1. Solvency Indicators
The solvency index is an important management index of an enterprise's financial management, which refers to the ability of an enterprise to repay due debts (including principal and interest). Solvency indicators include short-term solvency indicators and long-term solvency indicators. The main indicators to measure short-term solvency are current ratio, quick ratio and cash flow liability ratio; the indicators of long-term solvency mainly include assets and liabilities. ratio, equity ratio, owner's equity ratio, interest coverage ratio, interest-bearing liability ratio, etc.
1. Current ratio = total current assets/total current liabilities*100%
The current ratio is the ratio of current assets to current liabilities. It indicates how much current assets a company has for each dollar of current liabilities as a guarantee for repayment. It reflects the company's ability to repay maturing current liabilities with current assets that can be converted into cash in the short term.
Standard value: 2.0.
Meaning: Reflects the company's ability to repay short-term debt. The more current assets and less short-term debt, the greater the current ratio and the stronger the company's short-term debt repayment ability.
Analysis Tip: Lower than normal, the company's short-term debt repayment risk is greater. Generally speaking, the operating cycle, the amount of accounts receivable in current assets and the turnover rate of inventory are the main factors that affect the current ratio.
2. Quick ratio = (total current assets - inventory) / total current liabilities * 100%
Conservative quick ratio = (monetary funds + short-term investments + notes receivable + net accounts receivable) / current liabilities
Quick ratio is the ratio of quick assets to current liabilities. It measures the ability of a company's current assets to be immediately converted into cash to repay current liabilities.
Standard value: 1/0.8
Significance: It can better reflect the ability of enterprises to repay short-term debts than the current ratio. Because current assets include inventories that are slowly realized and may have depreciated in value, current assets are deducted from inventories and then compared with current liabilities to measure the company's short-term solvency.
Analysis Tip: A quick ratio lower than 1 is usually considered to be a low short-term solvency. An important factor affecting the credibility of the quick ratio is the liquidity of accounts receivable. Accounts receivable on the books may not always be liquidated, nor may they be very reliable.
Generally speaking, the ratio of current ratio to quick ratio is around 1.5:1.
3. Cash-to-liability ratio
The cash flow liability ratio is the ratio of a company's net operating cash flow to its current liabilities in a certain period. It examines the company's actual solvency from the dynamic perspective of cash inflows and outflows, reflecting that the net cash flow generated by operating activities in the current period is sufficient. The multiple that covers current liabilities.
(1) Cash flow liability ratio = annual operating net cash flow/year-end current liabilities*100%
Standard value: 0.5.
Meaning: Reflects the extent to which current liabilities are protected by cash generated from operating activities.
Analysis Tip: In addition to borrowing new debt to repay old debt, what an enterprise can use to repay debt should generally be cash inflow from operating activities.
(2) Cash flow to liabilities ratio = net cash flow from operating activities / total liabilities at the end of the period * 100%
Standard value: 0.25.
Meaning: In addition to borrowing new debt to repay old debt, what an enterprise can use to repay debt should generally be cash inflow from operating activities.
Analysis tips: Calculation results must be compared with the past and with peers to determine whether high or low is high. The higher the ratio, the greater the company's ability to shoulder debt. This ratio also reflects the company's maximum interest-paying ability.
4. Asset-liability ratio = total liabilities/total assets *100%
The asset-liability ratio is an important indicator that comprehensively reflects the company's solvency. It reflects how much of the company's total assets are obtained through debt through the comparison of liabilities and assets. The greater the indicator, the heavier the debt burden of the company; conversely, the lighter the debt burden of the company. For creditors, the lower the ratio, the better, because the lighter the company's debt burden, the stronger its overall solvency, and the higher the degree of guarantee of creditors' rights; for companies, it is hoped that the indicator will be larger, although this It will increase the debt burden of enterprises, but enterprises can also obtain more financial leverage benefits by expanding the scale of borrowing.
Standard value: 0.7.
Meaning: Reflects the proportion of capital provided by creditors to all capital. This metric is also known as the debt-to-operating ratio.
Analysis Tip: The greater the debt ratio, the greater the financial risk faced by the company and the stronger its ability to obtain profits. If a company has insufficient funds and relies on debt to maintain its operations, resulting in a particularly high asset-liability ratio, special attention should be paid to debt repayment risks. It is generally believed that when the asset-liability ratio is between 40% and 60%, it is conducive to the balance between risks and returns; when it is between 60% and 70%, it is more reasonable and stable; when it reaches 85% and above, it should be regarded as sending an early warning signal, and companies should Pay enough attention.
