专业英语286664.ppt

* SIC codes have been used many years to identify industries and allow for comparison with industry average ratios. The SIC codes are limited however and have not kept pace with a rapidly changing environment. Consequently, the North American Industry Classification System was introduced in 1997 to alleviate some of the problems with SIC codes. www: Click on the web surfer to go the NAICS home page. It provides information on the change to the NAICS and conversion between SIC and NAICS codes. * Computing Total Asset Turnover Total Asset Turnover = Sales / Total Assets 3,991,997 / 4,088,797 = .98 times Measure of asset use efficiency Not unusual for TAT 1, especially if a firm has a large amount of fixed assets * Computing Profitability Measures Profit Margin = Net Income / Sales 425,764 / 3,991,997 = .1067 times or 10.67% Return on Assets (ROA) = Net Income / Total Assets 425,764 / 4,088,797 = .1041 times or 10.41% Return on Equity (ROE) = Net Income / Total Equity 425,764 / 1,691,493 = .2517 times or 25.17% * Computing Market Value Measures Market Price = $61.625 per share Shares outstanding = 205,838,594 PE Ratio = Price per share / Earnings per share 61.625 / 2.17 = 28.4 times Market-to-book ratio = market value per share / book value per share 61.625 / (1,691,493,000 / 205,838,594) = 7.5 times * Table 3.5 * Deriving the Du Pont Identity ROE = NI / TE Multiply by 1 and then rearrange ROE = (NI / TE) (TA / TA) ROE = (NI / TA) (TA / TE) = ROA * EM Multiply by 1 again and then rearrange ROE = (NI / TA) (TA / TE) (Sales / Sales) ROE = (NI / Sales) (Sales / TA) (TA / TE) ROE = PM * TAT * EM * Using the Du Pont Identity ROE = PM * TAT * EM Profit margin is a measure of the firm’s operating efficiency – how well does it control costs Total asset turnover is a measure of the firm’s asset use efficiency – how well does it manage its assets Equity multiplier is a measure of the firm’s financial leverage * Why Evaluate Financial Statements? Internal uses Performance ev