DuPont system, based on analysis of the financial statements and its development 14271.doc

DuPont system, based on analysis of the financial statements and its development      Abstract Du Pont analysis system in the financial analysis of the advantages of simplicity, systems, and is workable. However, with the development of the times, DuPont analysis system increasingly exposed its shortcomings, is the core indicators "rights and interests of net profit margin" in the decline in earnings quality. In this paper, to retain the original system, based on the advantages of proposed indicators for the development of the original proposal, such as economic value added, and through layers of decomposition, with the balance sheet, income statement, cash flow statement interpretation outside to the inside of the indicators .      Key words Du Pont; EVA analysis; Financial Statement Analysis           1 Introduction           With the continuous advancement of social and economic development of the financial statements of system has been continually developed and improved, is now basically formed a balance sheet, income statement and cash flow-based system of the financial statements. Enterprises to provide financial statements that the financial statements of the accounting information is the business stakeholders to determine the necessary decision-making based on these accounting information comes from an analysis of the financial statements. As a corporate stakeholders, including house managers, current and potential investors, employees, lenders, raw material suppliers and other creditors, customers, government departments and the public to conduct financial analysis of the ultimate goal of all-round understanding of the business business financial condition and economic benefits to the merits of the enterprise to make systematic and rational assessment. Refers to a comprehensive analysis of financial viability such as solvency and profitability aspects of the analysis into an organic whole into a comprehensive manner on the business situation, financial situation and analysis of autopsy, which the pros and cons of economic efficiency of enterprises to make an accurate assessment of those involved. From the perspective of decision-making, financial statement analysis also choose the best program to analyze and judge the process.           Second, based on the DuPont System Statement Analysis           Are many ways to finance a comprehensive analysis of DuPont financial analysis system is one of them, which is the use of the intrinsic relationship between financial indicators of corporate financial management and economic benefits of an integrated business system analysis evaluation method can effectively reflect the corporate profitability The interlinkages between the various indicators on the financial results of enterprises to make a reasonable analysis.      (A) Financial Statement Analysis - Du Pont analysis system. Du Pont analysis is DuPont (DO PONT) has pioneered applied to analyze the financial situation of a financial analysis. It is the return on equity from the start of its decomposition, to calculate main financial indicators related to increase or decrease the level of their changes, and then again at every level analysis of key financial indicators, down to the balance sheet and income statement items, In contrast to find the reasons causing changes in the indicators, which can be targeted to seek the best management decisions. Financial Statement Analysis of Du Pont analysis Du Pont analysis diagram can be drawn as shown in Figure 1:      DuPont analysis can be seen from the figure, it is analyzed from two angles Finance: First, the internal management of factor analysis; 2 we carried out a capital structure and risk analysis, providing information on the relationship of the key indicators.      Net margin reflects the company's equity ownership interest return on investment, and highly integrated. Net margin interest factors that determine the level there are three areas - equity multiplier, sales net profit margin and total asset turnover. Equity multiplier, sales net profit margin and total asset turnover ratio of 3 to reflect the enterprise's debt ratios, profitability ratios and asset management ratios. After this break, you can put the interests of such a comprehensive index of net interest movements occur because specific, quantitative description of enterprise management problems, compared with a target to provide a more clear, more valuable information.      Rights and interests of the multiplier effect mainly by asset-liability ratio. Higher debt ratio, the higher the equity multiplier shows that enterprises have a higher debt level to bring more leverage to the enterprise interests, but also to bring more business risk. Asset Net margin is a comprehensive indicator of sales while net profit margin and asset turnover were affected.      Net profit margin high and low sales analysis, sales and marketing costs need two ways. Analysis in this area is related to profitability analysis. This indicator can be broken down into cost of sales ratio, sales tax rates of other profit and sales. Cost of sales ratio can be further broken down into gross margins and sales expense ratio during the period. In-depth breakdown of indicators can be the reasons for changes in marketing margins revealed quantitatively, such as the price is too low, the cost is too high or the cost is too large. Total asset turnover ratio reflects the use of assets, the ability to generate sales revenue targets. The analysis of the total asset turnover, asset turnover is required for impact analysis of various factors. In addition to the components of assets from the occupation of quantitative analysis of whether it is reasonable, but also on the flow through asset turnover, inventory turnover, accounts receivable turnover ratio, and the efficient use of the assets part of the analysis, identify the impact of asset turnover problem lies.      DuPont is the role of financial analysis system to explain the causes and changes in indicators of changes in the trend, in order to take measures direction. From the DuPont analysis diagram can be seen, equity sales and corporate profit margin size, cost levels, capital management, capital structure, etc. are closely linked. Only when this system, the relationship between the various factors that arrangements, and coordinate in order to maximize interest margins, to achieve the fiscal objectives of maximizing shareholder wealth.      (B) analysis of the advantages of DuPont. The financial activities of enterprises, financial indicators are interrelated and influence each other, which requires systematic analysis of financial analysts indicators. Du Pont Analysis System is the financial situation of the enterprise a comprehensive analysis of different types of indicators for which a relationship by linking up the pyramid analysis system, changes in the core indicators for analysis. Thus a comprehensive, intuitive, the system reflects the enterprise's financial situation, can greatly improve the efficiency of financial statement analysis. DuPont analysis system is through a comprehensive index of "rights and interests of net profit margin," to complete the decomposition diagram, the most important feature of the system is simple and workable. It is intrinsically linked to the indicators shown, through the layers of decomposition, the net assets of the combined measure of rate of return took place upward and downward changes of the reasons for specific, identified the crux of corporate financial problems lies.      (C) Du Pont analysis deficiencies. DuPont analysis to determine the level of equity net profit margin the size of the operating results and financial position is good or bad as a period of evaluation criteria. However, due to DuPont analysis of data from financial statements, financial indicators are based primarily on analysis and decision-making, reporting analyst mainly based on this series of key financial indicators to determine the enterprise's financial position and operating results and cash flows, financial indicators are "discretion" behavior that can lead to financial indicators "monitoring" role in weakening.           Third, the development of DuPont Analysis System           We all know, Guangxia the company since 1999, has received extensive attention in 2001, the market value is the third highest in Shenzhen and Shanghai cities, creating the stock market myth. However, in August 2001, "Finance" published the "Guangxia trap" opened Guangxia mystery. However, by analyzing the relevant financial indicators, such as net income and earnings per share and sales margins, return on total assets of the target return on equity targets, found that it is the traditional DuPont analysis system of relevant indicators, and constantly distort the fact that the deterioration of its financial the truth, for financial fraud fueled played a role. As the traditional indicators of misleading, giving Guangxia layers cast a halo. Hong Kong's "Asia Week," named "in 2000 in China - one hundred largest listed companies list" at 8, the "new wealth" the Top "100 most growth of listed companies", Guangxia ranked second, traditional financial indicators misled the media, and misleading the wide medium and small investors.      In view of this, we need the original in the Du Pont analysis, based on some new indicators to improve the Du Pont analysis, the results of the analysis of the financial statements more valuable. DuPont in developing the system, care must be taken to expand after the Du Pont analysis system should continue to be a comprehensive analysis of systems and can not in order to highlight a particular aspect of the analysis to give up other aspects of the analysis; new indicators should be representative, biodegradable nature, each at least one indicator reflects the capacity of enterprises in a particular area, the financial indicators must have the intrinsic link between the core indicators and the main indicators of the relationship between financial indicators can be used based formula.      (A) the introduction of economic value and cash flow analysis diagram of DuPont. The new system can create the following improvement of DuPont analysis diagram, shown in Figure 2:      First, the introduction of rights and interests of the economy as the Du Pont Analysis System Zengjiazhilv core indicators to meet the analytical needs of value-added enterprise funds; followed by the core indicators of a reasonable decomposition, the introduction of a total leverage ratio, the marginal contribution rate and asset cash recovery rate and other indicators in order to meet business operators, investors and other stakeholders to analyze the risk of the size, the cost of state structure and product capabilities to contribute, cash flow, condition, etc. needs. Shown in Figure 2, expanding after the interests of DuPont analysis system based on economic indicators as the core layer by layer Zengjiazhilv start a comprehensive analysis. Refers to the business interests of the economy Zengjiazhishuai achieved a certain period of economic value added accounted for an average percentage of total equity, which is a highly comprehensive and most representative of the financial indicators. Reposted elsewhere in the paper for free download http:/      Economic Value Added (Economic Valued Added: EVA) is the company's adjusted operating profit minus the economic value of the company's existing assets and the opportunity cost of the balance. Its calculation formula is: EVA = NOPAT-KW (NA)      In the last formula, KW: Company's weighted average cost of capital; NOPAT: the adjusted operating profit; NA: beginning of the economic value of the assets of the company.      Improved DuPont analysis diagram, the introduction of the cash flow this factor. In this way, Du Pont analysis system for data from the three companies must prepare reports, makes the financial analysis is more comprehensive and integrated. Cash flow analysis can help investors to understand and evaluate the businesses the ability to access cash and cash equivalents, and, according to project the company's future cash flows, the correct assessment of enterprise value to the creditor, analyze cash flow will help pay for the valuation of businesses capacity, solvency and liquidity. Debt and interest due must be paid in cash, with cash flow analysis of the solvency of companies than by profit-based financial targets, in theory, more scientific. On the capital market investors, cash flow analysis is the insight into the earnings manipulation, analysis of the quality of corporate earnings and corporate growth of the important means.      (B) The dividend payout ratio and earnings per share of the Du Pont system. For listed companies, the other an improved model is introduced in the Du Pont analysis system earnings per share is also an important means to improve. After the development of DuPont financial analysis system, the "dividend payout ratio" is also affect an important factor for sustainable growth, and the "dividend payout rate" to reflect the distribution of corporate profits is an important aspect of the situation. For corporate investors, they will own their own funds to invest in promising a certain stock, always count on its ability to create more attractive than any other portfolio investment rate of return, while the rate of return from equity investments dividend income and capital gains of two parts. Dividend payout ratio for the number of different investors, each holding a different view. In the case of certain corporate profits, dividends to pay the higher, then stay in the enterprise's internal accumulation of the less; and vice versa. In this analysis indicators, but also to introduce the "Earnings Per Share" and "share costs" of these two financial measures, together with the dividend payout ratio analysis of financial statements, as those taken into account. Among them, earnings per share reflects the realized profits of listed companies that year, the average earnings per share of stock entitled to. As for the choice of decision-making depends on decision-makers how to report in-depth analysis as well as their own risk tolerance attitude.           IV Summary           A sound financial evaluation system should be able to have the following aspects of the role:      First, the ability to accurately and timely reflect the financial situation of enterprises and abnormal fluctuations. Corporate financial officers need to keep abreast of changes in financial position of enterprises to adapt to changes in the environment, timely development and adjustment of corporate financial strategy, which requires financial management system of indicators to reflect the financial position of the sm