War22e Ch17 Indonesia

8/16/2019 War22e Ch17 Indonesia

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FinancialFinancial

StatementStatement

AnalysisAnalysis

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1. List basic financial statement

analytical procedures.

2. Apply financial statement analysis to

assess the solvency of a business.

3. Apply financial statement analysis to

stress the profitability of a business.

4. Describe the contents of corporate

annual reports.

After studying this chapter, you shouldbe able to:


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List basic financialstatement analytical

procedures.

b!ective 1b!ective 1

b!ective 1b!ective 1

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Horizontal Analysis 17-1

"he percenta#e analysis of

increases and decreases inrelated items in comparative

financial statements is called

horizontal analysis.


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Exhibit 1 Comparative Balance Sheets 17-1

Assets (in ‘000 Rp)Current assets 550,000 533,000 17,000 3.2%

Long-term investments 5,000 177,500 (!2,500) ("#.5%)

$rop., pant, an& e'uip. (net) """,500 "70,000 (25,500) (5."%)

ntangie assets 50,000 50,000

*ota assets 1,13,500 1,230,500 (1,000) (7."%)

Liaiities (in ‘000 Rp)

Current iaiities 210,000 2"3,000 (33,000) (13.#%)

Long-term iaiities 100,000 200,000 100,000) (50.0%)

*ota iaiities 310,000 ""3,000 (133,000) (30.0%) +too&ers/ 'uit (in ‘000 Rp)

$reerre& #% sto, Rp100 par 150,000 150,000

Common sto, Rp10 par 500,000 500,000

Retaine& earnings 17,500 137,500 "2,000 30.5%

*ota stoo&ers/ e'uit !2,500 7!7,500 "2,000 5.3%

*ota ia. 4 stoo&ers/ e'. 1,13,500 1,230,500 (1,000) (7."%)

200! 2007 Amount $erentnrease (erease)

$

$* Latuonsina

Comparative 6aane +eeteemer 31, 200! an& 2007


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%

%

%

Assets (in ‘000 Rp)

Current assets 550,000 533,000 17,000 3.2%




*ota assets 1,13,500 1,230,500 (1,000) (7."%)





$reerre& #% sto, Rp100 par 150,000 150,000

Common sto, Rp10 par 500,000 500,000


*ota stoo&ers/ e'uit !2,500 7!7,500 "2,000 5.3%

*ota ia. 4 stoo&ers/ e'. 1,13,500 1,230,500 (1,000) (7."%)

200! 2007 Amount $erent

$* Latuonsina


nrease (erease)

17-1

%

ori8onta Anasis9ori8onta Anasis9

ierene Rp17,000

6ase ear (2007) Rp533,000: 3.2%


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Assets (in ‘000 Rp)Current assets 550,000 533,000 17,000 3.2%




*ota assets 1,13,500 1,230,500 (1,000) (7."%)





$reerre& #% sto, Rp100 par 150,000 150,000

Common sto, Rp10 par 500,000 500,000


*ota stoo&ers/ e'uit !2,500 7!7,500 "2,000 5.3%

*ota ia. 4 stoo&ers/ e'. 1,13,500 1,230,500 (1,000) (7."%)

&

200! 2007 Amount $erent

$* Latuonsina


nrease (erease)

17-1


ierene Rp(!2,500)

6ase ear (2007) Rp177,500

: ("#.5%)


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Exhibit 2 Comparative Schedule of

Current Assets

17-1

$* LatuonsinaComparative +e&ue o Current Assetseemer 31, 200! an& 2007 (in ‘000 Rp)

(ncrease )Decrease)

Cash *+,$++ %4,&++ 2$,'++ 3*.*-

Marketable securities &$,+++ %+,+++ 1$,+++ 2$.+-

Accounts receivable )net 11$,+++ 12+,+++ )$,+++ )4.2-

(nventories 2%4,+++ 2'3,+++ )1*,+++ )%.&-

/repaid e0penses $,$++ $,3++ 2++ 3.'-"otal current assets $$+,+++ $33,+++ 1&,+++ 3.2-

2++' 2++& Amount /ercent


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*

*

*

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$* LatuonsinaComparative +e&ue o Current Assetseemer 31, 200! an& 2007 (in ‘000 Rp)

