The Necessity of Developing Ability Analysis
Enterprise financial analysis is a dynamic and static analysis process. First of all, the value of an enterprise depends to a great extent on its future profitability, future growth of operating income, earnings and dividends, rather than its past or present earnings. Secondly, whether it is to enhance profitability, solvency, or improve the efficiency of asset operation, it is for the future vitality of the enterprise and improve the development ability of the enterprise, that is to say, the development ability is a comprehensive embodiment of the profitability, operational ability and solvency of the enterprise. Therefore, to comprehensively measure the value of an enterprise, we should not only analyze its operating ability from a static point of view, but also focus on analyzing and predicting its operating development level, that is, its development ability, from a dynamic point of view.
Significance of developing ability analysis
Evaluating the development ability of enterprises can restrain the short-term behavior of enterprises and help to improve the modern enterprise system. The short-term behavior of enterprises focuses on pursuing immediate interests, ignoring the preservation and appreciation of enterprise assets. In order to realize short-term profits, some enterprises do not hesitate to spend equipment and reduce expenses and costs. After increasing the assessment of enterprise development ability, it is necessary to assess not only the current profits of enterprises, but also the preservation and appreciation of enterprise assets, which can restrain the short-term behavior of enterprises to a certain extent, truly increase the economic strength of enterprises and improve the modern enterprise system.
(Comment: The analysis of growth ability, while restraining the short-term behavior of enterprises, is actually concerned about whether enterprises will continue to grow. If the previous chapter is about the existing value of the enterprise, then the development ability is about the future value of the enterprise)
The content of developing ability analysis
From the point of view of financial situation, there are two representative development capacity analysis frameworks:
First, analyze the growth rate from the perspective of the formation of development ability, that is, the comparison of shareholders' equity, income, operating income and assets before and after the two periods;
The second is to analyze the growth of shareholders' economic added value from the perspective of development ability results.
The influence of competitiveness on the development ability of enterprises should not be ignored when using some financial indicators to comprehensively analyze the development ability of enterprises. Competitive ability is also very important for evaluating the development ability of enterprises. If an enterprise lacks competitiveness in the future, its development ability will inevitably be questioned, no matter how good its development ability is from the past and present financial indicators.
Therefore, the analysis of development ability mainly includes the analysis of growth rate, the analysis of added value of shareholders' economic interests and the analysis of competitiveness.
1. growth rate analysis: the growth of enterprise value depends on the continuous growth of shareholders' equity, income, operating income and assets. Growth rate analysis is to analyze the growth rate of shareholders' equity, income, operating income and total assets.
2. Analysis of the added value of shareholders' equity: By comparing the increase and decrease of the added value of shareholders' equity in different periods, analyze the growth of shareholders' value of enterprises and its reasons, so as to judge the growth of enterprises.
3. Competitiveness analysis: By comparing market share, market coverage, product competitiveness, enterprise competition strategy, etc. Make a reasonable analysis and evaluation of the strength of enterprises participating in the competition.
Growth rate analysis
Analysis of total assets growth rate index
1, the connotation and calculation of the growth rate of total assets
1) Evaluation criteria for enterprise asset growth: From the perspective of investors, it is generally hoped that the higher the growth rate of total assets, the better, because the expansion of asset scale is usually done by growth enterprises. However, to evaluate whether the asset scale growth of an enterprise is appropriate, it must be combined with the growth of operating income and profit. Only when the business income growth and profit growth of an enterprise exceed the asset scale growth, this asset scale growth belongs to benefit growth, which is appropriate and normal; On the contrary, if an enterprise's business income growth and profit growth are far below the asset scale growth and continue, investors should be vigilant. Therefore, the high growth rate of enterprise total assets does not mean that the growth of enterprise asset scale must be appropriate.
2) Sources of enterprise assets growth: Enterprise assets generally come from liabilities and owners' equity, so the change of enterprise assets scale is influenced by two factors: liabilities and owners' equity scale. Other things being equal, whether it is to increase the scale of liabilities or the scale of owners' equity, the growth rate of total assets will increase. The increase in debt scale indicates that enterprises borrow from abroad; There may be many reasons for the increase in the scale of owners' equity, such as enterprises absorbing new investment or enterprises realizing profits.
If the growth of enterprise assets depends entirely on the growth of liabilities, and the owner's equity has not changed or changed very little within one year, it shows that the enterprise does not have good development potential. The increase of enterprise assets should mainly depend on the increase of enterprise profits, not the increase of liabilities. Because only by increasing shareholders' rights and interests can enterprises continue to borrow from abroad, further expand the scale of assets, and then achieve steady growth, thus ensuring that enterprises can repay their debts.
