1、2023年5月10日星期三英国布里斯托大学财务英国布里斯托大学财务分析课程分析课程Operating activitiesFinancing activitiesInvesting activitiesThe firm:The value generatorThe Investors:The claimants on valueDebtholdersShareholdersSecondary DebtholdersSecondary ShareholdersCash from loansCash from share issuesDividends and cash from share re
2、purchasesInterest and loan paymentsCash from sale of debtCash from sale of sharesThe Capital Market:Trading valueSource:Penman,p.8Financial analysts are:information intermediaries;they digest information and provide summary information to the public/less sophisticated investors.especially important
3、where capital markets are well developed.They are doing:Fundamental analysis:contextual analysis of all publicly available information in order to value the company.Technical analysis:spotting share price time-series patterns in order to predict movement of prices.Part of fundamental analysis:Financ
4、ial statement analysis and valuation of shares so as to give well informed investment advice to an equity investor.Similar to what sell-side equity within brokerage houses are doing(as opposed to buy-side analysts affiliated with institutional investors)Final product:equity research reportNote of ca
5、ution in regard of financial statement analysis:Financial statement analysis can be done for various purposes:credit analysis,competitive benchmarking,analysis of mergers and acquisitions,etc.Different purposes require different approach to analysis Focus of this course:analysis of financial perform
6、ance and financial position in order to forecast future payoffs to equityholders Social welfare:The activity of analysts make markets efficient.Therefore,contribution to efficient allocation of resources.Personal gains:If markets are not efficient,the proper analysis helps in identifying mispriced c
7、ompanies.1980s:market efficiency paradigm widely accepted passive investment Evidence of market inefficiency active investment and a renewed interest in fundamental analysis(Warren Buffet)Fundamental analysis:anchoring on reliable information(accounting)rather than rumours and speculations;long-term
8、 perspective as opposed to short-term gainLate 1990s:unlimited faith in prospect of new technology and internet firms;bubble burst in 2001For the y/e 2000 Dell had reported earnings of$1.7 billion on sales of$25.3 billion.The MV of Dells shares at the time was$146.4 billion 3*the MV of GMC and Ford
9、Motor Company combined(P/E 8.5/5.0 respectively)Dells shares traded at a P/E of 87.9!Despite healthy trading and forecasted growth Dells stock appeared over-valued.In 2000 the per share stock price fell from$58 in early 2000 to$29 in 2003.The price had only recovered to$40 in 2005.They were riding t
10、he wave:involved in short-term speculation of the market mood rather than providing more sober picture to their clients based on fundamentals of the companies.Analysis based on internet clicks that do not generate any incomeConflict of interest:Many brokerage houses affiliated with investment banks:
11、the better picture of business,more lucrative business is created for the banks(SEOs,mergers,etc.)The role of F/S is to“anchor the investor on the rising tide of speculation”with hard information Earnings did matter!Losses reported by new economy firms during the bubble turned out to be a good predi
12、ctor of failure Surviving firms reported earnings turned out to be a better indicator of future performance Most of the intangible assets disappeared The much-criticised SoFP(B/S)also provided good forecasts.The ratio of debt assumed to pursue intangibles was large relative to tangible assets and th
13、at ratio predicts impending failureBusiness analysisTrading on the valuationAccounting analysisFinancial analysisForecastingValuationUnderstandingthe PastBusiness analysis Economic factors Industry structure Competitive strategy Corporate strategyAccounting analysis Evaluation of the extent to which
14、 a firms accounting captures the underlying business reality Understanding accounting distortionsFinancial analysis Analysis of financial performance and financial position using ratio and cash flow analysisForecasting the future Forecasting of payoffs through forecasts of balance sheet,income state
15、ment and cash flowsValuation Converting forecast in the estimates of equity value by using some of the available valuation modelsTrading on the valuation Investment recommendation:hold,buy or sellFinancial Statements Year 1Current financial statementsOtherinformationValuation of equityFinancial Stat
16、ements Year 2Financial Statements Year 3ForecastsConvert forecasts to valuationValue=Present value of future payoffs Deposit account,Loan,Bond=PV of future interest receivable+principal Investment project=PV of future net cash flows from the project Call option=PV of future expected difference betwe
17、en share price and strike price House=PV of future rents Equity=PV of future payoffs to shareholdersValue of the firm=Value of debt+Value of equityNote:Valuation Asset pricing Valuation is about current value of various classes of assets Asset pricing is about determining returns to various classes
18、of assetsValue of the firm=Value of debt+Value of equityValue of the operations and investment=Value of debt+Value of equityMiller-Modigliani:Capital structure irrelevance Dividend payout irrelevanceIn perfect and efficient capital markets,the value is generated only in operating activities.Economic
19、 environmentIndustryFirm GDP forecasts Maximum rate at which business can grow in the long run Interest rates Effect on costs of borrowing Effect of CHANGES in interest rates consumption vs saving decision:lower interest rates,more consumption,higher sales Inflation Affects allocation of capital(cap
20、ital escapes to countries with lower inflation or investment in commodities or real assets)Foreign exchange rates Important for companies exposed to foreign markets(input,output or investment)Oil and other commodity prices Key inputs to many businesses Look for the companys hedging,risk management p
21、olicies and use of derivatives Business cycle Sensitivity of profitability to business cycle varies across industries Understand industry operations supply,production,distribution and marketing processes,technology,nature of the product Effect of industry structure on the profitability Porters five
22、forces analysis Intensity of competition determines the potential for creating abnormal profits Whether abnormal profits are kept by the industry is determined by the relative bargaining power of the firms in the industry and their customers and suppliersIndustry profitabilityBargaining power of buy
23、ersThreat of substitute productsThreat of new entrantsRivalry among existing firmsBargaining power of suppliersDegree of actual and potential competitionBargaining power in input and output marketsCost leadership Focus on making internal processes more efficient Organisational focus on cost control
24、Competition on priceDifferentiation Focus on quality and uniqueness Investment in R&D,engineering and marketing;Organisation fosters creativity and innovation Premium charged for products or servicesFocus A niche strategy that supplies one of the market segments with exactly what they want,be it low
25、 cost or a differentiated productKey question:How sustainable is competitive advantage?Usually,not in the long run Single or multiple business?Diversify or not?Yes,if Economy of scope(lower transaction costs inside than outside the firm)Increased market power Important for companies exposed to foreign markets(input,output or investment)No if Result of managerial empire-building and lack of expertise
