FINANCIAL MANAGEMENT 财务管理

1 Name of Course/Module Financial Management

2 Course code MAC 200
3 Rationale for the inclusion of the course/module in the program
To understand the concepts of financial management techniques which to be apply
in whole picture in accounting process. By understanding these, it may help
students in preparing true and fair view account, which comply with the legislation
and regulation required by the authorities.

4 Pre-Requisite -NIL
5 Credit Value 3
6 Learning Outcomes
After completing this syllabus, student should able to :
• Analyses factors and situation that contribute to the overall investment decision
making of a company
• Apply basic technical tools for project and determine its minimum required rate
of return on investment
• Identify the processes and techniques of expansion through mergers and
acquisition
• Pre-empt financial distress symptoms and recommend appropriate ways of
overcoming them
7 Synopsis
This course focuses on the decision making process that a company usually adopt
before accepting any projects which are in line with the company objectives of
maximizing shareholder wealth. Greater emphasis is given on the determination
relevant cash flows from a project and the impact of financing these project has on
its capital structure. This course also focuses on the procedures and techniques
involve in the merger and acquisition exercise including the restructuring of
financially distressed company
8 Mode of Delivery
Lecture, Tutorial, Workshop, Seminar, etc.
9 Assessment Methods and Types
a) Quiz 35%
b) Assignment 10%
c) Mid Semester Test 25%
d) Final examination 30%

1
 10 Main references supporting the course
1. Gitman, Principles of Mangerial Finance (2009), 12th Edition, Pearson
International Edition
2. Roos, Westerfield, Jaffe, Jordan, Modern Financial Management (2009), 8th
Edition, McGraw-Hill International Edition
11 Other additional information - NIL

Study Plan – Day 1

No. Activities Times

1 Chapter 1 – 2 (Lecturing) 10am – 12am

2 Quiz 1 (5 Marks) & Quiz 2 (10 Marks) 12pm – 1pm
3 Lunch Break 1pm – 2pm
4 Chapter 3 Part 1 (Lecturing) 2pm – 4pm
5 Quiz 3 (10 Marks 4pm till finish

2
 FINANCIAL MANAGEMENT 财务管理
Chapter 1 – The role of financial
management 财务管理的作用
What is the importance of Financial Management 财
务管理的重要性是什么?
Financial management is one of the most important aspects in business. In
order to start up or even run a successful business, you will need excellent
knowledge in financial management. So, what exactly is this form of
management and why is it important? Read on to find out more.

What is financial management 什么是财务管理?

Financial management refers to the strategic planning, organizing, directing,

and controlling of financial undertakings in an organization or an institute. It
also includes applying management principles to the financial assets of an
organization, while also playing an important part in fiscal management.
Take a look at the objectives involved:

• Maintaining enough supply of funds for the organization.

• Ensuring shareholders of the organization to get good returns on their
investment.
• Optimum and efficient utilization of funds.
• Creating real and safe investment opportunities to invest in.

3
Financial management is also made up of certain elements. These include:

• Financial planning: This is the process of calculating the amount of

capital that is required by an organization and then determining its
allocation. A financial plan includes certain key objectives, which are:
o Determining the amount of capital required.
o Determining the capital organization and structure.
o Framing of the organization’s financial policies and regulations.
o Financial control: This is one of the key activities in financial
management. Its main role is to assess whether an organization
is meeting its objectives or not. Financial control answers the
following questions:
▪ Are the organization’s assets being used competently?
▪ Are the organization’s assets secure?
▪ Is the management acting in the best financial interests of
the organization and the key stakeholders?
▪ Financial decision-making: This involves investment and
financing with regards to the organization. This
department takes decisions about how the organization
should raise finance, whether they should sell new shares,
or how the profit should be distributed.

4
The financial management department of any firm is handled by a financial
manager. This department has numerous functions such as:

• Calculating the capital required (计算所需资本): The financial

manager has to calculate the amount of funds an organization requires.
This depends upon the policies of the firm with regards to expected
expenses and profits. The amount required has to be estimated in such
a way that the earning capability of the organization increases.
• Formation of capital structure ( 资 本 结 构 的 形 成 ): Once the
amount of capital the firm requires has been estimated, a capital
structure needs to be formed. This involves debt equity analysis in the
short-term and the long-term. This depends upon the amount of the
capital the firm owns, and the amount that needs to be raised via
external sources.
• Investing the capital (投资资本): Every organization or firm needs
to invest money in order to raise more capital and gain regular returns.
Hence, the financial manager needs to invest the organization’s funds
in safe and profitable ventures.
• Allocation of profits (利润分配): Once the organization has earned
a good amount of net profit, it is the financial manager’s duty to
efficiently allocate it. This could involve keeping a part of the net profit
for contingency, innovation, or expansion purposes, while another part
of the profit can be used to provide dividends to the shareholders.
• Effective management of money ( 有 效 的 资 金 管 理 ): This
department is also responsible for effectively managing the firm’s
money. Money is required for various purposes in the firm such as
payment of salaries and bills, maintaining stock, meeting liabilities, and
the purchase of any materials or equipment.
• Financial control (财政控制): Not only does the financial manager
have to plan, organize, and obtain funds, but he also has to control
and analyze the firm’s finances in the short-term and the long-term.
This can be done using financial tools such as financial forecasting,
ratio analysis, risk management, and profit and cost control.

5
Why is Financial Management important 为什么财务管理很重要?

This form of management is important for various reasons. Take a look at

some of these reasons:

• Helps organizations in financial planning.

• Assists organizations in the planning and acquisition of funds.
• Helps organizations in effectively utilizing and allocating the funds
received or acquired.
• Assists organizations in making critical financial decisions.
• Helps in improving the profitability of organizations.
• Increases the overall value of the firms or organizations.
• Provides economic stability.
• Encourages employees to save money, which helps them in personal
financial planning.

