F9-Vivian老师.ppt

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1、ACCA考前冲刺直播,F9 Financial management,直播时间：14：00 17：00,Core knowledge review,Q&A,1,2,What is financial management?,Management of finance,1.Financial planning,2.Financial control,3.Financial management decision,Financial management decisions,The financial manager makes decisions relating to investment,

2、financing and dividends. The management of risk must also be considered.,“3+1”,Financial,Non-financial,Primary objective-shareholder wealth maximisationProfit maximizationEPSothers,Step1.Identification and formulation of objectivesStep2.Formulation of strategy,Corporatestrategy,Corporate objectives,

3、Total shareholder return（TSR） is a measure which combines the increase in share price and dividends paid and can be calculated as: (P1 - P0 + D1) / P0 Where P0 is the share price at the beginning of the periodP1 is the share price at the end of periodD1 is the dividend paid,Shareholder wealth maximi

4、sation,Profit maximisation,DrawbacksAccounting profits can be manipulated to some extent by choices of accounting policies.Profit does not take account of risk. Profits on their own take no account of the volume of investment,Earnings per share is calculated by dividing the net profit or loss attrib

5、utable to ordinary shareholders by the weighted average number of ordinary shares. Particular importance in comparing results over a period of several years.Drawbacks：,Earnings per share growth,1.Historical,2.Based on profit，can be easily manipulated,Stakeholders are individuals or groups who are af

6、fected by the activities of the firm.They can be classified as internal (employees and managers), connected (shareholders, customers and suppliers) and external (local communities, pressure groups, government).,Stakeholders,Shareholder,Principle,Agent,Delegate,Maximization shareholders wealth,Maximi

7、zation profit,Agency relationship,Agency problem,Shareholders and management,如何解决agency problem萝卜：Managerial reward scheme棒槌：Regulatory requirement,P.R.P,Share option scheme,CG code of best practice,Stock exchange listing regulation,Goal congruence,Encouraging shareholder wealth maximisation,Ratio a

8、nalysis is often used by stakeholders to assess the performance of a company. Profitability important to assess managerial performanceDebt important to banksLiquidity important to suppliers and customersShareholder investor ratios important to shareholders,Measuring the achievement of stakeholder ob

9、jectives,Profitability ratios include:,Capital employed=equity + long term liability,Measuring the achievement of stakeholder objectives,Debt ratios include:,Measuring the achievement of stakeholder objectives,Liquidity ratios include:Current ratio = Current assets : Current liabilitiesAcid Test rat

10、io = Current assets : Current liabilitiesless inventory,Measuring the achievement of stakeholder objectives,Dividend yield = Dividend per share /Market price per share*100Dividend cover=EPS/DPSEarnings per share(EPS) = Profits distributable to ordinary shareholders /Number of ordinary shares issued

11、Price earnings (P/E) ratio = Market price per share /EPS,Measuring the achievement of stakeholder objectives,Value for money,Many organisations are not for profit, in this case a more appropriate objective is to make sure that the organisation is getting good value for money; economy, efficiency, ef

12、fectiveness.Economy purchase of inputs of appropriate quality at minimum costEfficiency use of these inputs to maximise outputEffectiveness use of these inputs to achieves it goals (quality, speed of response),Government objectives for the economy are referred to as macroeconomic objectives or targe

13、ts.The three main targets are usually:(a) Economic growth & high employment(b) Low inflation(c) Balance of payments stability,Macroeconomic objectives,Fiscal policy： spend，tax revenueMonetary policy：money supply ，interest ratesExchange rate policyCompetition policyGreen policy,Policies for achieving

14、 macroeconomic targets,Maturity transformationAggregation of fundPooling losses,Financial institutions,Financial markets,Financial market,Money market - provide short-term finance,Capital market - provide long-term finance,Capital markets,Money markets,Eurobonds,In recent years a strong market has b

15、uilt up which allows large companies with excellent credit ratings to raise finance in a foreign currency.e.g.在欧洲借美元Cheap，large company，no need for secure,Eurobonds,Working capital is the value of current assets less the value of current liabilities.,营运资金：企业投放到流动资产上的资金,Working capital,To increase th

16、e profits of a business,To provide sufficient liquidity to meet short term obligations as they fall due,conflict,Objectives of working capital management,Profits Higher inventory means greater availability & possibly more choice to the customer of different variants of the product and therefore high