5. Equity ratio = total liabilities/shareholders’ equity*100%
The equity ratio is also called the net asset-liability ratio. In joint-stock enterprises, it reflects whether the equity held by shareholders is too much (or whether it is not sufficient). It also indicates the degree of borrowing of the enterprise from another aspect. This ratio is one of the indicators that measures a company's long-term debt repayment ability. It is an important indicator of whether a company's financial structure is sound or not.
Standard value: 1.2.
Meaning: Reflects the relative proportion of capital provided by creditors and shareholders. It reflects whether the capital structure of the enterprise is reasonable and stable. It also shows the extent to which the capital invested by creditors is protected by shareholders' rights.
Analysis tips: Generally speaking, a high equity ratio indicates a high-risk, high-return financial structure, while a low equity ratio indicates a low-risk, low-return financial structure. From the perspective of shareholders, in times of inflation, companies borrowing money can transfer losses and risks to creditors; in times of economic prosperity, borrowing money can earn extra profits; in times of economic contraction, borrowing less debt can reduce interest burdens and financial risks.
6. Owner’s equity ratio = Owner’s equity/total assets *100%
The owner's equity ratio is an important indicator of the degree of long-term solvency guarantee. From the perspective of solvency, the higher the indicator, the more assets formed by investors' investment in the company's assets, and the more secure the interests of creditors are. .
Target value: 1.
Meaning: Reflects how much of the company's total assets are formed by investors' investments.
Analysis Tip: The higher the ratio, the firmer the company’s financing structure and the owner’s control over the company. However, for a company with stable profit growth or good operating conditions, if the ratio is too high, the company’s financing costs will inevitably increase. Investors cannot fully utilize the leverage of debt, so the owner's equity (or shareholders' equity) ratio should also be moderate.
7. Interest coverage ratio = profit before interest and tax / interest expense = (total profit + financial expenses) / (interest expense in financial expenses + capitalized interest)
The interest guarantee multiple indicator reflects the specific relationship between corporate profits and interest expenses. When using the interest coverage ratio to analyze and evaluate the long-term solvency of a company, from a static point of view, it is generally believed that this indicator must be at least greater than 1, otherwise it means that the company's solvency is very poor and it is unable to operate with debt; from a dynamic point of view, if the interest guarantee ratio If it increases, it means that the solvency of the company has increased, otherwise it means that the company's solvency has declined.
Standard value: 2.5.
Meaning: The ratio of an enterprise's business income to interest expenses is used to measure the enterprise's ability to repay borrowing interest, also called the interest earned multiple. As long as the interest coverage ratio is large enough, the company has sufficient ability to repay the interest.
Analysis Tip: A company must have a large enough profit before interest and tax to ensure that it can afford capitalized interest. The higher the indicator, the smaller the debt interest pressure of the company.
8. Interest-bearing debt ratio = total interest-bearing liabilities/total liabilities*100%
Total interest-bearing liabilities = short-term borrowings + long-term liabilities due within one year + long-term borrowings + bonds payable + interest payable
The interest-bearing debt ratio refers to the ratio of a company's total interest-bearing liabilities to its total liabilities at a certain point in time.
Standard value: 0.5.
Significance: Reflects the proportion of interest-bearing liabilities in a company's liabilities, and to a certain extent reflects the company's future debt repayment (especially interest repayment) pressure.
Analysis Tip: Generally speaking, the lower the interest-bearing debt ratio, the lower the debt repayment pressure of the company, especially the lower the pressure to repay debt interest; the higher the interest-bearing debt ratio, the interest-bearing debt ratio indicates the debt repayment burden of the company. Risks and interest repayments are greater
2. Operational capability indicators
Enterprise operating capability analysis is to calculate and analyze the indicators that reflect the operating efficiency and effectiveness of the enterprise's assets, evaluate the enterprise's operating capabilities, and point out the direction for the enterprise to improve its economic benefits.
First, operational capability analysis can evaluate the efficiency of enterprise asset operation;
Second, the analysis of operational capability can discover the problems existing in the enterprise's asset operation;
Thirdly, the analysis of operating capacity is the basis and supplement of the analysis of profitability and solvency.