6
Why study financial management 为什么要学习财务管理?

• Diverse career opportunities 多样化的职业机会: Studying financial

management opens up a lot of diverse career opportunities. It could
be in the private or public sector. Some of the career options include
investment banking, entrepreneurship, financial analysis, financial and
managerial accounting, and strategic financial management. It is also
beneficial for those people who are interested in starting their own
business. Doing a financial management course or obtaining a finance
degree can help people get promotions or better accounting jobs.

• Improve interpersonal skills 提高人际交往能力: Doing a course in

this field will allow you to build better communication and teamwork
skills through developing relationships with your colleagues.

• Builds personality 建立个性: Doing a course in this field also helps

in improving your soft skills. This is because people who wish to work
in this sector must be extroverts and should be able to talk about
finance for hours altogether. This helps in improving their personality,
knowledge, and communication.

• Greater job prospects 更大的就业前景 : According the USA’s Bureau

of Labor Statistics (BLS), there has been a spike in demand for finance
manager jobs in US due to a “growing range of financial products and
the need for in-depth knowledge of geographic regions”. This is further
proven by the fact that the demand for careers in financial
management has increased by 14%, careers in financial advising by
32%, and careers in financial analysis by 23%.

• Higher salary packages 高薪待遇 : People working in this sector are

usually paid very well, whether it is at the entry level or at the
management level. Additionally, this is a highly skilled job role that is
always in demand, even during recessions.

• Career growth 职业成长: There is always an opportunity to develop

your professional skills and climb the career ladder. You can quickly

7
 acquire in-depth knowledge of financial management systems and
financial management software once in this field. If you possess this
knowledge and great aptitude skills, this field is perfect for you.

Scope of studying Financial Management 学习财务管理的范围

Doing a management course related to finance or gaining a finance degree

offers excellent career opportunities. Take a look at some of these diverse
career options:

• Corporate manager.
• Investment banker.
• Financial advisor.
• Financial analyst.
• Financial examiners.
• Financial managers.
• Personal financial planners.
• Budget analysts.
• Investor relations associate or executive.
• Credit analyst.

8
The Role of Financial Management in
an Organization (财务管理在组织中的作
用)
Finance is an essential and indispensable part of any organization. It is
difficult for organizations, whether profit-making or otherwise, to sustain
themselves for long without proper finances. Not just that, the efficient
management of these financial resources is essential to be sustainable and
viable in the long run. Financial management helps organizations to do so.
Financial management refers to the effective and efficient planning,
organizing, directing and controlling of financial activities and processes of an
organization. This includes but is not limited to fund procurement, allocation
of financial resources, utilization of funds, etc. Considering the importance of
the finance function in organizations, the demand for professionals with these
skills has always been steady. Today, it is possible for even non-finance
professionals and entrepreneurs to learn finance concepts through a
certified financial analyst course.

What are the major roles of financial management (财务管理的主要

作用是什么)?

Financial decisions and controls ( 财 务 决 策 与 控 制 ): Financial

management and financial managers play a crucial role in making financial
decisions and exercising control over finances in the organization. They make
use of techniques like ratio analysis, financial forecasting, profit and loss
analysis, etc.
Financial Planning (金融计划): The finance managers are responsible
for the planning of financial activities and resources in the organization. To
this end, they use available data to understand the needs and priorities of
the organization as well as the overall economic situation and make plans
and budgets for the same.

9
Capital Management ( 资 本 管 理 ): It is the responsibility of financial
management to estimate the capital requirements of the organization from
time to time, determines the capital structure and composition and makes
the choice of source of funding for the capital needs.
Allocation and Utilization of financial resources (财政资源的分配和利
用 ): Financial management ensures that all financial resources of the
organizations are used and invested effectively and efficiently so that the
organization is profitable, sustainable and viable in the long run.
Cash Flow Management (现金流量管理): It is extremely important for
organizations to have sufficient working capital and cash flow to meet their
operational expenses and emergencies. Financial management tracks
account payable and receivable to ensure there is sufficient cash flow
available at all times.
Disposal of Surplus (处置剩余): The decisions on how the surplus or profits
of the organizations is utilized is taken by the financial managers of the
organizations. They decide if dividends should be distributed and how much
as well as the proportion of profits that must be retained and ploughed back
into the business.
Financial Reporting ( 财 务 报 告 ): Financial management maintains all
necessary reports related to the finance of the organization and uses this as
the database for forecasting and planning financial activities.
Risk Management (风险管理): Sound financial management prepares the
organization to forecast risks, put in place mitigation plans as well as to meet
unforeseen risks and emergencies effectively.

10
 FINANCIAL MANAGEMENT 财务管理
Chapter 2 – Review of Financial
Statement 财务报表审阅
To conduct financial management practice, it is essential for an individual to
understand what financial statements is, what elements involved in
the analysis and how you conduct the analysis.
What is a financial statement什么是财务报表?
A financial statement is the combination of the three major reports on a
business. It will contain the cash flow statement, the income statement and
the balance sheet of the business. All three together produce an overall
picture of the health of the business.

Why is a Financial Statement Important 为什么财务报表很重

要?

The answer to this question is in the definition; it is the complete report on

the health of the business taking in cash flow, income and the balance sheet.
The financial statement determines if a business has to ability to repay loans,
if it has the cash flow to meet bills and purchase stock. It will also tell from
where the business is generating cash and where the cash goes.

The financial statement tells if the business is profitable, if it will stay

profitable and if there are any large problems looming, such as a continuous
drop in sales over time. Reading the financial statement will give an overall
view of the condition of the business and if there are any warnings signs of
possible future problems. A bank or other such institution will look to the
financial statement as the first indicator of how the business is performing
and if there is a need for further investigation.

