Corporate Finance report
Title: Finance report of Yanjing Beer Faculty: IBF
Major: International business& trade group member:黄秋玲 苏晓琳 吕庭宏 谭志阳 陈永志 王科喻
2012.11.30
Corporate Finance report of
Yangjing Beer
Abstract :
The basic financial information of Yanjing beer and the comparison with Qingdao beer.Through analysing the financial ratio,we get some conclusions that the Yanjing beer is operating stably.
Key words:financial ratios, accounting analysis, comparison, current situation
Introduction to Yangjing Beer: Yanjing factory was built up in 1980 when the group was founded in 1993. It positively entered in the market in the past which is important for it to build a perfect marketing internet system as well as adapt the requirement of the market economic.
After 31 years rapid and healthy development, it has become one of China's biggest beer enterprise group.
(1)Industry characteristics: alcohol and drink wine
manufacturing supply chain is relatively simple upstream, but
the back is complex. The diversification of consumption terminal determines the complexity of the distribution network.
(2) The main products and business: non-alcoholic beverage, beer raw materials, feed, cap; Export enterprises produced beer, all kinds of beverages, yeast powder, soy sauce, import enterprise production, scientific research required raw
materials, mechanical equipment, instruments and spare parts.
(3) Market share :
At present, Yangjing has the national market share of 12%, north China market of 50%, Beijing market in more than 85%.
Explanation on the financial ratios:
1. Current ratio=current assets/current liabilities
Liquidity ratios are financial ratios that measure the degree to which an organization's current assets are adequate to pay current liabilities.
2. Quick ratio=current assets—inventory/current liabilities It’s used to measure current assets after deducting inventory short term debt repayment ability.
3. Cash ratio=cash/current liabilities.
It’s the trade credit account used to guarantee the minimum ratio of cash. Trade credit customers are required to pay a certain percentage of cash the entrustment of the deposit and shall not be against securities.
4. Total debt ratio=(total assets—total equity)/total assets Total debt ratio is one of the common ratios that people review to assess
the financial condition of a firm.
5. Debt-equity ratio=total debt/total equity. It is the index used to measure the company financial leverage, namely display company's assets capital source of equity and debt ratio. It can be used to compare with shareholders' equity if a company's
borrowing is exorbitant.
6. Equity multiplier=total debt/total equity
It’s used to show the enterprise's debt level. The greater is the multiplier, the higher level of debt.
7. Times interest earned ratio= EBIT/interest
It's the index used to provide the company with the ability to pay due interest.
8. Cash coverage ratio = (EBIT + depreciation)/interest
Cash coverage ratio is the degree generally measured if project generated cash flow can cover the corresponding loan principal and interest, and reveals the project cash flow on the loan repayment ability. 9. Inventory turnover=cost of goods sold/inventory
Inventory turnover ratio reflects the company sales efficiency and inventory used efficiency. In normal circumstances, if the enterprise management well, inventory turnover rate would be higher. It reflects that the faster is enterprise inventory turnover , the stronger is the enterprise sales ability . Working capital occupancy on the amount of the inventory would be less, too.
10. Day’s sales in inventory=365 days/inventory turnover Inventory turnover days, it is numbers of the day that the folk non-profit organization began to consume the acquisition stock to sale them. The less turnover days, the faster speed of the inventory liquidation and the higher inventory management work efficiency.
11. Receivables turnover = sales/accounts receivable
Generally speaking, it’s the higher the better. It shows that the company collection speed and average collection period are short, then the bad debt loss less and liquidity of the asset is faster which will
also lead to the stronger debt paying ability.
12. Days’ sales in receivable = 365 days/Receivables turnover Days’ sale in receivable is an average days (average collection period) that accounts receivable turnover once from happen to withdraw. The days are the shorter the better. The less turnover days reflect that accounts receivable realizable speed is faster, the time funds are occupied by the unit is shorter which result in higher efficiency of management work. 13. Total asset turnover ratio= Net sales/ Total assets Total assets turnover comprehensively reflects the enterprise overall assets operating ability. This is a measure of how well assets are being used to produce revenue.