There are many indicators for analyzing operating capabilities, such as: total asset turnover rate, current asset turnover rate, accounts receivable turnover rate, accounts payable turnover rate, inventory turnover rate, fixed asset turnover rate, non-performing asset ratio, operating cycle, tangible assets Net worth debt ratio, etc.
Special note: Some people can’t tell when to use the closing number of assets and when to use the average? When comparing time periods with time points, the average value is often used.
1. Total asset turnover = sales revenue/[(total assets at the beginning of the period + total assets at the end of the period)/2] *100%
The total asset turnover rate helps to judge the financial security of the enterprise and the profitability of the assets to make corresponding investment decisions; it helps to determine the degree of material protection of its claims or its safety to make corresponding credit decisions; it can discover idle assets and Underutilize assets, thereby disposing of idle assets to save money, or improve asset utilization efficiency to improve operating performance.
Standard value: 0.8.
Meaning: This indicator reflects the turnover speed of total assets. The faster the turnover, the stronger the sales ability. Enterprises can adopt the method of small profits but quick turnover to accelerate asset turnover and increase the absolute amount of profits.
Analysis Tips: The total asset turnover indicator is used to measure a company's ability to use its assets to earn profits. It is often used together with indicators reflecting profitability to comprehensively evaluate a company's profitability.
2. Current asset turnover rate = sales revenue/[(beginning current assets + ending current assets)/2] *100%
The current asset turnover rate analyzes the utilization efficiency of the company's assets from the perspective of the most liquid current assets among all the company's assets to further reveal the main factors that affect the quality of the company's assets. To achieve positive changes in this indicator, it should be guaranteed that the growth rate of main business income is higher than the growth rate of current assets.
Standard value: 1.
Significance: The current asset turnover rate reflects the turnover speed of current assets. The faster the turnover speed, the relatively less current assets will be, which is equivalent to expanding the investment of assets and enhancing the profitability of the enterprise; while slowing down the turnover speed requires supplementing current assets to participate in the turnover, forming The waste of assets reduces the profitability of the company.
Analysis tips: The current asset turnover rate should be analyzed together with inventory and accounts receivable, and used in conjunction with indicators reflecting profitability to comprehensively evaluate the profitability of the company.
3. Accounts receivable turnover rate = sales revenue/[(accounts receivable at the beginning of the period + accounts receivable at the end of the period)/2] *100%
Accounts receivable turnover is the average number of times accounts receivable is turned into cash during the specified analysis period. Its calculation formula is divided into theory and application. The difference between the two is whether the sales revenue includes cash sales revenue. Cash sales business can be understood as credit sales while collecting payment. In this way, the application formula of sales revenue including cash sales revenue also conforms to the meaning of the accounts receivable turnover rate indicator.
The number of turnovers of accounts receivable is a positive indicator. The greater the number of turnovers, the stronger the liquidity of accounts receivable and the higher the management level of accounts receivable of the company; the lower the number of turnovers, the greater the liquidity of accounts receivable. The weaker the ability, the lower the company's management level of accounts receivable.
(1) Theoretical formula: Net credit sales income = sales income - sales returns - cash sales income
(2) Use the formula: net sales revenue = sales revenue – sales returns
Standard value: 3.
Meaning: The higher the accounts receivable turnover rate, the faster they are collected. On the contrary, it shows that the working capital is too sluggish in the accounts receivable, which affects the normal capital turnover and solvency.
Analysis Tip: The turnover rate of accounts receivable should be considered in conjunction with the operating mode of the enterprise. The use of this indicator cannot reflect the actual situation in the following situations: first, enterprises operating seasonal operations; second, large-scale use of installment collection and settlement methods; third, large-scale use of cash-settled sales; fourth, large-scale sales at the end of the year or at the end of the year Sales dropped significantly.
(3) Accounts receivable turnover days = 360/Accounts receivable turnover rate = (Accounts receivable at the beginning of the period + Accounts receivable at the end of the period)/2]/Product sales revenue
Days receivable, also known as the collection period of receivables, indicates the average number of days it takes from the start of a sale to collect cash.
Standard value: 100.
Meaning: The higher the accounts receivable turnover rate, the faster they are collected. On the contrary, it shows that the working capital is too sluggish in the accounts receivable, which affects the normal capital turnover and solvency.