11
When Will a Company Prepare a Financial Statement 公司
何时准备财务报表?

Every business will ready a financial statement to go with their end of year
results, to give interested parties the overview of how the business is
functioning. If a business is looking to increase credit facilities with a bank
or trying to raise capital for an expansion, it will produce a financial
statement for the end of a fiscal quarter or the most recent month. When
preparing a financial statement for such purposes the best practice is to use
general accountancy language, understood by all parties. A financial
statement that may accompany an end of year report and read just by
employees, is often in terms familiar to just those involved.

Often a government body may request a financial statement for tax purposes
and the company will need to produce one of high quality using generally
accepted guidelines. A bank or investors may also request a financial
statement without warning, if they are concerned about the profitability or
otherwise of the company. For these reason alone it is vital for any business
to keep good and current records so that a financial statement is easy and
quick to produce.

Four Types of Financial Statements 四种财务报表

The four main types of financial statements are:

Statement of Financial Position [Balance Sheet] 财务状况

表[资产负债表]

Definition: Statement of Financial Position, also known as the Balance

Sheet, presents the financial position of an entity at a given date. It is
comprised of three main components: Assets, liabilities and equity.

Statement of Financial Position helps users of financial statements to assess

the financial soundness of an entity in terms of liquidity risk, financial risk,
credit risk and business risk.

12
Example
Following is an illustrative example of a Statement of Financial Position
prepared under the format prescribed by IAS 1 Presentation of Financial
Statements.

Classification of Components 组件分类

Statement of financial position consists of the following key elements:

Assets 资产

An asset is something that an entity owns or controls in order to derive

economic benefits from its use. Assets must be classified in the balance sheet
as current or non-current depending on the duration over which the
reporting entity expects to derive economic benefit from its use. An asset
13
which will deliver economic benefits to the entity over the long term is
classified as non-current whereas those assets that are expected to be
realized within one year from the reporting date are classified as current
assets.

Assets are also classified in the statement of financial position on the basis
of their nature:

▪ Tangible & intangible: Non-current assets with physical substance are

classified as property, plant and equipment whereas assets without
any physical substance are classified as intangible assets. Goodwill is
a type of an intangible asset.

▪ Inventories balance includes goods that are held for sale in the
ordinary course of the business. Inventories may include raw materials,
finished goods and works in progress.

▪ Trade receivables include the amounts that are recoverable from

customers upon credit sales. Trade receivables are presented in the
statement of financial position after the deduction of allowance for bad
debts.

▪ Cash and cash equivalents include cash in hand along with any short
term investments that are readily convertible into known amounts of
cash.

Liabilities 负债

A liability is an obligation that a business owes to someone and its settlement

involves the transfer of cash or other resources. Liabilities must be classified
in the statement of financial position as current or non-current depending on
the duration over which the entity intends to settle the liability. A liability
which will be settled over the long term is classified as non-current whereas
those liabilities that are expected to be settled within one year from the
reporting date are classified as current liabilities.

Liabilities are also classified in the statement of financial position on the basis
of their nature:

14
 ▪ Trade and other payables primarily include liabilities due to suppliers
and contractors for credit purchases. Sundry payables which are too
insignificant to be presented separately on the face of the balance
sheet are also classified in this category.

▪ Short term borrowings typically include bank overdrafts and short term
bank loans with a repayment schedule of less than 12 months.

▪ Long-term borrowings comprise of loans which are to be repaid over a

period that exceeds one year. Current portion of long-term borrowings
include the installments of long term borrowings that are due within
one year of the reporting date.

▪ Current Tax Payable is usually presented as a separate line item in the

statement of financial position due to the materiality of the amount.

Equity 股份权益

Equity is what the business owes to its owners. Equity is derived by

deducting total liabilities from the total assets. It therefore represents the
residual interest in the business that belongs to the owners.

Equity is usually presented in the statement of financial position under the

following categories:

▪ Share capital represents the amount invested by the owners in the

entity

▪ Retained Earnings comprises the total net profit or loss retained in the
business after distribution to the owners in the form of dividends.

▪ Revaluation Reserve contains the net surplus of any upward

revaluation of property, plant and equipment recognized directly in
equity.

Income Statement | Profit & Loss Account 损益表

Definition: Income Statement, also known as Profit & Loss Account, is a

report of income, expenses and the resulting profit or loss earned during an
accounting period.
15
Example
Following is an illustrative example of an Income Statement prepared in
accordance with the format prescribed by IAS 1 Presentation of Financial
Statements.

Components 组件

Income statement comprises of the following main elements:

Revenue 收入

Revenue includes income earned from the principal activities of an entity. So

for example, in case of a manufacturer of electronic appliances, revenue will
comprise of the sales from electronic appliance business. Conversely, if the
same manufacturer earns interest on its bank account, it shall not be
classified as revenue but as other income.

Cost of Sales 销售成本

Cost of sales represents the cost of goods sold or services rendered during
an accounting period.

16
Hence, for a retailer, cost of sales will be the sum of inventory at the start
of the period and purchases during the period minus any closing inventory.

In case of a manufacturer however, cost of sales will also include production

costs incurred in the manufacture of goods during a period such as the cost
of direct labor, direct material consumption, depreciation of plant and
machinery and factory overheads, etc.

You may refer to the article on cost of sales for an explanation of its
calculation.

Other Income 其他的收入

Other income consists of income earned from activities that are not related
to the entity's main business. For example, other income of an entity that
manufactures electronic appliances may include:

▪ Gain on disposal of fixed assets

▪ Interest income on bank deposits

▪ Exchange gain on translation of a foreign currency bank account

Distribution Cost 分销成本

Distribution cost includes expenses incurred in delivering goods from the

business premises to customers.