17、er sales and higher profits. Higher receivables may mean better payment terms, which may lead to higher sales and this again may lead to higher profits.Liquidity Higher inventory & higher receivables mean more cash tied up in the short term which may lead to cash flow problems. There is sometimes a

18、conflict between these two objectives.,Objectives of working capital management,Conservative approach favouring liquidity over profitability and decreasing risk. Aggressive approach to working capital management will emphasise profitability over liquidity, increasing the risk of running out of cash

19、while increasing profitability.,Objectives of working capital management,DefinitionThe cash operating cycle (also known as the working capital or the cash conversion cycle) is the period of time between the outflow of cash to pay for raw materials and the inflow of cash from customers.,cash operatin

20、g cycle,The optimal length of the cycle depends on the industry.Supermarket：short or even negativeConstruction company：long,cash operating cycle,1 Inventory days Inventory balance 365 Cost of sales2 Trade receivable days Receivables 365 (credit) sales3 Trade payable days Payables 365 (credit) purcha

21、ses or cost of sales,Calculating the cash operating cycle,cash operating cycle,周转倍数 ：Turnover = P / L SOFPFor example Receivable turnover = Credit sales Receivable,cash operating cycle,Overtrading is where a business has inadequate cash to support its level of sales.Overtrading = Under-capitalizatio

22、n,Overtrading,Indicators：OvertradingSales increaseReceivable and inventory increaseProfit margin decreaseUnder-capitalizationOverdraft increase/cash balance decreasePayable increaseCurrent ratio & quick ratio decrease liquidity变差,Overtrading,Managing inventoryManaging receivablesManaging payables,Pr

23、actice make perfect！,Managing working capital,Managing working capital,EOQ formula D = Annual demand in unitsCo = Cost of placing an orderCh = Annual cost of holding one unit in inventoryP = Purchase price per unitQ = Number of units ordered.,This formula gives the ideal order quantity to minimise t

24、otal inventory cost (holding + ordering),Managing inventory (stock),Holding Cost = Ch Q/2Ordering Cost = Co D/QPurchasing cost=P D,Managing inventory (stock),Managing inventory (stock),The drawbacks of the EOQ model are that it:Assumes 0 lead times, and 0 bulk purchase discounts although these can b

25、e adjusted for as shown aboveIgnores the possibility of supplier shortages or price risesIgnores fluctuations in demandIgnores the benefit of holding inventory to customers (choice, short lead times)Ignores the hidden costs of holding inventory,定量,定性,Drawback 1:DiscountsDiscounts may be available if

26、 the order quantity is above a certain size. Thus this needs to be considered in determining the best order quantity. The following approach should be used:Calculate EOQ in normal wayCalculate annual costs using EOQCalculate annual costs at the lower boundary of each discount above the EOQSelect ord

27、er quantity which minimises costs.,Managing inventory (stock),Drawback 2:buffer inventoryThe simplified version of the EOQ model ignores the delay between ordering and receiving the order from the supplier; in reality there is a need for buffer inventory to deal with this delay.The expected usage du

28、ring the lead time requires buffer inventory (B) to be held, and the average inventory level becomes B + Q/2.,Holding Cost = Ch （Q/2+B）,Managing inventory (stock),JIT (just-in-time)JIT is a philosophy which involves the elimination of inventory. Benefits：Holding costs can be reduced by reducing the

29、level of inventory held by a company. Lower level of investment in working capitalA reduction in materials handling costsAn improved relationship with suppliers Improved operating efficiency,Lower reworking costs due to the increased emphasis on the quality of supplies,Managing inventory (stock),Pol

30、icy formulationThe decision to offer credit can be viewed as an investment decision, resulting in higher profits. For many businesses offering generous payment terms to customers is essential in order to be competitive.CalculationCost benefit analysis!,Managing receivables (debtors),Framework for ma

31、naging receivables（内部）A credit analysis system事前A credit control system事中A debt collection system事后,Managing receivables (debtors),Managing receivables (debtors),Credit analysis：bank/trade reference、credit rating agency、fileCredit control：statement、aged receivable analysisDebt collection：reminders、

32、making customer visits 、 legal action,Managing foreign accounts receivable（外部）Letters of credit ： bank guarantees Bills of exchange ： IOU，raise financeInvoice discounting：selected invoices， discount， occasional source Export factoring（业务；计算；优缺点）,Managing receivables (debtors),Cost benefit analysisIt