Therefore, it is necessary to correctly analyze the source of enterprise asset growth. There are two analytical methods.
(1) Calculate the proportion of the increase in shareholders' equity to the increase in assets and compare them. If the increase in shareholders' equity accounts for a relatively large proportion, it means that the increase in assets mainly comes from the increase in shareholders' equity, reflecting the good growth of enterprise assets; On the contrary, the opposite is true.
(2) Analysis of the growth rate of shareholders' equity. The higher the growth rate of shareholders' equity, the more the shareholders' equity of the enterprise increases this year, reflecting the good growth of enterprise assets; On the contrary, the opposite is true.
3) Growth trend of enterprise assets: Trend analysis should be used to compare the growth rate of total assets of enterprises in a long period of time, so as to correctly evaluate the growth ability of asset scale.
2, operating income growth rate index analysis
1) the connotation and calculation of the growth rate of operating income: the market is the space for the survival and development of enterprises, and customers are the source of profit growth of enterprises. The better the business income and the more market share of an enterprise, the greater the survival and development space of the enterprise; Accordingly, the faster the business income of an enterprise grows, the faster the enterprise's ability to survive and develop improves. Therefore, the growth rate of operating income can be used to reflect the development ability of enterprises in operating income. The growth rate of operating income = the increase of operating income in the current period/the amount of operating income in the previous period * 100%, which indicates that the operating income has increased or decreased compared with the previous period, and is an important indicator for evaluating the growth status and development ability of enterprises.
This indicator reflects the growth of the overall operating income of the enterprise in a certain period. The higher the growth rate of operating income, the faster the product income growth of enterprises in this period, and the better the market development and customer development; On the contrary, it is even worse.
2) Analysis of operating income growth rate
(1) Benefit-oriented growth of operating income: If the growth of operating income mainly depends on the corresponding growth of assets, that is, the growth rate of operating income is lower than the growth rate of total assets, it shows that this growth of operating income is not effective, and it also reflects that the growth of future enterprises in operating income is not good and the ability of sustainable development is not strong. Under normal circumstances, the growth rate of business income should be higher than that of total assets. Only in this way can we show that the enterprise has a good development in business income. It can be seen that to judge whether an enterprise has a good development in terms of operating income, it is necessary to analyze whether the growth of operating income is favorable.
(2) Growth trend of business income: When actually analyzing this indicator, we should make a forward-looking forecast based on the long-term business income level of the enterprise, the market share of the enterprise, the future development of the industry and other potential factors affecting the development of the enterprise, or make a trend analysis and judgment based on the growth rate of business income in the previous three years. At the same time, in the process of analysis, it is necessary to determine the standard of comparison, because a single indicator of development ability can not explain all the problems clearly, and it is only meaningful to compare between enterprises or between the years of this enterprise.
(3) Analyze the growth of enterprises according to the growth rate index of product sales revenue: the life cycle of products can generally be divided into four stages, namely, launch period, growth period, maturity period and decline period. During the launch period, the growth rate of sales revenue is small; In the growth period, the growth rate of sales revenue is relatively large; In the mature period, the growth rate of sales revenue has not changed much compared with the previous period; During the economic recession, the growth rate of sales revenue was negative. According to this principle, the life cycle stages of enterprise products can be roughly analyzed, and the development prospects of enterprises can be judged accordingly. What is the ideal product structure of an enterprise with good development prospects? Mature generation, production generation, reserve generation and development generation? . For an enterprise whose products are in a mature or declining period, its development prospect is doubtful. (Comment: Product Life Cycle and Structure Composition)
(Comment: What is the difference and connection between sales revenue and operating income? Product sales income (main business income) refers to the total business income obtained by an enterprise from its main business operations such as selling products and providing labor services. Operating income refers to the total inflow of economic benefits formed by enterprises in their daily activities such as selling goods, providing services and transferring the right to use assets. Operating income = main business income+other business income, so we can clearly see the relationship between them: operating income = product sales income (main business income)+other business income. Simply put, sales revenue refers to the main business income)
3. Analysis of income growth rate indicators
1) the connotation and calculation of income growth rate: the value of an enterprise mainly depends on its profitability and development ability, so the income growth of an enterprise is an important aspect reflecting its development ability. Income is reflected in various indicators such as operating profit, total profit and net profit in accounting, so the corresponding income growth rate also has different forms. In practice, net profit growth rate, operating profit growth rate and pre-tax profit growth rate are usually adopted.