Administrative Expenses 行政费用

Administrative expenses generally comprise of costs relating to the

management and support functions within an organization that are not
directly involved in the production and supply of goods and services offered
by the entity.

Examples of administrative expenses include:

▪ Salary cost of executive management

17
 ▪ Legal and professional charges

▪ Depreciation of head office building

▪ Rent expense of offices used for administration and management

purposes

▪ Cost of functions / departments not directly involved in production such

as finance department, HR department and administration department

Other Expenses 其他费用

This is essentially a residual category in which any expenses that are not
suitably classifiable elsewhere are included.

Finance Charges 财务费用

Finance charges usually comprise of interest expense on loans and

debentures.

The effect of present value adjustments of discounted provisions are also

included in finance charges (e.g. unwinding of discount on provision for
decommissioning cost).

Income tax 所得税

Income tax expense recognized during a period is generally comprised of

the following three elements:

▪ Current period's estimated tax charge

▪ Prior period tax adjustments

▪ Deferred tax expense

Prior Period Comparatives 前期比较

Prior period financial information is presented along-side current period's

financial results to facilitate comparison of performance over a period.

18
It is therefore important that prior period comparative figures presented in
the income statement relate to a similar period.

For example, if an organization is preparing income statement for the six

months ending 31 December 2013, comparative figures of prior period
should relate to the six months ending 31 December 2012.

Purpose & Use 目的与用途

Income Statement provides the basis for measuring performance of an entity

over the course of an accounting period.

Performance can be assessed from the income statement in terms of the

following:

▪ Change in sales revenue over the period and in comparison to industry

growth

▪ Change in gross profit margin, operating profit margin and net profit
margin over the period

▪ Increase or decrease in net profit, operating profit and gross profit

over the period

▪ Comparison of the entity's profitability with other organizations

operating in similar industries or sectors

Statement of Cash Flows 现金流量表

Definition: Statement of Cash Flows, also known as Cash Flow Statement,

presents the movement in cash flows over the period as classified under
operating, investing and financing activities.

Example

Following is an illustrative cash flow statement presented according to

the indirect method suggested in IAS 7 Statement of Cash Flows:

19
Components 组件

Cash flow statement comprises of the following three components:

Operating Activities 经营活动

Cash flow from operating activities presents the movement in cash during
an accounting period from the primary revenue generating activities of
the entity.
20
For example, operating activities of a hotel will include cash inflows and
outflows from the hotel business (e.g. receipts from sales revenue, salaries
paid during the year etc.), but interest income on a bank deposit shall not
be classified as such (i.e. the hotel's interest income shall be presented in
investing activities).

Profit before tax as presented in the income statement could be used as a

starting point to calculate the cash flows from operating activities.

Following adjustments are required to be made to the profit before tax to

arrive at the cash flow from operations:

1. Elimination of non cash expenses (e.g. depreciation, amortization,

impairment losses, bad debts written off, etc.)
2. Removal of expenses to be classified elsewhere in the cash flow
statement (e.g. interest expense should be classified under financing
activities)
3. Elimination of non cash income (e.g. gain on revaluation of
investments)
4. Removal of income to be presented elsewhere in the cash flow
statement (e.g. dividend income and interest income should be
classified under investing activities unless in case of for example an
investment bank)
5. Working capital changes (e.g. an increase in trade receivables must
be deducted to arrive at sales revenue that actually resulted in cash
inflow during the period)

Investing Activities 投资活动

Cash flow from investing activities includes the movement in cash flow as a
result of the purchase and sale of assets other than those which the entity
primarily trades in (e.g. inventory). So for example, in case of a manufacturer
of cars, proceeds from the sale of factory plant shall be classified as cash
flow from investing activities whereas the cash inflow from the sale of cars
shall be presented under the operating activities.

Cash flow from investing activities consists primarily of the following:

21
 ▪ Cash outflow expended on the purchase of investments and fixed
assets

▪ Cash inflow from income from investments

▪ Cash inflow from disposal of investments and fixed assets

Financing activities 筹资活动

Cash flow from financing activities includes the movement in cash flow
resulting from the following:

▪ Proceeds from issuance of share capital, debentures & bank loans

▪ Cash outflow expended on the cost of finance (i.e. dividends and

interest expense)

▪ Cash outflow on the repurchase of share capital and repayment of

debentures & loans

Statement of Changes in Equity 权益变动表

Definition: Statement of Changes in Equity, often referred to as Statement

of Retained Earnings in U.S. GAAP, details the change in owners' equity over
an accounting period by presenting the movement in reserves comprising
the shareholders' equity. Movement in shareholders' equity over an
accounting period comprises the following elements:

▪ Net profit or loss during the accounting period attributable to

shareholders

▪ Increase or decrease in share capital reserves

▪ Dividend payments to shareholders

▪ Gains and losses recognized directly in equity

▪ Effect of changes in accounting policies

▪ Effect of correction of prior period error

22
Example
Following is an illustrative example of a Statement of Changes in Equity
prepared according to the format prescribed by IAS 1 Presentation of
Financial Statements.

Components 组件

Following are the main elements of statement of changes in equity:

Opening Balance 期初余额

This represents the balance of shareholders' equity reserves at the start of

the comparative reporting period as reflected in the prior period's statement
of financial position. The opening balance is unadjusted in respect of the
correction of prior period errors rectified in the current period and also the
23
effect of changes in accounting policy implemented during the year as these
are presented separately in the statement of changes in equity (see below).

Effect of Changes in Accounting Policies 会计政策变更的影响

Since changes in accounting policies are applied retrospectively, an

adjustment is required in stockholders' reserves at the start of the
comparative reporting period to restate the opening equity to the amount
that would be arrived if the new accounting policy had always been applied.