(ncrease )Decrease)

Cash *+,$++ %4,&++ 2$,'++ 3*.*-

Marketable securities &$,+++ %+,+++ 1$,+++ 2$.+-

Accounts receivable )net 11$,+++ 12+,+++ )$,+++ )4.2-

(nventories 2%4,+++ 2'3,+++ )1*,+++ )%.&-

/repaid e0penses $,$++ $,3++ 2++ 3.'-"otal current assets $$+,+++ $33,+++ 1&,+++ 3.2-



ierene Rp25,!00

6ase ear (2007) Rp#",700: 3.%

*


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1+

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$* Latuonsina

Comparative nome +tatement;or te


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$* Latuonsina

Comparative nome +tatement;or te


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Exhibit ! Comparative "E Statement 17-117-1

A percenta#e analysis that

shos the relationship of each

component to the total ithina sin#le statement is called

vertical analysis.

$* LatuonsinaComparative Retaine& arnings +tatementeemer 31, 200! an& 2007 (in ‘000 Rp)

(ncrease )Decrease)

etained earnin#s, an. 1 13&,$++ 1++,+++ 3&,$++ 3&.$- et income for year *1,+++ &%,$++ 14,$++ 1*.+-

"otal 22',$++ 1&%,$++ $2,+++ 2*.$-

Dividends5

n preferred stock *,+++ *,+++ 6

n common stock 4+,+++ 3+,+++ 1+,+++ 33.3-"otal 4*,+++ 3*,+++ 1+,+++ 2$.%-

"otal current assets 1&*,$++ 13&,$++ 42,+++ 3+.$-



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Exhibit ! Comparative "E Statement 17-117-1

A percenta#e analysis that

shos the relationship of each

component to the total ithina sin#le statement is called

vertical analysis.

$* LatuonsinaComparative Retaine& arnings +tatementeemer 31, 200! an& 2007 (in ‘000 Rp)

(ncrease )Decrease)

etained earnin#s, an. 1 13&,$++ 1++,+++ 3&,$++ 3&.$- et income for year *1,+++ &%,$++ 14,$++ 1*.+-

"otal 22',$++ 1&%,$++ $2,+++ 2*.$-

Dividends5

n preferred stock *,+++ *,+++ 6

n common stock 4+,+++ 3+,+++ 1+,+++ 33.3-"otal 4*,+++ 3*,+++ 1+,+++ 2$.%-

"otal current assets 1&*,$++ 13&,$++ 42,+++ 3+.$-



nrease amount Rp37,500

6ase ear (2007) Rp100,000: 37.5%


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Example Exercise 17-1

17-1

"he comparative cash and accounts receivable for a

company are provided belo5

2++' 2++&Cash %2,$++,+++ $+,+++,+++

Accounts receivable )net &4,4++,+++ '+,+++,+++

7ased on this information, hat is the amount and

percenta#e of increase or decrease that ould be shonin a balance sheet ith hori8ontal analysis9

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1%

#ertical Analysis 17-1

A percenta#e analysis used to

sho the relationship of eachcomponent to the total ithin a

sin#le statement is called

vertical analysis.

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17-1

(n a vertical analysis of the balance

sheet, each asset item is stated as a

percent of the total assets. ;ach

liability and stockholders> e?uity item

is stated as a percent of the total

liabilities and stockholders> e?uity.

#ertical Analysis of Balance Sheet

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1'


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$* LatuonsinaComparative 6aane +eet

;or te


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1*

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1*

17-1

"o demonstrate ho vertical

analysis percenta#es are

calculated for the balance sheet,let>s see ho the 4'.3 percent

as calculated for the 2++'

current assets in the ne0t slide.

2+2+

2+


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$* LatuonsinaComparative 6aane +eet

;or te


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17-1

(n a vertical analysis of the

income statement, each item is

stated as a percent of net saes.As an e0ample, let>s see ho the

percent of 12.'- as calculated

for 2++' sellin# e0penses.

#ertical Analysis of ncome Statement

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+aes 1,530,500 102.2% 1,23",000 102.!%

+aes returns an& ao=. 32,500 2.2 3",000 2.!