Analysis tips: The turnover days of accounts receivable should be considered in conjunction with the business mode of the enterprise. The use of this indicator cannot reflect the actual situation in the following situations: first, enterprises operating seasonal operations; second, large-scale use of installment collection and settlement methods; third, large-scale use of cash-settled sales; fourth, large-scale sales at the end of the year or at the end of the year Sales dropped significantly.
Summary: From the accounting statements, we can see that revenue is the representative of the profit and loss statement, accounts receivable is the main account of the balance sheet, and receivables are the main indicator of operating activities in the cash flow statement. Therefore, it can be said that the accounts receivable turnover rate connects the three major accounting statements. And be able to effectively analyze the company's operating conditions. Reasonable use of this indicator as an assessment content can also effectively manage the company's sales performance and urge payment collection in a timely manner. Therefore, it can be said that the accounts receivable turnover ratio is a "financial golden indicator".
4. Accounts payable turnover ratio = (main business cost + ending inventory cost - beginning inventory cost) / average accounts payable * 100%
Accounts Payable Turnover Days = 360/Accounts Payable Turnover Ratio
The accounts payable turnover ratio reflects the ability of the enterprise to use the funds of the supplier enterprise free of charge.
Significance: The accounts payable turnover rate itself reflects the company's ability to use supplier funds for free. A reasonable accounts payable turnover rate comes from comparison with the same industry and the company's historical normal level.
Analysis tip: The higher the accounts payable turnover rate, it means that the payment terms are not favorable, and the company is always forced to pay off its debts as soon as possible. All other things being equal, the lower the accounts payable turnover rate in each industry, the better. There is no standard for the specific range.
Summary: This is an issue to pay close attention to because you need seller credit as a source of low- or no-cost financing. Additionally, a deterioration in accounts payable turnover may be a symptom of a cash crisis and jeopardize the relationship between the two.
So the goal should be to make the timing of accounts receivable turnover and accounts payable turnover as close as possible so that cash inflows can offset cash outflows.
5. The inventory turnover rate indicator has two forms: inventory turnover times and inventory turnover days:
(1) Inventory turnover = cost of product sales / [(beginning inventory + ending inventory) / 2] * 100%
It is used to reflect the turnover speed of inventory, that is, whether the liquidity of inventory and the amount of inventory funds occupied are reasonable, prompting enterprises to improve the efficiency of the use of funds and enhance the enterprise's short-term solvency while ensuring the continuity of production and operations. Inventory turnover rate is a supplementary explanation of current asset turnover rate. It is a comprehensive indicator to measure the enterprise's input into production, inventory management level and sales recovery ability.
Standard value: 3.
Significance: The turnover rate of inventory is the main indicator of the speed of inventory turnover. Improving the inventory turnover rate and shortening the business cycle can improve the liquidity of the enterprise.
Analysis Tips: Inventory turnover rate reflects the level of inventory management. The higher the inventory turnover rate, the lower the inventory occupation level, the stronger the liquidity, and the faster the inventory can be converted into cash or accounts receivable. It not only affects the short-term solvency of the enterprise, but is also an important part of the entire enterprise management.
(2) Inventory turnover days = 360/inventory turnover rate = [360*(beginning inventory + ending inventory)/2]/product sales cost
Standard value: 120.
Meaning: The number of days it takes for an enterprise to purchase inventory, put it into production, and sell it out. Increasing the inventory turnover rate and shortening the business cycle can improve the company's liquidity.
Analysis Tips: Inventory turnover speed reflects the level of inventory management. The faster the inventory turnover speed, the lower the inventory occupation level, the stronger the liquidity, and the faster the inventory can be converted into cash or accounts receivable. It not only affects the short-term solvency of the enterprise, but also an important part of the entire enterprise management.
There are many factors that affect inventory turnover. But it is also mainly affected by material turnover rate, work in progress turnover rate and finished goods turnover rate. The calculation formulas for these three turnover rates are:
(1) Material turnover rate = current material consumption/average material inventory
(2) Work in process turnover rate = Cost of completed products in the current period/Average cost of work in progress
(3) Finished goods turnover rate = sales cost/average finished goods inventory
The evaluation criteria for these three turnover rates are the same as those for inventory evaluation. The more turnover times, the better, and the fewer turnover days, the better. By comparing inventory turnover rates in different periods, the level of inventory management can be evaluated, the reasons for changes in inventory utilization effects can be found, and the level of inventory management can be continuously improved.