Effect of Correction of Prior Period Error 前期差错更正的影响

The effect of correction of prior period errors must be presented separately

in the statement of changes in equity as an adjustment to opening reserves.
The effect of the corrections may not be netted off against the opening
balance of the equity reserves so that the amounts presented in current
period statement might be easily reconciled and traced from prior period
financial statements.

Restated Balance 重列余额

This represents the equity attributable to stockholders at the start of the

comparative period after the adjustments in respect of changes in
accounting policies and correction of prior period errors as explained above.

Changes in Share Capital 股本变动

Issue of further share capital during the period must be added in the
statement of changes in equity whereas redemption of shares must be
deducted therefrom. The effects of issue and redemption of shares must be
presented separately for share capital reserve and share premium reserve.

Dividends 股利

Dividend payments issued or announced during the period must be deducted

from shareholder equity as they represent distribution of wealth attributable
to stockholders.
24
Income / Loss for the period 该期间的收入/损失

This represents the profit or loss attributable to shareholders during the

period as reported in the income statement.

Changes in Revaluation Reserve 重估储备金变动

Revaluation gains and losses recognized during the period must be

presented in the statement of changes in equity to the extent that they are
recognized outside the income statement. Revaluation gains recognized in
income statement due to reversal of previous impairment losses however
shall not be presented separately in the statement of changes in equity as
they would already be incorporated in the profit or loss for the period.

Other Gains & Losses 其他损益

Any other gains and losses not recognized in the income statement may be
presented in the statement of changes in equity such as actuarial gains and
losses arising from the application of IAS 19 Employee Benefit.

Closing Balance 期末余额

This represents the balance of shareholders' equity reserves at the end of

the reporting period as reflected in the statement of financial position.

25
Sample of Real-Life Financial Statement 真实财务报
表样本

26
27
28
29
30
Five types of Accounts 五种账户

Business owners either handle their accounting themselves or they hire

someone else to do it. In general, startups and sole proprietors choose the
first option to reduce their expenses. Even if you do hire an accountant, it's
important that you have a basic understanding of what is involved. Start by
learning about the five major accounts, so you know how to read financial
reports.

Accounting Categories and Their Role 会计类别及其作用

There are five main types of accounts in accounting, namely assets, liabilities,
equity, revenue and expenses. Their role is to define how your company's
money is spent or received. Each category can be further broken down into
several categories.

Asset accounts, for example, can be divided into cash, supplies, equipment,
deferred expenses and more. Equity accounts may include retained earnings
and dividends. Revenue accounts can include interest, sales or rental income.

The five major accounts relate to each other. If one changes, the others will
change too. For instance, if you purchase a new computer worth $1,000 with
a loan, then both the Assets and Liabilities accounts will increase by $1,000
each. These accounting categories are relatively new. Traditionally, the
accounts were classified into four types: valuation accounts, nominal
accounts, real accounts and personal accounts. However, most companies
nowadays rarely use this approach.

Assets Account 资产账户

The assets account includes everything that your company owns. Assets are
divided into tangible and intangible. Examples of tangible assets include
desktop computers, laptops, cars, cash, equipment, buildings and more. Your
trademark, logo, copyrights and other non-physical items are considered
intangible assets.

When you're starting a business, it's your responsibility to list the types of
assets that your company has. Every time you purchase new products, add
31
them to your list. Let your accountant know about it so he or she can deduct
any expenses that are considered necessary for your business.

Expenses Account 费用帐户

Any product or service that your company purchases to generate income or

manufacture goods is considered an expense. This may include advertising
costs, utilities, rent, salaries and others. Some expenses are deductible and
help reduce your taxable income.

For example, you may deduct direct labor costs and business-related travel
costs, but you cannot deduct personal expenses, donations, exchange loss
and penalties.

Revenue or Income 收入

Revenue, one of the primary types of accounts in accounting, includes the

money your company earns from selling goods and services. This term is
also used to denote dividends and interest resulting from marketable
securities.

Liabilities Account 负债账户

Liabilities include the debts or obligations payable to creditors and other

outsiders to which your company owes money. These can be loans, unpaid
utility bills, bank overdrafts, car loans, mortgages and more.

Equity Account 权益账户

The equity account defines how much your business is currently worth. It's
the residual interest in your company's assets after deducting liabilities.
Common stock, dividends and retained earnings are all examples of equity.

After recording these transactions, your accountant will make a balance

sheet. This information will provide a snapshot of what your business owns
and owes. It reflects your company's financial position and offers valuable
insights into its overall performance.

32
Sample of Real-Life Charts of Accounts 真实会计科目
表 样 本 (For Full Chart – Please download from
Schoology)

33
34
 FINANCIAL MANAGEMENT 财务管理
Chapter 3 – Financial Ratio Analysis 财务
比率分析
What Is Ratio Analysis 什么是比率分析?

Ratio analysis is a quantitative method of gaining insight into a company's

liquidity, operational efficiency, and profitability by studying its financial
statements such as the balance sheet and income statement. Ratio analysis
is a cornerstone of fundamental equity analysis.

What Does Ratio Analysis Tell You 比率分析告诉您什么?

Investors and analysts employ ratio analysis to evaluate the financial health
of companies by scrutinizing past and current financial statements.
Comparative data can demonstrate how a company is performing over time
and can be used to estimate likely future performance. This data can also
compare a company's financial standing with industry averages while
measuring how a company stacks up against others within the same sector.

Investors can use ratio analysis easily, and every figure needed to calculate
the ratios is found on a company's financial statements.

Ratios are comparison points for companies. They evaluate stocks within an
industry. Likewise, they measure a company today against its historical
numbers. In most cases, it is also important to understand the variables
driving ratios as management has the flexibility to, at times, alter its strategy
to make its stock and company ratios more attractive. Generally, ratios are
typically not used in isolation but rather in combination with other ratios.
Having a good idea of the ratios in each of the four previously mentioned
categories will give you a comprehensive view of the company from different
angles and help you spot potential red flags.

