9

Глосарій

operating environment(s) – операційне середовище

value drivers - драйвери вартості (цінності)

ratio decomposition – декомпозиція фінансових коефіцієнтів (тобто представлення їх як добутку або частки інших коефіцієнтів)

tax shield – податкове навантаження

operating activities – операційна діяльність

financing activities – фінансова діяльність

profit margin - прибутковість

Information intermediaries – інформаційні посередники

'mean effects' – відчутний ефект

benchmarking – порівнювальний аналіз

meaningful sector aggregates – значимі середньо галузеві показники

forecasting - прогнозування

stakeholder – зацікавлена особа

Timeliness - своєчасність (в обліку розуміється як така властивість фінансової звітності, яка забезпечує доведення до акціонерів інформації, необхідної для прийняття певного рішення, до того моменту, як прийняття рішення втрачає сенс)

conservatism – консервативний підхід (в обліку означає, що очікувані збитки відображаються в обліку, а очікувані прибутки – ні)

insider groups – інсайдерські групи (інсайдери)

economic income – економічний прибуток

Income Gearing – коефіціент покриття відсотків

Capital Gearing – питома вага позикового капіталу у валюті балансу (один з варіантів розрахунку фінансового леверіджу)

Topic # 6

Interpreting financial statements

1. Драйвери операційної діяльності як фактор впливу на фінансовий стан підприємства. Performance drivers as factors of corporate financial standing.

2. Порівнювальний аналіз як спосіб інтерпретації фінансових коефіцієнтів. Benchmarks as a tools for financial ratios interpretation.

3. Фінансовий аналіз та фондовий ринок. Financial analysis and the capital market.

1. Performance drivers as factors of corporate financial standing

So we have emphasized the need to understand the aspects of interna­tional business operations that determine the profitability and structure of a firm, suggesting that financial statements should be interpreted in the context of the company's operating environment(s) and illustrating how some international com­panies actually report on these issues.

To understand the dynamics of business performance, financial analysts have developed approaches to financial statement analysis that identify various value drivers, including the firm's ability to use its asset base to generate sales revenue, the sales profit margin that can be achieved, and the way in which capital sources can be mixed effectively in financing the operations. Following this approach, the analysis of Return on Equity (ROE) may be based on the following financial ratio decomposition (the notation is explained in the simplified balance sheet and income statement in Table 1):

Return on Equity = Return on Assets x (1 - Income Gearing)/(1 - Capital Gearing) where Return on Assets = Operating Margin x Asset Turnover

Table 1. Simplified financial statements and financial ratios

Balance Sheet		Ratios
Shareholders' Equity	SE	Profitability
+ Total Debt	TD	Return on Equity	E/SE
= Net Assets	NA	Return on Net Assets	OI/NA
Income Statement		Return on Sales	Ol/S
Sales	S	Efficiency
- Operating Costs	OC	Net Asset Turnover	S/NA
= Operating Income	Ol	Leverage
- Interest Charged	IC	Income Gearing	IC/OI
= Earnings	E	Capital Gearing	TD/NA

Note: To simplify matters, the tax shield has been ignored in this table and in the example that follows. Operating income is defined as the net income before preference dividends and interest expense. Income Gearing is the ratio of interest charged to operating income, and therefore IC/OI + E/OI = 1. The balance sheet equivalent of Income Gearing is Capital Gearing, the ratio of short and long term debt to total capital, TD/NA. Total capital, i.e. net assets, is defined such that TD/NA + SE/NA = 1. Therefore, E/SE = OI/NA x E/OI x NA/SE.

It can be seen that Return on Equity (E/SE) is driven by:

• operating activities that produce operating income (OI) from net operating assets (NA) - this is summarized in the Return on Net Assets ratio (OI/NA); and

• financing activities that incur interest expense - these leverage effects arise jointly from Income Gearing (expressed here in terms of the ratio of interest charged to earnings before interest, IC/OI) and Capital Gearing (expressed here in terms of the ratio of total debt to the total capital employed in funding net operating assets (TD/NA)).

In turn, Return on Assets is driven by:

• the profit margin that is indicated by the Return on Sales ratio (OI/S); and

• the efficient usage of capital employed to generate revenues, as summarized by Asset Turnover (S/NA)).

Table 2 shows the results of a ratio analysis for three European vehicle manu­facturers: Fiat, Volkswagen and Volvo. An interfirm trend comparison is plotted in the graphs in Figure 1 (overleaf). We can see that Fiat recorded substantial net losses during the period. In addition, Volkswagen's return on equity dropped gradually between 2000 and 2004, whilst Volvo's increased. Fiat's trend is the classic 'sharp-bender' that has bounced back from its low point in 2002, although it still remains relatively low. Interestingly, Fiat and Volvo increased their asset turnover over the five years, whilst Volkswagen's declined steadily. Fiat's problems are associated with its greater reliance on a higher proportion of debt, which prevents return on equity from reflecting the improvement in operating results. The analysis shows how Fiat's gearing is consistently higher than that of its competitors, whilst Volvo's is consistently lower. Income gearing was very volatile in this period - when greater

Table 2. Ratio analysis: Fiat, Volkswagen and Volvo

	Year	Return on equity	Income gearing	Capital gearing	Return on net assets	Net operating margin	Net asset turnover
Fiat	2001	-3.34	1.29	0.71	3.34	2.67	1.25
	2002	-46.85	-1.11	0.77	-5.01	-3.38	1.48
	2003	-25.46	4.27	0.75	1.97	1.20	1.64
	2004	-27.67	5.44	0.77	1.46	0.77	1.90
Volkswagen	2001	12.15	0.36	0.64	6.81	4.95	1.37
	2002	10.49	0.19	0.65	4.56	3.56	1.28
	2003	4.48	0.59	0.69	3.35	2.95	1.13
	2004	2.84	0.69	0.72	2.58	2.46	1.05
Volvo	2001	-1.72	-1.82	0.49	0.48	0.43	1.14
	2002	1.78	0.43	0.48	2.15	1.74	1.24
	2003	0.41	0.14	0.51	1.49	1.19	1.25
	2004	13.48	0.12	0.47	8.07	5.03	1.60

Figure 3 Drivers of return on equity

than one, this means that there was insufficient income from operations to cover interest charges.