Under the conditions of enterprise production balance and production and sales balance, the relationship between inventory turnover rate and turnover rate in the three stages can be expressed by the following formula:
Inventory turnover days = material turnover days × material consumption/total output value production fee + product turnover days + finished goods turnover days
Factor analysis can be used to determine the impact of changes in various factors on inventory turnover.
6. Fixed asset turnover rate
(1) Fixed asset turnover rate = [operating income / (beginning net value + closing net value) ÷ 2] * 100%
(2) Fixed asset turnover days = 360/fixed asset turnover rate
(3) Ratio of fixed assets to income = average net fixed assets/sales revenue
Note: The difference between the original price of fixed assets, the net value of fixed assets and the net amount of fixed assets: the original price of fixed assets is the historical cost of fixed assets (usually the recorded value when purchased); net value of fixed assets = original value of fixed assets - accumulated depreciation; fixed Net assets (also known as book value of fixed assets) = original price of fixed assets - accumulated depreciation - provision for impairment
The fixed assets to revenue ratio indicates the fixed assets required for every 1 yuan of sales revenue.
The fixed asset turnover rate is mainly used to analyze the utilization efficiency of fixed assets such as factories and equipment. The higher the ratio, the higher the utilization rate and the better the management level. If the fixed asset turnover rate is lower than the industry average, it means that the company's utilization of fixed assets is low, which may affect the company's profitability. It reflects the degree of utilization of enterprise assets.
7. Non-performing asset ratio = total non-performing assets at the end of the year/total assets at the end of the year * 100%
The total non-performing assets at the end of the year refer to the part of the enterprise's assets that has problems and is difficult to participate in normal production and operation. It mainly includes accounts receivable for more than three years, other receivables and prepaid accounts, backlog of inventory, idle fixed assets and non-performing assets. The book balance of investment, etc., the net loss of current assets and fixed assets to be processed, as well as hidden losses and operating losses.
Indicator description:
(1) The non-performing asset ratio reflects the quality of the company's assets from the perspective of assets that cannot be recycled normally to earn profits, reveals the problems existing in the company's asset management and use, and is used to supplement and correct the operating status of the company's assets. .
(2) While this indicator is used for evaluation work, it is also helpful for enterprises to discover their own shortcomings, improve management, and increase asset utilization efficiency.
(3) In general, the higher this indicator is, the more funds the enterprise has accumulated and cannot participate in normal operations, and the worse the utilization rate of funds is. The smaller the indicator, the better, with 0 being the optimal level.
8. Business cycle = inventory turnover days + accounts receivable turnover days = {[(beginning inventory + ending inventory)/2]*360}/product sales cost + {[(beginning accounts receivable + ending accounts receivable) )/2]*360}/product sales revenue
Standard value: 200.
Meaning: The operating cycle is the time from when inventory is obtained to when the inventory is sold and cash is collected. Generally speaking, a short operating cycle indicates a fast capital turnover; a long operating cycle indicates a slow capital turnover.
Analysis Tips: The business cycle should generally be analyzed in conjunction with inventory turnover and accounts receivable turnover. The length of the business cycle not only reflects the company's asset management level, but also affects the company's solvency and profitability.
9. Tangible net worth debt ratio = [total liabilities/(shareholders’ equity - net intangible assets)]*100%
Tangible net value is the net value of owners' equity minus the net value of intangible assets, that is, the net value of tangible assets to which the owner has ownership. The tangible net worth debt ratio is used to reveal the long-term solvency of a company and the extent to which creditors are protected in the event of bankruptcy.
Standard value: 1.5.
Significance: An extension of the property rights ratio indicator, a more prudent and conservative reflection of the extent to which the capital invested by creditors is protected by shareholders' rights when the company is liquidated. Regardless of the value of intangible assets including goodwill, trademarks, patents and non-patented technologies, they may not necessarily be used to repay debts. For the sake of prudence, they are all deemed to be unable to repay debts.
Analysis Tips: From the perspective of long-term solvency, it is mainly used to measure the risk level of the company and its ability to repay debts. The larger the indicator, the greater the risk; conversely, the smaller the risk. In the same way, the smaller the indicator is, the stronger the company's long-term solvency is, and vice versa.