>et saes 1,"!,000 100.0% 1,200,000 100.0%

Cost o goo&s so& 1,0"3,000 #.# !20,000 #!.3

?ross proit "55,000 30."% 3!0,000 31.7%+eing e@penses 11,000 12.!% 1"7,000 12.3%

A&ministrative e@penses 10",000 #. 7,"00 !.1

*ota operating e@penses 25,000 1.7% 2"","00 20."%

nome rom operations 1#0,000 10.7 135,#00 11.3%

ter inome !,500 0.# 11,000 0.

1#!,500 11.3% 1"#,#00 12.2%

ter e@pense (interest) #,000 0." 12,000 1.0nome eore inome ta@ 1#2,500 10.% 13",#00 11.2%

nome ta@ e@pense 71,500 ".! 5!,100 ".!

>et inome 1,000 #.1% 7#,500 #."%

200! 2007

Amount $erent Amount $erent

$* LatuonsinaComparative nome +tatement

;or te


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+aes 1,530,500 102.2% 1,23",000 102.!%

+aes returns an& ao=. 32,500 2.2 3",000 2.!

>et saes 1,"!,000 100.0% 1,200,000 100.0%

Cost o goo&s so& 1,0"3,000 #.# !20,000 #!.3

?ross proit "55,000 30."% 3!0,000 31.7%+eing e@penses 11,000 12.!% 1"7,000 12.3%

A&ministrative e@penses 10",000 #. 7,"00 !.1

*ota operating e@penses 25,000 1.7% 2"","00 20."%

nome rom operations 1#0,000 10.7 135,#00 11.3%

ter inome !,500 0.# 11,000 0.

1#!,500 11.3% 1"#,#00 12.2%

ter e@pense (interest) #,000 0." 12,000 1.0nome eore inome ta@ 1#2,500 10.% 13",#00 11.2%

nome ta@ e@pense 71,500 ".! 5!,100 ".!

>et inome 1,000 #.1% 7#,500 #."%

200! 2007

Amount $erent Amount $erent

$* LatuonsinaComparative nome +tatement

;or te et saes Rp1,"!,000: 12.!%

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17-1

Common$Size Statements

(n a common-sized statements, all

items are e0pressed as a percenta#e.

Common


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2$

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Common$Size ncome

Statement

2%2%

2%


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2%


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(ncome statement information for /" inaati is

provided belo5 /" inaati

@ales p1++,+++,+++

Cost of #oods sold %$,+++,+++

ross profit p 3$,+++,+++

/repare a vertical analysis of the income statement for/" inaati.

2%

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2&


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Apply financialstatement analysis to

assess the solvency

of a business.

b!ective 2b!ective 2b!ective 2b!ective 2

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Solvency Analysis

"he ability of a business to meet

its financial obli#ations )debts

is called solvency.

"he ability of a business to earn

income is called profitability.

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17-2

Current %osition Analysis

sin# measures to assess a

business>s ability to pay its

current liabilities is calledcurrent position analysis. @uch

analysis is of special interest to

short


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&or'in( Capital

"he e0cess of current assets of a

business over its current liabilities

is called working capital . "heorkin# capital is often used in

evaluatin# a company>s ability to

meet currently maturin# debts.

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Doring apita (aDoring apita (a E ) Rp3"0,000 E ) Rp3"0,000

Current asset9

Cas Rp 0,500

Faretae seurities 75,000

Aounts reeivae (net) 115,000

nventories 2#",000

$repai& e@penses 5,500

a. *ota urrent assets Rp550,000

. Current iaiities 210,000

$* Latuonsina (in ‘000 Rp)$* Latuonsina (in ‘000 Rp)

3333

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17-2

Current "atio

"he current ratio, sometimes

called the working capital

ratio or bankers’ ratio, iscomputed by dividin# the total

current assets by the total

current liabilities.

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Current ratio (aGCurrent ratio (aG) 2.# 2.2) 2.# 2.2

a. Current assets Rp550,000 Rp533,000

. Current iaiities 210,000 2"3,000

Doring apita (a E ) Rp3"0,000 Rp20,000

200! 2007

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3$3$

3$


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17-2

)uic' "atio

A ratio that measures the

instant> debt


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17-2

200! 2007

Hui ratio (aGHui ratio (aG) 1.3 1.0) 1.3 1.0

Hui assets9

Cas Rp 0,500 Rp #",700

Faretae seurities 75,000 #0,000

Aounts reeivae (net) 115,000 120,000

a. *ota 'ui assets Rp2!0,500 Rp2"",700

. Current iaiities Rp210,000 Rp2"3,000

$* Latuonsina$* Latuonsina

Quick assets are cash

and other current assets

that can be ?uicklyconverted to cash.

