会计专业英语Chapter 11.ppt

The Earning Yield and the P/E Ratio Net Income Earning Yield = market Value of Shareholders’ Equity Is “earnings yield” a useful measure of financial performance? No! A company’s P/E ratio depends principally on two things: its future earnings prospects and the risk associated with those earnings. ROE or market Price? 11.4 Ratio Analysis It is now time to consider the systematic use of these ratios to analyze financial performance. This involves simply calculating a member of diverse ratios and comparing them to certain standards to gain insights into the company’s operations and financial health. Few things to bear in mind about ratios. Using Ratios Effectively Three approaches to decide whether a company is healthy or sick: Compare the ratios to rules of thumb Compare them to industry averages Or look for changes in the ratios over time The most useful way to evaluate ratios involves trend analysis: Calculate ratios for a company over several years, and note how they change over time. The levers of performance suggest one logical approach to trend analysis: Instead of calculating ratios at random, hoping to stumble across one that might be meaningful, it is wise to take advantage of the structure implicit in the levers. Using Ratios Effectively Chapter Summary Chapter Skeleton What is a company’s cash flow cycle? Explain the difference between financial stamens and a company’s market value. Define some levers of financial performance. Explain how to evaluate the performance of a company by using ratio analysis. 11.1 The cash Flow Cycle The cash flow production cycle illustrates the close interplay between company operations and finances. The movement of cash to inventory , to accounts receivable, and back to cash is the firm’s operating , or working , capital cycle. Another ongoing activity represented in the cash flow cycle is investment. Financial statements are an important window on reality. The cash flow