14. Capital intensity = Price-earnings ratio /Market-to-book ratio
If the capital is higher, the actual value would be higher, too.
15. Profit margin= margin profit/sales revenue
Profit margin reflects the increased income that result from the increased product sales for enterprises. 16. Return on asset (ROA) = Net income/Total assets Return on asset is high, indicates that the asset utilization efficiency is high which explains that enterprise has achieved good effect in increasing income and save money.
17. Return on equity (ROE) = Net income/Total equity ROE is the receiving investment reward that common stock investors entrusts company management researchers to use the money. So number the bigger the better.
18. Price-earnings ratio= price per share/ earnings per share Price-earnings ratio is one of the most common indexes used to evaluate if the level of share price is reasonable.
19. Market-to-book ratio= Market value per share/Book value per share
If the book value of the joint-stock company is higher, then the
shareholders have the more actual assets. It is the important basis for the stock investors to evaluate and analyze the strength of the listed company.
Accounting analysis:
1.
current ratio
Nt only the liquidity in Qingdao is better than yanjing, it also indicate Qingdao cannot use the cash and other short term assets efficiently.
2.
quick ratio Yanjing 09-11 years of quick ratio is in 0.5, but in 2011 it plunged to 0.38. Compared to Qingdao beer, it is lower. It shows that the
company's liquid asset cashability is not strong, the actual bad debt of accounts receivable is likely to be prepared more than the planning.
3. Cash ratio
Cash assets has the strongest liquidity in the liquid asset, it can be applied directly to sinking assets. So the higher is the cash ratio, the better short-term debt paying ability. Compared to the Qingdao beer, Yanjing group's overall cash ratio is not high, its short-term debt paying ability is weak.
4.
Total debt ratio
From the chart, total debt ratio rise obviously result from the greater
increase amplitude in liabilities than the increase amplitude in asset. But compared with Qingdao beer companies, it's asset liability ratio is low which also means its assets on debt financing is less, the financial risk of the enterprise is below Qingdao beer company.
5. Debt equity ratio
Debt equity ratio can be used to measure the company’s financial leverage. Qingdao has higher debt ratio, so it has higher risk. Though yanjing has lower risk, but its capital operation ability is weaker.
6. Equity multiplier
From the chart we can see that yanjing beer company equity
multiplier is rising year by year in 2009-2011. So compared with Qingdao beer company, its debt level is relatively low.
7. Times interest earned ratio
In 2011, yanjing has the highest time interest earned ratio which means that it has stronger ability to pay the interest expense. This ratio of Qingdao is lower than yanjing, so the debt paying guarantee and stability will be lower,
too. Bank would be willing to lend more money to yanjing.
8. Cash coverage ratio
It shows that Yanjing has higher cash coverage ratio than Qingdao. So Yanjing’s generated cash flow can cover the corresponding loan principal and interest better than qingdao. But their cash coverages are both increasing year by year. It also reveals that the project cash flow on the loan repayment ability of yanjing is stronger.
9. Inventory turnover
Both of the company’s inventory turnover is decreasing year by year. It shows that the enterprise stock asset is getting weaker and weaker. Inventory and the asset occupancy in the inventory’s turnover speed is slower in this two company.
10. Day’s sale in inventory
As we can see, yanjing has higher day’s sale in inventory than Qingdao. The less turnover days, the faster speed of the inventory liquidation and the higher inventory management work efficiency. So Qingdao should improve its inventory management work efficiency.
11. Receivables turnover
The data shows that the company's accounts receivable management before late in 2010 is good, accounts receivable turnover speed up greatly which also activates the enterprise operating funds. But Qingdao is better than Yanjing company in this ratio.
12. Days’ sales in receivable
The less turnover days reflect that accounts receivable realizable speed is faster, the time funds are occupied by the unit is shorter which result in higher efficiency of management work. Yanjing has two times day’s sales in receivable, but the day is the shorter, the better. It is to say, Qingdao can receivable the debt faster.