35
Examples of Ratio Analysis Categories 比率分析类别的示例

The various kinds of financial ratios available may be broadly grouped into the
following six silos, based on the sets of data they provide:

1. Liquidity Ratios 流动性比率

Liquidity ratios measure a company's ability to pay off its short-term debts as
they become due, using the company's current or quick assets. Liquidity ratios
include the current ratio, quick ratio, and working capital ratio.

2. Solvency Ratios 偿付能力比率

Also called financial leverage ratios, solvency ratios compare a company's debt
levels with its assets, equity, and earnings, to evaluate the likelihood of a company
staying afloat over the long haul, by paying off its long-term debt as well as the
interest on its debt. Examples of solvency ratios include: debt-equity ratios, debt-
assets ratios, and interest coverage ratios.

3. Profitability Ratios 盈利率

These ratios convey how well a company can generate profits from its operations.
Profit margin, return on assets, return on equity, return on capital employed, and
gross margin ratios are all examples of profitability ratios.

4. Efficiency Ratios 效率比

Also called activity ratios, efficiency ratios evaluate how efficiently a company
uses its assets and liabilities to generate sales and maximize profits. Key efficiency
ratios include: turnover ratio, inventory turnover, and days' sales in inventory.

5. Coverage Ratios 覆盖率

Coverage ratios measure a company's ability to make the interest payments and
other obligations associated with its debts. Examples include the times interest
earned ratio and the debt-service coverage ratio.

6. Market Prospect Ratios 市场前景比率

These are the most commonly used ratios in fundamental analysis. They
include dividend yield, P/E ratio, earnings per share (EPS), and dividend payout
ratio. Investors use these metrics to predict earnings and future performance.

36
For example, if the average P/E ratio of all companies in the S&P 500 index is 20,
and the majority of companies have P/Es between 15 and 25, a stock with a P/E
ratio of seven would be considered undervalued. In contrast, one with a P/E ratio
of 50 would be considered overvalued. The former may trend upwards in the future,
while the latter may trend downwards until each aligns with its intrinsic value.

Examples of Ratio Analysis in Use 使用比率分析的示例

Ratio analysis can predict a company's future performance—for better or

worse. Successful companies generally boast solid ratios in all areas, where
any sudden hint of weakness in one area may spark a significant stock sell-
off. Let's look at a few simple examples

Net profit margin, often referred to simply as profit margin or the bottom
line, is a ratio that investors use to compare the profitability of companies
within the same sector. It's calculated by dividing a company's net income
by its revenues. Instead of dissecting financial statements to compare how
profitable companies are, an investor can use this ratio instead. For example,
suppose company ABC and company DEF are in the same sector with profit
margins of 50% and 10%, respectively. An investor can easily compare the
two companies and conclude that ABC converted 50% of its revenues into
profits, while DEF only converted 10%.

Using the companies from the above example, suppose ABC has a P/E ratio
of 100, while DEF has a P/E ratio of 10. An average investor concludes that
investors are willing to pay $100 per $1 of earnings ABC generates and only
$10 per $1 of earnings DEF generates.

(For easy understanding on the calculation part, I will use the Profit
& Loss Statement and Balance attached between page 26 – 30 for
illustration.)

PROFITABILITY OR RETURN ON INVESTMENT RATIOS 盈利能力或投

资比率

Profitability ratios provide information about management's performance in

using the resources of the small business. Many entrepreneurs decide to
start their own businesses in order to earn a better return on their money
37
than would be available through a bank or other low-risk investments. If
profitability ratios demonstrate that this is not occurring—particularly once a
small business has moved beyond the start-up phase—then entrepreneurs
for whom a return on their money is the foremost concern may wish to sell
the business and reinvest their money elsewhere. However, it is important
to note that many factors can influence profitability ratios, including changes
in price, volume, or expenses, as well as the purchase of assets or the
borrowing of money. Some specific profitability ratios follow, along with the
means of calculating them and their meaning to a small business owner or
manager.

Gross profitability: Gross Profits/Net Sales—measures the margin

on sales the company is achieving. It can be an indication of manufacturing
efficiency, or marketing effectiveness. Higher ratio is favorable to the
company.
毛利率（Gross
margin），又称销售毛利率，是一个衡量盈利能力的指标，通常用百分数
表示。其计算公式为：

销售收入净额－销售成本
毛利率＝ ×100%
销售收入净额
Formula: Gross Profit: 2,684,578.95 Ratio:
Gross Profit / Net Sales Net Sales: 6,139,357.66 43.73%

Net profitability: Net Income/Net Sales—measures the overall

profitability of the company, or how much is being brought to the bottom
line. Strong gross profitability combined with weak net profitability may
indicate a problem with indirect operating expenses or non-operating
items, such as interest expense. In general terms, net profitability shows
the effectiveness of management. Though the optimal level depends on
the type of business, the ratios can be compared for firms in the same
industry. Higher ratio is favorable to the company.
纯益率、净利率(Net Profit margin) 指的是净利占营收的百分比.

