same industry companies, it can accurately reflect its industry position and competitiveness in the market.

3. mobile ratio and quick ratio: the current ratio is the current assets divided by current liabilities, reflecting the safety of an enterprise asset. This ratio can not be less than 1, preferably 2.

The quick ratio is that the current assets are deducted from inventory and then divided into current liabilities. The quick ratio is generally not less than 1.

This is generally not a problem. The key is to look at the safety and growth of enterprise assets from the point of view. Sometimes there will be some contradictions. Too much safety means growth is not enough. Therefore, creditors such as banks prefer this indicator, while shareholders and higher authorities or investors prefer smaller ones, which is the choice of interest orientation.

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4. inventory turnover: the result of the main business cost divided by the inventory (accounting is based on the average cost of goods sold and the average balance of the inventory. If the business of the company is relatively simple, its selling cost can be replaced by the main business cost), and the data of the inventory are generally used at the beginning and end of the year.

This indicator is not intuitive. The method used in the private placement is the final inventory amount divided by the sales revenue of that year.

This figure should not exceed 20%.

That is to say, the inventory of enterprises is about two months or more.

Too much, indicating that the backlog of products and excessive capital occupation may be an early warning signal for enterprises.

The best thing is whether the finished products, semi-finished products or raw materials can not exceed one month's sales revenue.

5. accounts receivable turnover: general sales revenue divided by accounts receivable.

The higher the ratio, the better.

If you want to judge the accounts receivable of an enterprise, it is mainly seen that it accounts for the proportion of sales revenue, not more than 20% of the best (the less the better!)

(three) cash flow statement

Looking at the cash flow statement, it is mainly to find out whether the profit of the enterprise is real, whether it conceals profits or not, and whether it has prospects for development.

The cash flow statement generally has three main items: cash flow of business activities, cash flow of investment activities and cash flow of financing activities. (simply speaking, if the balance of cash flow of enterprises is positive, the funds that represent enterprises' production and operation are inflow into enterprises, which indicates that the business condition of enterprises is relatively good, and the key point is to see that cash flow of business activities is positive, which is the foundation of enterprises.

Many enterprises have the overall balance of cash flow, but the cash flow of business activities is negative. It depends on the cash flow of investment activities and the positive cash flow of financing activities, which indicates that the business management ability of the enterprise is poor or the market viability is poor.

Of course, if the balance of cash flow is negative at last, it goes without saying.

The annual report of an enterprise also provides an additional item, which is listing the difference between the net profit of the enterprise and the cash flow of the business activities. We can learn in detail in this table the effects of the assets impairment, bad debts, asset depreciation, inventory changes and receivables changes on the cash inflow.

Through this table, we can basically determine the real performance of the enterprise.

The whitewash statements often reveal a lot in a lot of ways. As long as investors are willing to take more time to come up with the shopping spirit of selecting the goods and buying goods better than three, we can make a good comparison of the company's financial situation by making a comparative analysis of the company's financial situation, so that we can effectively defend our interests.

Generally speaking, the three main tables of balance sheet, profit statement and cash flow statement are disclosed in the periodic reports of listed companies.

If a listed company owns a controlling descendant company, it will disclose the consolidated balance sheet, the consolidated profit and loss statement and the consolidated cash flow statement.

Since consolidated financial statements reflect the overall situation of listed companies and controlled enterprises, we are more focused on the use of consolidated financial statements.

Most investors are accustomed to consulting the company's earnings per share, net profit growth rate, net assets per share, net assets yield and a few other indicators.

In fact, if the company has the motive to gloss over the report, these indicators are likely to be manipulated.

To better judge the company's status, investors can take the following analysis methods:

The first is the inter table analysis.

That is to say, we should comprehensively measure the related items between the company's financial statements, and pay attention to whether there are unreasonable doubtful points, so as to understand the real profit quality and asset quality of the enterprises, and prevent the misleading of the sheet statements.

The two is financial ratio analysis.

The company's financial statements are compared with the relevant items in the accounting period, and the ratio is calculated to determine their solvency, capital structure, operational efficiency and profitability.

The three is the period analysis.

A dynamic comparative analysis is made on the company's reporting items in different periods, and the trend of asset liability structure and profitability is judged.

The four is the inter company comparative law.

Compare and analyze the financial situation of other listed companies in the same industry and the same type, and understand the advantages and disadvantages of the company in the group.

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