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Executives of the company to be listed shortcut to interpret financial statements

Author: Shao Qiong1 Fan Zuo2 From: www.yourpaper.net Posted: 2009-04-02 16:42:54 Read:
Abstract To be listed as the company's senior management, in order to adapt to the needs of the listing of, and capital operation and meet the strict regulatory requirements of the securities regulatory authorities must have a certain financial quality and financial expertise. Among them, the correct understanding of the basic work and decision-making based on the financial statements is operating and management processes. Actual work and work experience to be listed, and a brief description to be listed senior management to understand and analyze financial statements, to provide reference and help to give a positive restructuring and executives of the company to be listed.
Keywords financial statements accounting principles Ratio Analysis

Financial statements of the type and structure
Corporate financial statements mainly refers to the balance sheet, income statement and cash flow statement.
(1) The balance sheet reflects the de facto statements of financial position of enterprises and business entities. Its essence: Assets = Liabilities Shareholders 'equity, expressed as assets - liabilities = shareholders' equity.
Company executives must understand the purpose of the preparation of the balance sheet: business objectives is to achieve the maximization of shareholders 'equity; can not ignore the interests of suppliers, creditors and other stakeholders; shareholders' equity is the residual claim of shareholders of corporate assets; fall due debt so that enterprises can survive long-term stability.
Example 1: the balance sheet to reflect the financial position of the instance (December 31, 2006)
Total current assets 20 Liabilities Total 100
- Cash - short-term liabilities 50
- Bank deposits 15 - Long-term liabilities 50
Fixed assets Total 100
Shareholders' equity 50
Long-term investments 20 - Paid-in capital 10
- Capital reserve 10
Intangible assets 10 - surplus reserve 20
- Retained earnings 10
Total assets 150 Liabilities with Equity Total 150
As can be seen, the relationship between the total items and sub-items that assets = liabilities owner's equity (or equity)
(2) The income statement reflects the statements during the the enterprise accounting period operating results. As can be seen from Example 2 profit statements, the profit enterprises maximize shareholders' value; to close over expenditure is the bottom line of the enterprise to maintain basic operations; efficient use of capital and profit is the key to enterprise development.
Example 2: income statement to reflect the results of operations instance:
Main business income of 25
Less: Cost of 15
Profit from principal operations 10
Add: Profit from other operations 15
Less: expenses for the period 10
Operating profit 15
Add: Investment income and non-operating income and expenses 5
A total profit of 20
Less: Income tax 5
Net profit of 15
(3) A statement of cash flows to reflect the period of the enterprises accounting period and cash flow statements. The interpretation of the essence: cash inflow - cash outflow = Net increase in cash. Of course, the cash flow statement cash flows include cash flow from operating activities, investment and financing activities. As can be seen from the statement of cash flows: cash inflow is a measure of the level of profit quality standards; maintain cash flow is the premise of going concern.
Example 3: reflect the cash inflows and outflows of cash flow instance
Net cash flows from operating activities 15
Cash inflow 40
Cash outflow 25
Net cash flows from investing activities (95)
Cash inflow
Cash outflow 100
Financing Activities Net cash flow 95
Cash inflow 100
Cash outflow
Total net cash flow 15 (1 2 3)
Financial statements and utility
2.1 The financial statements of transactions in the market function
Financial statements for the performance evaluation of the general manager and other effective means of control. Can understand the basis for capital preservation and appreciation by the balance sheet; understand current operating results through the income statement; understanding of the accounting period by the cash flow statement and cash flow.
Financial statements guard against all kinds of risks of trading the underlying transaction basis, through reports to learn about the financing transactions (equity financing, bond financing, bank loans), investment transactions and credit transactions provide the basis for rational traders. Financial information, income distribution, maintenance, state tax revenue, agent compensation, interest, dividends to shareholders and other interests of all parties. The financial statements of the value of physical assets, the value of intangible assets, the net asset value, the value of the goodwill value of recognized and property rights trading price of reference for.