(1) net profit growth rate: net profit growth rate = net profit growth in the current period/net profit in the previous period * 100%, and net profit is the result of enterprise's operating performance, so net profit growth rate is the basic performance of enterprise's development ability.
(2) Operating profit growth rate: Operating profit growth rate = current operating profit growth/previous operating profit * 100%, which reflects the changing level of enterprise operating profit and is the basic performance of enterprise development ability.
(3) earnings before interest and tax growth rate: earnings before interest and tax growth rate = earnings before interest and tax growth rate in the current period/earnings before interest and tax in the previous period * 100%. Income before interest and tax is the income created by total assets, which can better observe the development of enterprises.
2) Analysis of revenue growth rate: When analyzing the growth rate of enterprise net profit, it should be combined with the growth rate of operating income or operating profit. If the growth rate of enterprise net profit is higher than the growth rate of operating income or operating profit, it shows that the profitability of enterprise products is constantly improving, and the enterprise is in a rapid growth stage with good development ability; On the contrary, if the growth rate of enterprise net profit is lower than the growth rate of operating income, especially the growth rate of operating profit, it means that the growth of enterprise cost exceeds the growth of operating income, reflecting the poor growth ability of enterprises.
When analyzing the growth rate of operating profit (or earnings before interest and tax growth rate), it should be analyzed together with the growth of enterprise operating income. If the growth rate of enterprise's operating profit (or earnings before interest and tax growth rate) is higher than the growth rate of enterprise's operating income, it means that the products of the enterprise are in the growth stage, the business is expanding and the profitability of the enterprise is improving; On the other hand, if it is lower than the growth rate of operating income, it reflects that the increase of operating costs and period expenses of enterprises exceeds the increase of operating income, indicating that the profitability of enterprises is not strong and the development potential is in doubt.
It is worth noting that it is necessary to compare and analyze the growth rate of net profit, operating profit and pre-tax profit for many years, and exclude the influence of some accidental and special factors in individual periods, so as to fully and truly reveal whether the enterprise has sustained and stable growth ability.
(Comments: Through the analysis of revenue growth rate, we can not only evaluate the profitability of products, but also see the life cycle of products, taking into account the trend of costs and expenses, which is indeed multifaceted. )
4. Analysis of the growth rate index of shareholders' equity.
1) The connotation and calculation of the growth rate of shareholders' equity: the growth rate of shareholders' equity = the growth amount of shareholders' equity in the current period/the initial balance of shareholders' equity * 100%, also called the capital accumulation rate, which reflects the change level of owners' equity of the enterprise in that year and the capital accumulation of the enterprise. It is a sign of enterprise development and an important index to evaluate enterprise development ability.
The growth rate of shareholders' equity reflects the safety and growth of investors' capital investment in enterprises. The higher the index, the more capital accumulation of enterprises. If the index is negative, it shows that the capital of the enterprise has been eroded and the owner's rights and interests have been damaged.
2) Analysis of the growth rate of shareholders' equity: Shareholders' equity mainly comes from the retained net profit generated by operating activities and the net investment generated by financing activities. The growth rate of shareholders' equity can also be expressed as: shareholders' equity growth rate = return on net assets+shareholders' net investment rate (note: the calculation process is omitted). As can be seen from the formula, the growth rate of shareholders' equity is driven by two factors: the return on equity and the net investment rate of shareholders. Among them, the rate of return on net assets reflects the ability of enterprises to create income by using the capital invested by shareholders, while the rate of net investment by shareholders reflects the extent to which enterprises use the new investment by shareholders. These two ratios reflect the contribution to the growth of shareholders' rights and interests, but the former can better reflect the essence of capital accumulation and show good enterprise development ability and potential.
The above indicators of total assets growth rate, operating income growth rate, income growth rate and shareholders' equity growth rate respectively examine the development ability of enterprises from different aspects such as asset scale, operating income scale, income and shareholders' equity.
Enterprise assets are the guarantee of obtaining operating income. In order to realize the growth of operating income, we must expand the scale of assets under the condition of certain asset efficiency. On the one hand, expanding the scale of assets can be achieved through debt financing; On the other hand, we can rely on the growth of shareholders' equity, that is, the growth of net profit and net investment.