Quick assets are cash

and other current assets

that can be ?uicklyconverted to cash.

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"he folloin# items are reported on a company>s

balance sheet5

Cash p3++,+++,+++Marketable securities 1++,+++,+++

Accounts receivable )net 2++,+++,+++

(nventory 2++,+++,+++

Accounts payable 4++,+++,+++

Determine )a the current ratio and )b the ?uick ratio.

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Accounts "eceivable *urnover

"he relationship beteen sales and

accounts receivable may be stated as

the accounts receivable turnover ."he ratio is to assess the efficiency of

the firm in collectin# receivables and

in the mana#in# of credit.

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4+


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Aounts reeivae turnover

(aG) 12.7 .2

a. >et saes Rp1,"!,000 Rp1,200,000

Aounts reeivae (net)9

6eginning o ear Rp 120,000 Rp 1"0,000n& o ear 115,500 120,000

*ota Rp 235,000 Rp 2#0,000

. Average (*otaG2) Rp 117,500 Rp 130,000

200! 2007$* Latuonsina (in ‘000 Rp)$* Latuonsina (in ‘000 Rp)


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>umer o &as/ saes in>umer o &as/ saes in

reeivaes (aGreeivaes (aG) 2!.# 3.5) 2!.# 3.5

a. Average (*otaG2) Rp 117,500 Rp 130,000

>et saes Rp1,"!,000 Rp1,200,000

. Average &ai saes on

aount (+aesG3#5) Rp ",10"Rp 3,2!!

200! 2007


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17-2

A company reports the folloin#5

et sales p*%+,+++,+++

Avera#e accounts receivable )net 4',+++,+++Determine )a the accounts receivable turnover and )b

the number of days> sales in receivables. ound to one

decimal place.

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:or /ractice5 /; 1& @ales in eceivables E 4',+++,+++B2,%3+,+++

umber of Days> @ales in eceivables E 1!.3 &as

4$4$

4$


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nventory *urnover

"he relationship beteen the

volume of #oods )merchandise

sold and inventory may be statedas the inventory turnover . "he

purpose of this ratio is to assess

the efficiency of the firm in

mana#in# its inventory.

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4%


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200! 2007

nventor turnover (aGnventor turnover (aG) 3.! 2.!) 3.! 2.!

a. Cost o goo&s so& Rp1,0"3,000 Rp !20,000

nventories9

6eginning o ear Rp 2!3,000

Rp 311,000

n& o ear 2#",000

2!3,000

*ota Rp 5"7,000Rp 5",000

. Average (*otaG2) Rp 273,500 Rp 27,000


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>umer o &as/ saes in>umer o &as/ saes in inventor (aGinventor (aG) 5.7 132.2) 5.7 132.2

a. Average (*otaG2) Rp 273,500 Rp 27,000

Cost o goo&s so& Rp1,0"3,000 Rp !20,000

. Average &ai ost o goo&s

so& (C?+G3#5 &as) Rp2,!5! Rp2,2"7

200! 2007

+umber of ,ays- Sales in nventory


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Cost of #oods sold p$%+,+++,+++

Avera#e inventory 112,+++,+++Determine )a the inventory turnover and

)b the number of days> sales in inventory.

ound to one decimal place.

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4*


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17-2

"atio of .ixed Assets to /on($*erm

/iabilities

"he ratio of fied assets to long-

term liabilities is a solvency measure

that indicates the mar#in of safety ofthe noteholders or bondholders. (t

also indicates the ability of the

business to borro additional funds

on a lon#


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17-2

200! 2007

Ratio o i@e& assets toRatio o i@e& assets to

ong-term iaiities (aGong-term iaiities (aG) "." 2.") "." 2."

a. ;i@e& assets (net) Rp""",500 Rp"70,000

. Long-term iaiities Rp100,000 Rp200,000

17-2


$2$2

$2


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17-2

"atio of /iabilities to Stoc'holders-

E0uity

"he relationship beteen the

total claims of the creditors and

oners6the ratio of liabilities to stockholders’ equity 6is a

solvency measure that indicates

the mar#in of safety for creditors.