2.2 Financial Statements Information on the capital market effects
Incomplete, untrue information about the effects of the financial statements mainly in: incomplete, untrue statements lead to uncertainty; uncertainty risks to investors / creditors; risk for the investor / creditor demanding higher returns; higher return increased the company's cost of capital; increase in the cost of capital lead to the decline in the company's share price.
Complete and true effects of the financial statements information: full and true accounting information can reduce uncertainty; reduce uncertainty can reduce the risk of investment / creditor; lower risk for the investor / creditor to meet lower returns; lower return to reduce the company's cost of capital; capital cost reduction led to the company's share price higher.
Interpret the financial statements of the three shortcut
3.1 executives to understand the the six accounting elements
(1) the three elements of the balance sheet: assets - liabilities = shareholders' equity. Assets: bring economic benefits to the future business activities; liabilities: legal obligation to repay and bring assets / outflow of labor; Shareholders' equity: Shareholders claim of the net assets of the enterprise.
(2) the three major elements of the income statement: revenue - expenses = profit. Revenue: emphasis on risk transfer of goods obtained in a reliable cash inflows; fee: emphasizing the cost of full compensation and robust; profit: stressed that the acquisition of the actual business operations.
3.2 executives to understand the basic principles of accounting
Accounting and practical treatment must adhere to the seven basic principles: the principle of double-entry bookkeeping (of a business transaction records the dragon go veins); staging principles of accounting (billing and statements to be divided accounting period); accrual principle (to determine revenue and costs to the transfer of rights and obligations as a standard); historical cost principle (assets accounted for the actual purchase cost); cautious with conservative principles (fully estimated liabilities and expenses, not to overestimate assets and income); than a matter of principle (record revenue at the same time to carry forward the corresponding cost); drawn between revenue expenditure and capital expenditure (current period should be borne by said revenue expenditure / multiple burden during the said capital expenditure).
3.3 executives to understand the accounting policies
Meaning in accounting policy is followed in accounting principles and the specific accounting treatment adopted.
SIGNIFICANT ACCOUNTING POLICIES: take foreign currency translation rates ruling at the policy, when to recognize sales revenue revenue recognition policy, the principle of how to account for the cost of cost amortization, inventory what price accounted for inventory valuation principle, how to asset impairment prepare the principles, depreciation of fixed assets ratio to determine policy, investment accounting method to confirm the principle of investment income, the scope of consolidation of the financial statements and consolidated methodological principles, the provision and distribution of a variety of tax provisioning methods for its tax policy and provident fund The proportion of profit distribution policy.
To determine the accounting policies are accounted for on the basis of appropriate accounting policies are conducive to a reasonable financial operations, conducive to achieving specific financial goals. Accounting system allows the accounting treatment for a variety of choices; processing of the same transaction, between different laws; need for specific accounting issues based on legal professional judgment. The current legal regime does not expressly require the new business transactions, experience has shown that companies have chosen accounting policies should pay attention to the following points: select systems permit; should follow the principles of robustness and consistency; should be consistent with the characteristics of the industry; should be coordinated with the corporate finance business strategy; mandatory requirements and regulations can not conflict; accounting policy option can not be abused.
4 Key financial ratios and its analysis
4.1 Liquidity Analysis (short-term debt)
4.1.1 to reflect the realization of the two ratios
(1) Current ratio: Current assets / current liabilities. Current Ratio credibility factors include the length of the operating cycle, accounts receivable liquidity, speed of inventory turnover.
(2) Quick ratio: (Current assets - inventories) / current liabilities. Quick Ratio credibility of factors, including the realization of receivables.
4.1.2 Analysis Liquidity should consider other factors
(1) to enhance the liquidity of factors: indicators of the availability of bank loans, to prepare quickly realized long-term assets, repayment of the credit and reputation of the debt capacity.
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