净利率 = 税后净利 / 销货净额 x 100%

38
净利率通常用于内部对比。准确的对不同的实体进行净利率的比较是困难
的。不同商业的运作方式以及财务分类有着极大的不同，以至于不同的实
体被绑定到不同的费用级别上，为了使得这些实体之间的比较具有一定的
意义。一个低的净利率指出了一个低的安全率：将会有更高的可能性发生
销售的下降导致收益的减少，最终导致净损失以及负收益。

收益率是一个公司定价策略以及成本控制一个指示符。竞争策略的不同以
及产品的混合会引起不同公司之间收益率的巨大区别。
Formula: Net Income: 339,528.87 Ratio:
Net Income / Net Sales Net Sales: 6,139,357.66 5.53%

Return on assets: Net Income/Total Assets—indicates how

effectively the company is deploying its assets. A very low return on asset,
or ROA, usually indicates inefficient management, whereas a high ROA
means efficient management. However, this ratio can be distorted by
depreciation or any unusual expenses.
资产收益率（return on
assets，ROA），又称资产回報率或资产報酬率，是用来衡量每单位资产
创造多少净利润的指标，也可以解释为企业利润额与企业平均资产的比率
。计算公式为：

资产收益率＝净利润／平均资产总额×100%

资产收益率是反映企业资产综合利用效果的指标，也是衡量企业利用债权
人和所有者权益总额所取得盈利的重要指标，资产收益率越高，说明企业
资产的利用效率越高，利用资产创造的利润越多，整个企业的获利能力也
就越强，企业经营管理水平越高；反之，资产收益越低，说明企业资产的
利用效率不高，利用资产创造的利润越少，整个企业的获利能力也就越差
，企业经营管理水平越低。

39
Formula: Net Income: 339,528.87 Ratio:
Net Income / Total Total Assets: 2,824,117.82 12.02%
Assets

Return on Equity): Net Income/Owners' Equity—indicates how well

the company is utilizing its equity investment. Due to leverage, this
measure will generally be higher than return on assets. ROI is considered
to be one of the best indicators of profitability. It is also a good figure to
compare against competitors or an industry average. Experts suggest that
companies usually need at least 10-14 percent ROI in order to fund future
growth. If this ratio is too low, it can indicate poor management
performance or a highly conservative business approach. On the other
hand, a high ROI can mean that management is doing a good job, or that
the firm is undercapitalized. In general, the higher ratio the better.
净资产收益率（又称股权收益率、股本收益率或净资产收益率，英语：ret
urn on
equity，缩写：ROE），是衡量相对于股东权益的投资回报之指标，反映
公司利用资产净值产生纯利的能力。计算方法是将税后净利扣除优先股股
息和特殊收益后的净收益除以股东权益。此比例计算出公司普通股股东的
投资回报率，是上市公司盈利能力的重要指标。计算公式为：

净资产收益率 : 淨收益 / 股東權益

Formula: Net Income / Net Income: 339,528.87 Ratio:

Owners’ Equity Owners’ Equity: - Not Appropriate
2,148,860.04

Earnings per share: Net Income/Number of Shares Outstanding—

states a corporation's profits on a per-share basis. It can be helpful in
further comparison to the market price of the stock. In general, the higher
ratio the better.
每股盈余（英语：Earnings Per
Share，EPS)，又称每股收益或每股盈利，是指公开市场上，由于股价波
动，每股给投资者/股东带来的收益。它是公司的获利指标，对于有公开市

40
场股票交易的公司而言，每股盈余和公司的股价都有一定的联动性，因此
这也是公司现有股东与潜在投资人衡量公司获利的关键要素之一。这词汇
经常出现于财经刊物或报章的财经版 。
每股盈余的计算非常简单易懂，其最基本的公式为：

每股盈余=净利/普通股股数

Formula: Net Income / Net Income: 339,528.87 Ratio:

Number of Share Number of Share: 600,000 56.59%

Investment turnover: Net Sales/Total Assets—measures a

company's ability to use assets to generate sales. Although the ideal level
for this ratio varies greatly, a very low figure may mean that the company
maintains too many assets or has not deployed its assets well, whereas a
high figure means that the assets have been used to produce good sales
numbers.
Formula: Net Sales / Net Sales: 6,139,357.66 Ratio:
Total Assets Total Assets: 2,824,117,82 2.17 Times

LIQUIDITY RATIOS 流动比率

Liquidity ratios demonstrate a company's ability to pay its current obligations.

In other words, they relate to the availability of cash and other assets to
cover accounts payable, short-term debt, and other liabilities. All small
businesses require a certain degree of liquidity in order to pay their bills on
time, though start-up and very young companies are often not very liquid.
In mature companies, low levels of liquidity can indicate poor management
or a need for additional capital. Any company's liquidity may vary due to
seasonality, the timing of sales, and the state of the economy. But liquidity
ratios can provide small business owners with useful limits to help them
regulate borrowing and spending. Some of the best-known measures of a
company's liquidity include:

41
Current ratio: Current Assets/Current Liabilities—measures the
ability of an entity to pay its near-term obligations. "Current" usually is
defined as within one year. Though the ideal current ratio depends to some
extent on the type of business, a general rule of thumb is that it should be
at least 2:1. A lower current ratio means that the company may not be
able to pay its bills on time, while a higher ratio means that the company
has money in cash or safe investments that could be put to better use in
the business.
流动比率（Current ratio）是个用来衡量公司在未来 12 个月内是否具有足
够资源来偿还其债务的一种财务比率。[1]以公司的流动资产与流动负债做
比较衡量，公式如下：

流动资产
流动比率＝
流动负债

流动比率能显示一个公司的市场流动性和满足债权人要求的能力。流动比
率因行业而异，一般数字在 1.5 到 3 之间为健康的企业。如果一个公司的
流动比率是在这个范围内，那么它通常表示具有良好的短期金融实力。如
果流动负债超过流动资产（流动比率小于 1），那么该公司可能产生短期
偿债能力的问题。如果流动比率过高，那么该公司可能无法有效地利用其
现有资产或短期融资，这也可能显现在公司营运资金管理的问题。
Formula: Current Current Asset: 2,310,045.42 Ratio:
Assets/Current Liabilities Current Liabilities: 4,972,721.34 46.45% or
0.465:1

Quick ratio (or "acid test"): (Current Asset-Stock-

Prepayment/Current Liabilities—provides a stricter definition of the
company's ability to make payments on current obligations. Ideally, this
ratio should be 1:1. If it is higher, the company may keep too much cash
on hand or have a poor collection program for accounts receivable. If it is
lower, it may indicate that the company relies too heavily on inventory to
meet its obligations.