$3$3

$3


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17-2

Ratio o iaiities toRatio o iaiities to

stoo&ers/ e'uit (aGstoo&ers/ e'uit (aG) 0." 0.#) 0." 0.#

a. *ota iaiities Rp310,000 Rp""3,000

. *ota stoo&ers/ e'uit Rp!2,500 Rp7!7,500

200! 2007

17-2


$4$4

$4


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"he folloin# information as taken from Acme

Company>s balance sheet5

:i0ed assets )net p1,4++,+++,+++

Lon# e?uity 1,4++,+++,+++

Determine the company>s )a ratio of fi0ed assets to

lon# e?uity.

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$$$$

$$


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:or /ractice5 /; 1& ;?uity E

p$%+,+++,+++Bp1,4++,+++,+++

atio of Liabilities to "otal @tockholders> ;?uity E 0."

$%$%

$%


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17-2

+umber of *imes nterest Char(es

Earned

Corporations in some industries

normally have hi#h ratios of debt to

stockholders> e?uity. :or such

corporations, the relative risk of the

debtholders is normally measured as the

number of times interest charges are

earned )durin# the year, sometimescalled the fied charge coverage ratio.

$&$&

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17-2

200! 2007

nome eore inome ta@ Rp1#2,500 Rp13",#00

a. A&& interest e@pense #,000 12,000. Amount avaiae to meet

interest arges Rp1#!,500 Rp1"#,#00

17-2


>umer o times interest>umer o times interest

arges earne& (Garges earne& (Ga) 2!.1 12.2a) 2!.1 12.2

$'$'

$'


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17-2


(ncome before income ta0 p2$+,+++,+++

(nterest e0pense 1++,+++,+++Determine the number of times interest char#es

are earned.

$'

$*$*

$*


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%+

Apply financialstatement analysis to

assess the profitability

of a business.


17-3

%1%1

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%rofitability Analysis

!rofitability is the ability of an entity to earn profits.

"his ability to earn profits depends on the

effectiveness and efficiency of operations as

ell as resources available as reported in the

balance sheet.

!rofitability analysis focuses primarily on

the relationship beteen operatin# resultsreported in the income statement and

resources reported in the balance sheet.

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%2


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"atio of +et Sales to Assets

"he ratio of net sales to assets

is a profitability measure thatshos ho effectively a firm

utili8es its assets.

%3%3

%3


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%3%3

200! 2007

a. >et saes Rp1,"!,000 RpB1,200,000

*ota assets9

6eginning o ear Rp1,053,000 Rp1,010,000n& o ear 1,0"",500 1,053,000

*ota Rp2,07,500 Rp2,0#3,000

. Average (*otaG2) Rp1,0"!,750 Rp1,031,500

17-3


;0cludes lon#


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%4%4

200! 2007

a. >et saes Rp1,"!,000 Rp1,200,000

*ota assets9

6eginning o ear Rp1,053,000 Rp1,010,000n& o ear 1,0"",500 1,053,000

*ota Rp2,07,500 Rp2,0#3,000

. Average (*otaG2) Rp1,0"!,750 Rp1,031,500

17-3


Ratio o net saes to assets (aGRatio o net saes to assets (aG)) 1." 1.2 1." 1.2

%$%$

%$

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A company reports the folloin#5 et sales p2,2$+,+++,+++

Avera#e total sales 1,$++,+++,+++

Determine the ratio of net sales to assets.

%$

Follow My Example 17-8

atio of et @ales to "otal Assets E et @alesBAvera#e "otal

Assets

atio of et @ales to "otal Assets E

p2,2$+,+++,+++Bp1,$++,+++,+++

atio of et @ales to "otal Assets E 1.5

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"ate Earned on *otal Assets

"he rate earned on total

assets measures the profitability of total assets,

ithout considerin# ho the

assets are financed.