The analysis of the tangible net worth debt ratio indicator is the same as the analysis of the equity ratio. Total liabilities and net tangible assets should maintain a ratio of 1:1. When using the equity ratio, it must be combined with the tangible net worth debt ratio indicator for further analysis.
3. Profitability Indicators
Profitability indicators mainly include operating profit margin, gross sales profit margin, net sales profit margin, cost and expense profit margin, surplus cash guarantee multiple, return on total assets, return on net assets and return on capital, etc.
1. Operating profit margin = operating profit/operating income × 100%
The higher the operating profit margin, the stronger the company's market competitiveness, greater development potential, and stronger profitability.
2. Sales gross profit margin = [(sales revenue-sales cost)/sales revenue]*100%
Indicates how much money can be used for various period expenses and profit after deducting sales costs for each dollar of sales revenue. Gross sales profit margin is the initial basis of a company's net sales profit margin. Without a large enough sales gross profit margin, profits cannot be formed. Enterprises can analyze gross sales profit margin on a regular basis and make judgments on the occurrence and proportion of sales revenue and sales costs.
3. Sales net profit rate = net profit/sales revenue *100%
Net sales profit margin refers to the comparative relationship between a company's net profit and sales revenue, which is used to measure the company's ability to obtain sales revenue in a certain period.
This indicator reflects the net profit generated by each dollar of sales revenue. Indicates the revenue level of sales revenue. When an enterprise increases sales revenue, it must obtain more net profits accordingly in order to keep the net sales profit rate unchanged or increase.
4. Cost and expense profit rate = total profit/total cost and expense × 100%
Total costs and expenses = operating costs + business taxes and surcharges + sales expenses + administrative expenses + financial expenses
The cost profit rate is the ratio of the total profit of the company to the total cost in a certain period. The higher the cost and expense profit rate, the smaller the price the company pays to obtain profits, the better the cost and expense control, and the stronger the profitability.
5. Surplus cash coverage ratio = net operating cash flow/net profit
The surplus cash guarantee multiple is the ratio of a company's net operating cash flow to its net profit in a certain period. It reflects the degree of guarantee of cash income in the company's net profit for the current period and truly reflects the quality of the company's earnings.
Generally speaking, when the company's current net profit is greater than 0, the surplus cash guarantee ratio should be greater than 1. The greater the indicator, the greater the contribution of the net profit generated by the company's operating activities to cash.
6. Return on equity = net profit/average net assets × 100%
Return on equity is the ratio of a company's net profit to its average net assets in a certain period. It reflects the return on investment of the company's owners' equity. It is also called return on net worth or return on equity. It is highly comprehensive. is the most important financial ratio.
It is generally believed that the higher the return on net assets, the stronger the company's ability to obtain income from its own capital, the better the operating efficiency, and the higher the degree of guarantee for the interests of the company's investors and creditors.
Analysis Tips: The DuPont analysis system can decompose this indicator into a variety of related factors to further analyze various aspects that affect owner equity returns. Such as asset turnover rate, sales profit margin, equity multiplier. In addition, when using this indicator, you should also analyze "accounts receivable", "other receivables" and "prepaid expenses".
7. Return on total assets = Total profit before interest and tax / Total average assets × 100%
Return on total assets is the ratio of the total remuneration received by an enterprise to the average total assets within a certain period, and is the comprehensive utilization effect of the enterprise's assets. Generally speaking, the higher the return on total assets, the better the asset utilization efficiency of the company and the stronger the profitability of the entire company.
Analysis tip: Net asset interest rate is a comprehensive indicator. The amount of net profit is closely related to the amount of assets of the enterprise, the structure of the assets, and the level of operation and management. The factors that affect the net interest rate of assets include: product price, unit product cost, product output and sales volume, and the amount of capital occupied. The DuPont financial analysis system can be used to analyze existing problems in operations.
8. Capital return rate = net profit/average capital × 100%
Average capital = (Beginning amount of paid-in capital + Capital reserve + Ending amount of paid-in capital + Ending amount of capital reserve)/2
The rate of return on capital is the ratio of a company's net profit to its average capital (i.e., capital investment and its capital premium) in a certain period, and reflects the company's actual return on investment.
4. Development capability indicators
Development capability indicators mainly include: operating income growth rate, capital preservation and appreciation rate, capital accumulation rate, total asset growth rate, operating profit growth rate, technology investment ratio, three-year average growth rate of operating income and three-year average growth rate of capital.