13. Total asset turnover
The Yanjing company's asset turnovers remain unchanged nearly three years, but Qingdao has slightly increases. This means qingdao’s assets can better produce revenue.
The margin profit declined in prophase in 2011, this is mainly because of the rising cost of raw materials and labor. The gap between Yangjing and Qingdao is shrinking. From the data of gross profit and profit margin, it reflects that the profitability of companies is enhancing.
16. Return on asset (ROA)
The yanujing’s return on asset ratio decreased year by year, This shows that using the cash inflow of the asset to create is reducing, the company's business management performance should be further enhanced, and the economic benefit is wait to be enhanced. On contrary, qingdao's situation is better which has better economic benefit.
17. Return on equity (ROE)
Yanjing’s return on equity has basic stable trend for three
consecutive years overall. It has slightly increases in 2010 which is higher than the industry average ratio. But compared with Qingdao beer, there are still some gaps.
18. Price-earnings ratio The p/e ratio of Yanjing and Qingdao are declining in three years, this part may caused by the enterprise's net profit falling. But they are higher than the average expected rate of return. In general, the prospect of yanjing is really good.
19. Market-to-book ratio
The book value of their stock are both increased year by year which are benefited from their improving strength. In addition, book value reflects the actual asset of the company. So Qingdao has more actual asset than Yangjing.
Conclusion:
According to the four major abilities index of Yanjing beer's financial analysis,which are profit, the turnover, sinking,
development, it both have reached the excellent level.It shows that Yanjing beer has a good basis to develop its four major abilities.The advantage show much evident of its Capital management profitability and short-term debt paying ability .
From the analysing chart,comparing with Qingdao beer,although some indexes are in a good situation,a downward trend has came up in 2011.It means that Yanjing has a challenge of its assets
management profitability,commodity business profitability and the solvency of interest.
Finally,we can draw a conclusion that Yanjing beer is in a
situation that its development foundation is stable and the trend of future is great of challenge.
Corporate Finance report
Title: Finance report of Yanjing Beer Faculty: IBF
Major: International business& trade group member:黄秋玲 苏晓琳 吕庭宏 谭志阳 陈永志 王科喻
2012.11.30
Corporate Finance report of
Yangjing Beer
Abstract :
The basic financial information of Yanjing beer and the comparison with Qingdao beer.Through analysing the financial ratio,we get some conclusions that the Yanjing beer is operating stably.
Key words:financial ratios, accounting analysis, comparison, current situation
Introduction to Yangjing Beer: Yanjing factory was built up in 1980 when the group was founded in 1993. It positively entered in the market in the past which is important for it to build a perfect marketing internet system as well as adapt the requirement of the market economic.
After 31 years rapid and healthy development, it has become one of China's biggest beer enterprise group.
(1)Industry characteristics: alcohol and drink wine
manufacturing supply chain is relatively simple upstream, but
the back is complex. The diversification of consumption terminal determines the complexity of the distribution network.
(2) The main products and business: non-alcoholic beverage, beer raw materials, feed, cap; Export enterprises produced beer, all kinds of beverages, yeast powder, soy sauce, import enterprise production, scientific research required raw
materials, mechanical equipment, instruments and spare parts.
(3) Market share :
At present, Yangjing has the national market share of 12%, north China market of 50%, Beijing market in more than 85%.
Explanation on the financial ratios:
1. Current ratio=current assets/current liabilities
Liquidity ratios are financial ratios that measure the degree to which an organization's current assets are adequate to pay current liabilities.
2. Quick ratio=current assets—inventory/current liabilities It’s used to measure current assets after deducting inventory short term debt repayment ability.
3. Cash ratio=cash/current liabilities.
It’s the trade credit account used to guarantee the minimum ratio of cash. Trade credit customers are required to pay a certain percentage of cash the entrustment of the deposit and shall not be against securities.
4. Total debt ratio=(total assets—total equity)/total assets Total debt ratio is one of the common ratios that people review to assess
the financial condition of a firm.