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%&


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%&

200! 2007

Rate earne& on totaRate earne& on tota

assets (aG) !.2% 7.3%assets (aG) !.2% 7.3%

>et inome Rp 1,000 Rp 7#,500

$us interest e@pense #,000 12,000

a. *ota Rp 7,000 Rp !!,500

*ota assets9

6eginning o ear Rp1,230,500 Rp1,1!7,500

n& o ear 1,13,500 1,230,500

*ota Rp2,370,000 Rp2,"1!,000

. Average (*otaG2) Rp1,1!5,000 Rp1,20,000

17-3


%'%'

%'

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17-3

A company reports the folloin# income statement and

balance sheet information for the current year5

et income p 12$,+++,+++

(nterest e0pense 2$,+++,+++Avera#e total assets 2,+++,+++,+++

Determine the rate earned on total assets.

%'

%*%*

%*

17


69/93


%*

:or /ractice5 /; 1&


70/93


&+

17-3

"ate Earned on Stoc'holders- E0uity

"he rate earned on

stockholders’ equity measureemphasi8es the rate of income

earned on the amount invested

by the stockholders.

&1&1

&1


71/93


&1&1

Rate earne& on stoo&ers/Rate earne& on stoo&ers/e'uit (aGe'uit (aG)) 11.3% 10.0%11.3% 10.0%

a. >et inome Rp 1,000 Rp 7#,500

+too&ers/ e'uit9

6eginning o ear Rp 7!7,500 Rp 750,000n& o ear !2,500 7!7,500

*ota Rp1,#17,000 Rp1,537,500

. Average (*otaG2) Rp !0!,500 Rp 7#!,750

200! 2007

17-3


&2&2

&2


72/93


&2

17-3

"he difference in the rate

earned on stockholders> e?uityand the rate earned on total

assets is called leverage.

/evera(e

&3&3

&3


73/93


&3&3

1+-

$-

+-

ate earned on

total assets

ate earned on

stockholders> e?uity

!.2%

11.3%Leverage

3.1%

2008

7.3%

10.0%

Leverage

2.7%

2007

17-3

Exhibit /evera(e

&4&4

&4


74/93


&4

17-3

"he rate earned on common

stockholders’ equity focusesonly on the rate of profits

earned on the amount invested

by the common stockholders.

"ate Earned on Common

Stoc'holders- E0uity

&$&$

&$


75/93


&$

200! 2007

>et inome Rp 1,000 Rp 7#,500

Less preerre& &ivi&en&s ,000 ,000

a. Remain&erommon sto Rp !2,000 Rp #7,500

Common stoo&ers/ e'uit96eginning o ear Rp #37,500 Rp #00,000

n& o ear #7,500 #37,500

*ota Rp1,317,000 Rp1,237,500

. Average (*otaG2) Rp #5!,500 Rp #1!,750 Rate earne& on ommonRate earne& on ommon

stoo&ers/ e'uit (aGstoo&ers/ e'uit (aG)) 12.5% 10.% 12.5% 10.%

17-3$* Latuonsina (in ‘000 Rp)$* Latuonsina (in ‘000 Rp)

&$

&%&%

&%

17-


76/93


&%


17-3


et income p 12$,+++,+++

/referred dividends $,+++,+++

Avera#e stockholders> e?uity 1,+++,+++,+++Avera#e common stockholders>

e?uity '++,+++,+++

Determine )a the rate earned on stockholders> e?uity

and )b the rate earned on common stockholders>e?uity.

&%

&&&&

&&

17-


77/93


&&

:or /ractice5 /; 1& ;?uity

ate ;arned on @tockholders> ;?uity Ep12$,+++,+++Bp1,+++,+++,+++

ate ;arned on @tockholders> ;?uity E 12.5%

b. ate ;arned on Common @tockholders> ;?uity E )et(ncome = /referred DividendsBAvera#e Common

@tockholders> ;?uity

ate ;arned on Common @tockholders> ;?uity E

)p12$,+++,+++ = p$,+++,+++Bp'++,+++,+++ate ;arned on Common @tockholders> ;?uity E 15%

&'&'

&'


78/93


&'

17-3

Earnin(s per Share on Common Stoc'

ne of the profitability

measures often ?uoted by the

financial press is earning per

share "#!$% on common stock .

(t is also normally reported in

the income statement in

corporate annual reports.