Operating income growth is the main source of enterprise income growth and the source of enterprise value growth. Only by constantly exploring the market and maintaining a stable market share can enterprises continuously expand their income and increase shareholders' rights and interests. At the same time, it provides a source of funds for enterprises to further expand the market, develop new products and carry out technological transformation, and finally promotes the further development of enterprises.
The growth of income is mainly manifested in the growth of net profit, and for a sustainable enterprise, the growth of net profit should mainly come from operating profit, and it mainly depends on the growth of operating income when the net profit rate of operating income remains unchanged.
On the one hand, the growth of shareholders' equity comes from net profit, which mainly comes from operating profit, which mainly depends on operating income, and the growth of operating income depends on the increase of asset investment under the premise of using efficiency of fixed assets; On the other hand, it comes from the net investment of shareholders, which depends on the increase of shareholders' investment capital and the dividend distribution to shareholders in the current period.
It can be seen that these four types of growth rates are interrelated and interactive. Only when the growth rate of total assets, operating income, income and shareholders' equity of an enterprise keeps growing synchronously and is not lower than the industry average can it be judged that the enterprise has good development ability.
(Comment: This section is very clear about enterprise value. If you understand this section, you will mostly understand the core connotation of value. )
Analysis of Economic Value Added of Shareholders
Connotation and calculation of shareholder's economic added value
1. Connotation of shareholder's economic added value: Shareholder's economic added value (EVAE) refers to the net profit added value after deducting the necessary cost of equity capital. Therefore, the economic added value of shareholders reflects the increase of shareholders' wealth, and its growth reflects the company's development ability. Growth companies must be companies that can continuously increase the economic added value of shareholders.
When shareholders invest in a company, the book value of their rights and interests is the net assets. Companies use these net assets in their operations to increase the wealth of shareholders. However, the increase in net asset value does not reflect the company's development ability. Because the increase in net assets only deducts the cost of debt capital, but ignores the compensation for the cost of equity capital. Only after the enterprise has made up all the investment capital costs, including debt capital costs and equity capital costs, the rest is the wealth that truly belongs to the owner of the enterprise.
(Comment: In other words, the capital invested by shareholders has a cost. Risk-free interest rates such as bank deposits are the cost of equity capital, and the real gain is to deduct this cost of capital. )
2. Calculation of shareholder's economic added value: shareholder's economic added value = (return on net assets-cost of equity capital) * net assets. In the formula, the return on net assets has been discussed before, and the average value of net assets at the beginning and end of the period is generally adopted. The calculation of the cost rate of equity capital is a difficult problem. At present, there are many methods to measure the cost rate of equity capital, which can be summarized as: 1, discounted dividend method; 2. Capital asset pricing model method; 3. The accumulation process of debt capital cost.
Analysis of Economic Value Added of Shareholders
As can be seen from the above formula, the economic added value of shareholders is influenced by three factors: return on net assets, cost rate of equity capital and net assets.
1. Factors affecting the economic added value of shareholders:
1) Return on net assets (ROE): the core indicator reflecting the profitability of an enterprise, which can not only reflect the value-added ability of shareholders' equity, but also affect the increase of shareholders' value. When the cost ratio of equity capital to net assets remains unchanged, the higher the return on net assets, the greater the economic added value of shareholders.
2) Cost ratio of equity capital: Only the increase of the book value of shareholders' equity after deducting all costs can truly reflect the growth of shareholders' wealth. The net profit calculated by accrual basis only deducts the cost of debt capital, and does not consider the cost of equity capital. Therefore, only when the return on net assets exceeds the cost rate of equity capital can we really promote the increase of equity capital. On the premise that the return on net assets and net assets conditions remain unchanged, the lower the cost ratio of equity capital, the greater the economic added value of shareholders.
3) Net assets: A company can increase the economic added value of shareholders by increasing equity investment, but only if the increased investment has a return on investment that exceeds the cost rate of equity capital can it really increase the wealth of shareholders. On the premise that ROE is higher than the cost ratio of equity capital, the more net assets are invested, the greater the economic added value created by the company for shareholders.
2. Analysis of economic added value of shareholders: (For details of the case, see page 190)
Competitive ability analysis
The future development ability of an enterprise mainly depends on its competitive ability.
Analysis of enterprise competitiveness
The competitiveness of enterprises is reflected in the market share of products. Therefore, by analyzing the market share of enterprise products, we can evaluate the competitiveness of enterprises.
1. Market share analysis: Market share is the basic index to reflect the market share of enterprises. Refers to the proportion of the sales of a certain product of an enterprise to the sales of similar products in the market in a certain period and within a certain market scope.