5. Debt-equity ratio=total debt/total equity. It is the index used to measure the company financial leverage, namely display company's assets capital source of equity and debt ratio. It can be used to compare with shareholders' equity if a company's
borrowing is exorbitant.
6. Equity multiplier=total debt/total equity
It’s used to show the enterprise's debt level. The greater is the multiplier, the higher level of debt.
7. Times interest earned ratio= EBIT/interest
It's the index used to provide the company with the ability to pay due interest.
8. Cash coverage ratio = (EBIT + depreciation)/interest
Cash coverage ratio is the degree generally measured if project generated cash flow can cover the corresponding loan principal and interest, and reveals the project cash flow on the loan repayment ability. 9. Inventory turnover=cost of goods sold/inventory
Inventory turnover ratio reflects the company sales efficiency and inventory used efficiency. In normal circumstances, if the enterprise management well, inventory turnover rate would be higher. It reflects that the faster is enterprise inventory turnover , the stronger is the enterprise sales ability . Working capital occupancy on the amount of the inventory would be less, too.
10. Day’s sales in inventory=365 days/inventory turnover Inventory turnover days, it is numbers of the day that the folk non-profit organization began to consume the acquisition stock to sale them. The less turnover days, the faster speed of the inventory liquidation and the higher inventory management work efficiency.
11. Receivables turnover = sales/accounts receivable
Generally speaking, it’s the higher the better. It shows that the company collection speed and average collection period are short, then the bad debt loss less and liquidity of the asset is faster which will
also lead to the stronger debt paying ability.
12. Days’ sales in receivable = 365 days/Receivables turnover Days’ sale in receivable is an average days (average collection period) that accounts receivable turnover once from happen to withdraw. The days are the shorter the better. The less turnover days reflect that accounts receivable realizable speed is faster, the time funds are occupied by the unit is shorter which result in higher efficiency of management work. 13. Total asset turnover ratio= Net sales/ Total assets Total assets turnover comprehensively reflects the enterprise overall assets operating ability. This is a measure of how well assets are being used to produce revenue.
14. Capital intensity = Price-earnings ratio /Market-to-book ratio
If the capital is higher, the actual value would be higher, too.
15. Profit margin= margin profit/sales revenue
Profit margin reflects the increased income that result from the increased product sales for enterprises. 16. Return on asset (ROA) = Net income/Total assets Return on asset is high, indicates that the asset utilization efficiency is high which explains that enterprise has achieved good effect in increasing income and save money.
17. Return on equity (ROE) = Net income/Total equity ROE is the receiving investment reward that common stock investors entrusts company management researchers to use the money. So number the bigger the better.
18. Price-earnings ratio= price per share/ earnings per share Price-earnings ratio is one of the most common indexes used to evaluate if the level of share price is reasonable.
19. Market-to-book ratio= Market value per share/Book value per share
If the book value of the joint-stock company is higher, then the
shareholders have the more actual assets. It is the important basis for the stock investors to evaluate and analyze the strength of the listed company.
Accounting analysis:
1.
current ratio
Nt only the liquidity in Qingdao is better than yanjing, it also indicate Qingdao cannot use the cash and other short term assets efficiently.
2.
quick ratio Yanjing 09-11 years of quick ratio is in 0.5, but in 2011 it plunged to 0.38. Compared to Qingdao beer, it is lower. It shows that the
company's liquid asset cashability is not strong, the actual bad debt of accounts receivable is likely to be prepared more than the planning.
3. Cash ratio
Cash assets has the strongest liquidity in the liquid asset, it can be applied directly to sinking assets. So the higher is the cash ratio, the better short-term debt paying ability. Compared to the Qingdao beer, Yanjing group's overall cash ratio is not high, its short-term debt paying ability is weak.
4.
Total debt ratio
From the chart, total debt ratio rise obviously result from the greater
increase amplitude in liabilities than the increase amplitude in asset. But compared with Qingdao beer companies, it's asset liability ratio is low which also means its assets on debt financing is less, the financial risk of the enterprise is below Qingdao beer company.