42
速动比率，又称为酸性测试比率，是用来衡量公司流动性的重要比率之
一。[1]由于只考量可立即用来偿还流动负债的资金科目(如：现金、约当现
金、应收账款及短期投资等资产)，因此对公司流动性能更精准衡量。速动
比率小于 1 的公司，意指其目前无法偿还流动负债。

速动资产 流动资产－存货-预付款项
速动比率＝ ＝
流动负债 流动负债

要注意的是，库存不包括在速动比率的流动资产，但包含在流动比率里。
此比率检验企业实体的可行性，但并不一定保证企业的健康程度
Formula: (Current Asset – Current Asset – Stock - Ratio:
Stock - Prepayment) / Prepayment: 2,276,278.14 45.78% or
Current Liabilities Current Liabilities: 0.458:1
4,972,721.34

Cash to total assets (现金占资产总额): Cash/Total Assets—measures

the portion of a company's assets held in cash or marketable securities.
Although a high ratio may indicate some degree of safety from a creditor's
viewpoint, excess amounts of cash may be viewed as inefficient.
Formula: Cash / Total Cash: 1,193,917.09 Ratio:
Assets Total Assets: 2,824,117.82 42.28% or
0.423:1

Sales to receivables (or turnover ratio) 销售额与应收帐款比率: Net

Sales/Accounts Receivable—measures the annual turnover of accounts
receivable. A high number reflects a short lapse of time between sales and
the collection of cash, while a low number means collections take longer.
Because of seasonal changes this ratio is likely to vary. As a result, an
annual floating average sales to receivables ratio is most useful in
identifying meaningful shifts and trends.
Formula: Net Sales / Net Sales: 6,139,357.66 Ratio:
Accounts Receivable Accounts Receivable: 10.71 Times
573,409.03

43
Days' receivables ratio (天数应收帐款比率): 365/Sales to receivables
ratio—measures the average number of days that accounts receivable are
outstanding. This number should be the same or lower than the company's
expressed credit terms. Other ratios can also be converted to days, such
as the cost of sales to payables ratio.
Formula: 365 / Sales to 365 Days Ratio:
receivable ratio Sales to Receivable Ratio: 34.08 day
10.71 Times

Cost of sales to payables (应付账款销售成本): Cost of Sales/Trade

Payables—measures the annual turnover of accounts payable. higher
numbers tend to indicate good performance, though the ratio should be
close to the industry standard.
Formula: Cost of Sales / Cost of Sales: 3,454,778.71 Ratio:
Trade Payable Trade Payable: 1,459,373.27 2.38 Times

Cash turnover (现金周转率): Net Sales/Net Working Capital (current

assets less current liabilities)—reflects the company's ability to finance
current operations, the efficiency of its working capital employment, and
the margin of protection for its creditors. A high cash turnover ratio may
leave the company vulnerable to creditors, while a low ratio may indicate
an inefficient use of working capital. In general, sales five to six times
greater than working capital are needed to maintain a positive cash flow
and finance sales.
Formula: Net Sales / Net Net Sales: 6,139,357.66 Ratio:
Working Capital Net Working Capital: - Not Appropriate
2,662,675.92

44
EFFICIENCY RATIOS 效率比

By assessing a company's use of credit, inventory, and assets, efficiency

ratios can help small business owners and managers conduct business better.
These ratios can show how quickly the company is collecting money for its
credit sales or how many times inventory turns over in a given time period.
This information can help management decide whether the company's credit
terms are appropriate and whether its purchasing efforts are handled in an
efficient manner. The following are some of the main indicators of efficiency:
Annual inventory turnover: Cost of Goods Sold for the Year/Average
Inventory—shows how efficiently the company is managing its production,
warehousing, and distribution of product, considering its volume of sales.
Higher ratios—over six or seven times per year—are generally thought to be
better, although extremely high inventory turnover may indicate a narrow
selection and possibly lost sales. A low inventory turnover rate, on the other
hand, means that the company is paying to keep a large inventory, and may
be overstocking or carrying obsolete items.

Inventory holding period ( 库 存 持 有 期 ): 365/Annual Inventory

Turnover—calculates the number of days, on average, that elapse between
finished goods production and sale of product, a lower ratio is considered
better efficiency in sales.

Formula: 365 / Annual 365 Days Ratio:

Inventory Turnover Annual Inventory Turnover: No Not Available
Data Provided

Inventory to assets ratio (库存资产比率): Inventory/Total Assets—

shows the portion of assets tied up in inventory. Generally, a lower ratio is
considered better.
Formula: Inventory / Inventory: No Inventory Figure Ratio:
Total Assets Total Assets: 2,824,117.82 Not Available

45
Accounts receivable turnover ( 应 收 账 款 周 转 ): Net (credit)
Sales/Average Accounts Receivable—gives a measure of how quickly credit
sales are turned into cash. Alternatively, the reciprocal of this ratio
indicates the portion of a year's credit sales that are outstanding at a
particular point in time, a lower number showing higher efficiency.
Formula: Net Credit Net Credit Sales: No Figure Show Ratio:
Sales / Average Average Accounts Receivable: Not Available
Accounts Receivable No Data Provided

Collection period ( 回 收 期 ): 365/Accounts Receivable Turnover—

measures the average number of days the company's receivables are
outstanding, between the date of credit sale and collection of cash, a lower
ratio showing better efficiency.
Formula: 365 days / 365 days Ratio:
Accounts Receivable Accounts Receivable Turnover: Not Available
Turnover Not Available

46