&*&*

&*


79/93


&*&*

200! 2007

arnings per sare on ommonarnings per sare on ommon

sto (aG) Rp1.#" Rp1.35sto (aG) Rp1.#" Rp1.35

>et inome Rp 1,000 Rp 7#,500

$reerre& &ivi&en&s ,000 ,000

a. Remain&eri&entiie& =it ommon sto Rp !2,000 Rp #7,500

. +ares o ommon sto 50,000 50,000


17-3

'+'+

'+


80/93


'+

17-3

%rice$Earnin(s "atio

Another profitability measure

?uoted by the financial press

is the price-earnings "!%

ratio on common stock. "he

prices future

earnin#s prospects.

'1'1

'1


81/93


'1'1

200! 2007

$rie-earnings ratio on$rie-earnings ratio on

ommon sto 25 20ommon sto 25 20

Faret prie per sare o

ommon sto Rp"1,000 Rp27,000

arnings per sare on ommon

sto I 1,#"0 I 1,350

17-3


'2'2

'2

17-


82/93


'2


173


et income p2$+,+++,+++

/referred dividends p1$,+++,+++

@hares of common stock

outstandin# 2+,+++,+++

Market price per share of

common stock p3$,+++

a. Determine the company>s earnin#s per share on

common stock. b. Determine the company>s price


83/93


'3

Follow My Example 17-11

'3

173

)a ;arnin#s /er @hare of Common @tock E )et

(ncome = /referred DividendsB@hares of

Common @tock utstandin#;arnin#s per @hare of Common @tock E

)p2$+,+++,+++ = p1$,+++,+++B2+,+++,+++

;arnin#s per @hare of Common @tock E Rp11,750

"'ontinued%

'4'4

'4

17-


84/93


'4

173

'4

)b /rice


85/93


'$

17-3

,ividends per Share

(ividends per share can be reported

ith earnin#s per share to indicate the

relationship beteen dividends and

earnin#s. Comparin# these to pershare amounts indicates the e0tent to

hich the corporation is retainin# its

earnin#s for use in operations.

'%'%

'%


86/93


'%'%Dividends ;arnin#s

Rp!00

Rp1,#"0

2008

Rp#00

Rp1,350

2007

$er

sare

Rp2,000Rp2,000

Rp1,500Rp1,500

Rp1,000Rp1,000

Rp500Rp500

Rp0

17-3


Exhibit ,ividends and Earnin( per

Share of Common Stoc'

'&'&

'&


87/93


'&

17-3

"he dividend yield on common

stock is a profitability measure

that shos the rate of return tocommon stockholders in terms

of cash dividends.

,ividend 4ield

''''

''


88/93


''''

200! 2007

ivi&en& ie& onivi&en& ie& on

ommon sto 2.0% 2.2%ommon sto 2.0% 2.2%

ivi&en&s per sare o

ommon sto Rp !00 Rp #00Faret prie per sare o

ommon sto I"1,000 I27,000

17-3


'*'*

'*


89/93


'*

(escribe thecontents of corporate

annual reports.


17-4

*+*+

*+


90/93


*+

17-4

Corporate Annual "eports

(n addition to the financial statements and

the accompanyin# notes, corporate annual

reports usually include the folloin#

sections5 Mana#ement Discussion and Analysis

eport on fairness of financial statements

*1*1

*1


91/93


*1

"he )anagement (iscussion and Analysis

")(*A% includes an analysis of the results

of operations and discusses mana#ement>s

opinion about future performance. (t

compares the prior year>s income statement

ith the current year>s. (t also contains an

analysis of the firm>s financial condition.

17-4

5ana(ement ,iscussion and

Analysis

*2*2

*2


92/93


*2

Mana#ement for listed firm is re?uired by

7apepam to provide a report statin# their

responsibility for establishin# and

maintainin# internal control. (n addition, the

report must state mana#ement>s conclusion

concernin# the effectiveness of internal

controls over financial reportin#.

17-4

"eport on Ade0uacy of

nternal Control

*3*3

*3


93/93


*3

All publicly held corporations are

re?uired to have an independent audit

)e0amination of their financialstatements. "he C/As ho conduct the

audit render an opinion on the fairness

of the statements.

17-4

"eport on .airness of .inancial

Statements

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