5. Debt equity ratio
Debt equity ratio can be used to measure the company’s financial leverage. Qingdao has higher debt ratio, so it has higher risk. Though yanjing has lower risk, but its capital operation ability is weaker.
6. Equity multiplier
From the chart we can see that yanjing beer company equity
multiplier is rising year by year in 2009-2011. So compared with Qingdao beer company, its debt level is relatively low.
7. Times interest earned ratio
In 2011, yanjing has the highest time interest earned ratio which means that it has stronger ability to pay the interest expense. This ratio of Qingdao is lower than yanjing, so the debt paying guarantee and stability will be lower,
too. Bank would be willing to lend more money to yanjing.
8. Cash coverage ratio
It shows that Yanjing has higher cash coverage ratio than Qingdao. So Yanjing’s generated cash flow can cover the corresponding loan principal and interest better than qingdao. But their cash coverages are both increasing year by year. It also reveals that the project cash flow on the loan repayment ability of yanjing is stronger.
9. Inventory turnover
Both of the company’s inventory turnover is decreasing year by year. It shows that the enterprise stock asset is getting weaker and weaker. Inventory and the asset occupancy in the inventory’s turnover speed is slower in this two company.
10. Day’s sale in inventory
As we can see, yanjing has higher day’s sale in inventory than Qingdao. The less turnover days, the faster speed of the inventory liquidation and the higher inventory management work efficiency. So Qingdao should improve its inventory management work efficiency.
11. Receivables turnover
The data shows that the company's accounts receivable management before late in 2010 is good, accounts receivable turnover speed up greatly which also activates the enterprise operating funds. But Qingdao is better than Yanjing company in this ratio.
12. Days’ sales in receivable
The less turnover days reflect that accounts receivable realizable speed is faster, the time funds are occupied by the unit is shorter which result in higher efficiency of management work. Yanjing has two times day’s sales in receivable, but the day is the shorter, the better. It is to say, Qingdao can receivable the debt faster.
13. Total asset turnover
The Yanjing company's asset turnovers remain unchanged nearly three years, but Qingdao has slightly increases. This means qingdao’s assets can better produce revenue.
The margin profit declined in prophase in 2011, this is mainly because of the rising cost of raw materials and labor. The gap between Yangjing and Qingdao is shrinking. From the data of gross profit and profit margin, it reflects that the profitability of companies is enhancing.
16. Return on asset (ROA)
The yanujing’s return on asset ratio decreased year by year, This shows that using the cash inflow of the asset to create is reducing, the company's business management performance should be further enhanced, and the economic benefit is wait to be enhanced. On contrary, qingdao's situation is better which has better economic benefit.
17. Return on equity (ROE)
Yanjing’s return on equity has basic stable trend for three
consecutive years overall. It has slightly increases in 2010 which is higher than the industry average ratio. But compared with Qingdao beer, there are still some gaps.
18. Price-earnings ratio The p/e ratio of Yanjing and Qingdao are declining in three years, this part may caused by the enterprise's net profit falling. But they are higher than the average expected rate of return. In general, the prospect of yanjing is really good.
19. Market-to-book ratio
The book value of their stock are both increased year by year which are benefited from their improving strength. In addition, book value reflects the actual asset of the company. So Qingdao has more actual asset than Yangjing.
Conclusion:
According to the four major abilities index of Yanjing beer's financial analysis,which are profit, the turnover, sinking,
development, it both have reached the excellent level.It shows that Yanjing beer has a good basis to develop its four major abilities.The advantage show much evident of its Capital management profitability and short-term debt paying ability .
From the analysing chart,comparing with Qingdao beer,although some indexes are in a good situation,a downward trend has came up in 2011.It means that Yanjing has a challenge of its assets
management profitability,commodity business profitability and the solvency of interest.
Finally,we can draw a conclusion that Yanjing beer is in a
situation that its development foundation is stable and the trend of future is great of challenge.