Generally speaking, the market share of this enterprise is compared with that of its main competitors. On the one hand, we should see the gap or advantage of this enterprise through comparative analysis; On the other hand, we need to find out the reasons further. There are many factors that affect market share, including market demand, the strength of competitors, the competitiveness of our products, the scale of production and other factors.
2. Analysis of market coverage: Market coverage is another major indicator reflecting the market share of enterprises. Market coverage refers to the ratio of the number of regions where a product is marketed to the total number of regions where the same product is marketed.
To use this indicator to illustrate the strength of enterprise competitiveness, we must also compare it with competitors. The main factors affecting the market coverage are: the demand structure of different regions, the level of economic development, national customs and habits, the strength of competitors, the competitiveness of our products, regional economic blockade and so on. Through the calculation and comparative analysis of the market coverage, we can investigate the current marketing areas of enterprise products, study the possible marketing areas, and reveal the reasons for the poor marketing of products, which is conducive to expanding the geographical scope of competition, opening up new markets for products and improving the competitiveness of enterprises.
3, product competitiveness analysis:
1) product quality competitiveness analysis: product quality is the primary condition of product competitiveness. Improving product quality is the main means to improve the competitiveness of enterprises. The poor product quality of this enterprise will not only harm the interests of consumers, but also directly affect the reputation, product sales and market competitiveness of the enterprise, and then affect the development ability of the enterprise.
The quality characteristics of products can be summarized into six aspects: performance, life, safety, reliability, economy and appearance. Analyzing the quality competitiveness of enterprise products is to compare the relevant quality indicators of enterprise products with the requirements of national standards, competitors and users, so as to observe the level and gap of enterprise product quality and make an objective evaluation of enterprise product quality competitiveness.
2) Analysis of product variety competitiveness: Enterprises should constantly adjust product structure, actively improve old products and actively develop new products and varieties according to market changes and the development of new technologies to maintain product competitiveness. The competitiveness of product varieties should be analyzed from the following two aspects. (1) product variety share analysis; (2) Analysis of new varieties development.
3) Competitiveness analysis of product cost and price: cost is the basis of price, and the level of cost determines the competitiveness of product price. The lower the cost, the greater the price fluctuation of the products sold, and the stronger the competitiveness. Therefore, it is necessary to compare and analyze the cost level with the main competitors or the lowest-cost enterprises in the same industry, so as to make a correct evaluation of the price competitiveness of this enterprise, point out the gap in cost level and its reasons, and then put forward effective countermeasures to further reduce costs and improve the price competitiveness of enterprises.
(Comment: I have seen a famous American enterprise expert say that the competitiveness of enterprises is only two points: low-cost advantage and product differentiation. In addition, Buffett mentioned in his article a few days ago that the competitive advantage is low cost and brand. The truth of the two statements is the same)
4) Analysis of product sales service competitiveness: Sales service is an important aspect of enterprise competitiveness. Strengthening sales service is one of the important means to close the relationship between enterprises and users, improve the reputation of enterprises, expand sales and occupy the market, and improve the competitiveness of enterprises. We should not only do a good job in pre-sales service, but also do a good job in after-sales service. The analysis contents include: investigating users' demand for sales services; Analyze the sales service quality of this enterprise; Analyze and study the degree to which the technical force of sales service of this enterprise meets the needs; User satisfaction with sales service and new demand; Compare and analyze the advantages and disadvantages of this enterprise and its competitors in service.
4, enterprise competitive strategy analysis
Whether the competitive ability of an enterprise can be brought into normal or maximum play depends on whether the competitive strategy of the enterprise is correct. The competitive strategy of an enterprise refers to the management policy formulated by the enterprise according to the development of the market and the situation of competitors.
The competitive strategies of enterprises can be summarized as follows: winning by high quality, winning by innovation, winning by low price, winning by fast delivery, winning by high quality service, winning by reputation and so on.
Analyzing the competitive strategy of an enterprise is to combine the economic benefits of the enterprise and compare it with the main competitors, and analyze and study what problems or potentials exist in the competitive strategy currently adopted; According to the changes of market situation and competition pattern, this paper puts forward what changes will take place in the competitive strategy of this enterprise.
Through the analysis of the above competitiveness, we can make a correct evaluation of the overall competitiveness of enterprises in this region and the same industry, so as to make a reasonable analysis and evaluation of the future development ability of enterprises.