The development capability indicators are all positive indicators. The higher the indicator, the faster the company's growth rate, the stronger its ability to cope with risks, sustainable development trends and market expansion, and the better the company's market prospects.
5. Cash flow liquidity analysis
The cash flow analysis mainly examines the relationship between the cash flow generated by the company's operating activities and its debts.
1. Cash to maturity ratio = net cash flow from operating activities/debt due in the current period
Debt due in the current period = long-term liabilities due within one year + notes payable
Standard value: 1.5.
Significance: Comparing the net cash flow of operating activities with the debts due in the current period can reflect the ability of the enterprise to repay the debts due.
Analysis Tip: In addition to borrowing new debt to repay old debt, what an enterprise can use to repay debt should generally be cash inflow from operating activities.
2. Cash current liability ratio = annual net cash flow from operating activities / current liabilities at the end of the period
Standard value: 0.5.
Meaning: Reflects the extent to which current liabilities are protected by cash generated from operating activities. Generally, if this indicator is greater than 1, it means that the repayment of the company's current liabilities is reliably guaranteed. The larger the indicator, the greater the net cash flow generated by the company's operating activities, and the better it can guarantee the company's repayment of maturing debts on schedule. However, bigger is not always better. If the indicator is too large, it indicates that the company's liquidity is insufficiently utilized and profitability is compromised. Not strong.
Analysis Tip: In addition to borrowing new debt to repay old debt, what an enterprise can use to repay debt should generally be cash inflow from operating activities.
3. Total cash-to-debt ratio = net cash flow from operating activities/total liabilities at the end of the period
Standard value: 0.25.
Significance: The total cash-to-debt ratio can reflect the company's ability to repay its liabilities from the perspective of cash flow. The greater the total cash-to-debt ratio, the greater the net cash flow generated by the company's operating activities, and the better it can protect the company's ability to repay debts. However, the bigger the indicator, the better. If the indicator is too large, it indicates that the company's liquidity is insufficiently utilized and its profitability is not strong.
Analysis tips: Calculation results must be compared with the past and with peers to determine whether high or low is high. The higher the ratio, the greater the company's ability to shoulder debt. This ratio also reflects the company's maximum interest-paying ability.
6. Ability to obtain cash
1. Sales cash ratio = net cash flow from operating activities / operating income * 100%
Standard value: 0.2.
Significance: It reflects the net cash inflow per dollar of sales, the larger the value, the better.
Analysis tip: Calculation results must be compared with the past and compared with peers to determine whether it is high or low. The higher the ratio, the better the company's income quality and the better its capital utilization.
2. Operating cash flow per share = net cash flow from operating activities / number of common shares
No standard value.
Meaning: Reflects the net cash received from operations per share. The larger the value, the better.
Analysis Tip: This indicator reflects the company's ability to distribute maximum cash dividends. If you exceed this limit, you will need to borrow money and distribute dividends.
3. Cash recovery rate of all assets = net cash flow from operating activities/average total assets × 100%
Standard value: 0.06.
Significance: This indicator is designed to evaluate the ability of all assets of an enterprise to generate cash. The larger the ratio, the better. The larger the ratio, the better the asset utilization effect, the more cash inflows created by using assets, the stronger the entire enterprise's ability to obtain cash, and the higher the level of operation and management. On the contrary, the lower the level of operation and management, the operator needs to improve the level of management, thereby improving the economic benefits of the enterprise.
Analysis Tips: By taking the reciprocal of the above indicators, you can analyze the length of time required to recover all assets using cash from operating activities. Therefore, this indicator reflects the meaning of corporate asset recovery. The shorter the payback period, the stronger the asset's ability to obtain cash.
In addition to the above financial indicator analysis, there are also some financial flexibility indicators, such as cash to investment ratio, cash dividend protection multiple, and cash operating index. These indicators are also positive indicators. The larger the value, the better. The greater the ratio, the higher the self-sufficiency rate of funds, and the stronger the enterprise's ability to pay.
Through the calculation and comparative analysis of this indicator in different periods, we can understand the changes in corporate debt burden. Any enterprise must determine a moderate standard based on its actual situation. When the corporate debt burden continues to grow and exceeds this moderate standard, the enterprise should pay attention to making adjustments and cannot just obtain leverage benefits without considering the financial risks it may face.
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