33、 is important that when suppliers offer credit, invoices are not paid early; an exception to this is when early payment discounts are offered.,Benefit,Managing trade payables,Cash flow forecast（format method）Mathematical model（Baumol、Miller-orr）The factors to be considered in determining the optimum

34、 level of cash（4种）,Cash flow forecasting,Cash forecast for the three months ended 31 March 20X1 January February MarchCash receiptsSales receipts (W1)Issue of sharesCash paymentsPurchase payments (W2) Dividends/Taxes Purchase of non-current assets Wages Cash surplus/deficit for monthCash balance, be

35、ginningCash balance, ending,Cash flow forecasting,Baumols model(b) Miller-Orrs model,Mathematical models,The Baumol Model is an adaptation of the EOQ Model to manage cash. It assumes that cash is used at a steady rate during the year, which will often not be the case.,The Economic Order =Quantity of

36、 Cash,Baumol model,Another cash management model is the Miller Orr Model which recognizes that cash inflows and outflows vary considerably on a day to day basis (unlike the Baumol model). This is clearly more realistic.,Miller-Orr model,Cash Balance,daily,Lower limit + (1/3 spread),Miller-Orr model,

37、The transactions need for cash：expected receipts against expected payments. The speculative need for cash： business opportunityThe precautionary need for cash：cash bufferThe availability of finance：overdraft capability,与管理层的risk attitude和风格有关,Factors to be considered,Managing cash flow surplusesMana

38、ging cash flow shortages,Managing cash flow surpluses & shortage,Desirable investments would generally be low risk and liquid.,Managing cash flow surpluses,Working capital funding policyPermanent current asset：core level of investment in current assets that supports a given level of business activit

39、yFluctuating current asset： changes in the level of current assets that arise through, for example, the unpredictability of business operations,Managing cash flow shortages,Working capital funding policyMatchingAggressiveconservative,Managing cash flow shortages,Working capital funding policy(长配长，短配

40、短),Managing cash flow shortages,Working capital funding policy,Managing cash flow shortages,Working capital funding policy,Managing cash flow shortages,Working capital investment policy is concerned with the level of investment in current assets, with one company being compared with another. Working

41、 capital financing policy is concerned with the relative proportions of short-term and long-term finance used by a company.,Inter-company,Company alone,Working capital investment & financing,Comparative level of investment in current assets on an inter-company basis. Aggressive approach：lower invest

42、ment in current assetThe way in which fluctuating current assets and permanent current assets are matched to short-term and long-term finance sources.Aggressive approach：profitable but risker,Working capital financing policy,Working capital investment policy,Both working capital investment policy an

43、d working capital financing policy use the terms conservative and aggressive.,Working capital investment & financing,Return on capital employed (ROCE),ROCE/ARR/ROI,ROCE = Average annual profit from investment100 initial investment or Average annual profit from investment 100average investmentwhere a

44、verage investment = initial outlay + scrap value 2,Cash flow-depreciation,Consistent with methods used to evaluate the company as a wholeRelative score (%) is easy to understandConsiders the whole life of the project,Advantages of ROCE,Accept all projects with an ROCE above the companys target.,Igno

45、res the timing of the cash flowsWorsens if a small amount of extra cash is earned in an extra year of the projectProfits can be affected by costs that are not relevant costs,Disadvantages of ROCE,Depreciation,Relevant cash flows,项目测算计算题,选择题relevant cash flow,CharacteristicsCash flowFutureIncremental

46、,Here are some examples of non-relevant cash flows that you will come across in the exam:,Relevant cash flows,Interest cost：ignore allfinancing cash flows（interestdividendloan repayment），which have been take into account in discounting,Relevant cash flows,DefinitionThis is a measure of how many year

47、s it takes for the cash flows affected by the decision to invest to repay the cost of the original investment.A long payback period is considered risky because it relies on cash flows that are in the distant future.,Payback period,Ignores the timing of the cash flows within the payback PeriodIgnores

48、 the cash flows outside the payback period,Disdvantages of payback,含义：NPV=0不是不挣钱，是没有超过n%的回报率，有没有超额收益NPV0,financially acceptableAnnuity,Net present value (NPV),定义: A series of equal cash flows, use the annuity table or discount each cash flow separatelyPerpetuity: A series of equal cash flows (1-n)Deferred annuity:start from the year after year 0Immediate annuity:start from year 0,