(1) financial statements

Generally speaking, the financial statements of an enterprise include four tables and a note, which mainly reflect the financial status of the enterprise at a certain point in time and the operating results and cash flow during a certain period. The economic consequences of various economic activities of enterprises are reflected in the financial statements of enterprises. However, due to the strong professionalism and abstraction of financial statements, if the stakeholders of enterprises know little or nothing about accounting knowledge, it will be difficult to understand financial statements, which will lead to the inability to understand the real situation of enterprises. Therefore, it is necessary to analyze the financial statements of enterprises.

(b) Analysis of financial statements

The analysis of financial statements can enable stakeholders to understand the signals sent by enterprises and make decisions. At present, the analysis of financial statements mainly includes the following aspects: solvency (including short-term and long-term), profitability, asset operation ability, development ability analysis, comprehensive ability analysis and so on. These aspects, especially indicators, are closely related and complement each other. An indicator can reflect several aspects of an enterprise at the same time, or it can be used together to meet the basic needs of different users.

The solvency analysis includes short-term solvency and long-term solvency. The indicators reflecting short-term solvency mainly include current ratio, quick ratio, cash ratio and cash flow ratio. The similarity of these indicators is that the larger the indicators, the stronger the short-term solvency of enterprises. But at the same time, if the indicators are too large, it also reflects that the proportion of current assets of enterprises is too high, which will lead to low utilization rate of current assets, so these indicators are not necessarily as high as possible. Indicators reflecting long-term solvency mainly include asset-liability ratio, equity multiplier, property right ratio and interest guarantee multiple. The first three indicators reflect the same situation. The greater the index, the greater the debt degree of the enterprise, the greater the debt repayment pressure, and the greater the interest rate multiple, the stronger the debt repayment ability of the enterprise.

There are many indicators that reflect the analysis of profitability, and the most representative ones are net profit rate of sales (or net profit rate of operation) and return on net assets. To some extent, these two indicators not only reflect profitability, but also reflect solvency and operational capacity. The bigger the index, the stronger the profitability of the enterprise.

The indicators reflecting the analysis of operational capacity mainly include inventory turnover, accounts receivable turnover, current assets turnover, fixed assets turnover and total assets turnover. On the one hand, if the enterprise is at a certain level with the same industry, the greater the index, the stronger the operational ability of the enterprise and the better the asset management of the enterprise; On the other hand, if these indicators of this enterprise are far higher than those of other enterprises in the same industry, it may explain some problems. For example, a high inventory turnover rate may indicate a shortage of inventory; If the turnover rate of accounts receivable is too high, it may mean that there are too few accounts receivable, that is, the credit policy of enterprises is strict, and so on. Therefore, whether the index is too large or too small, it will have an impact on enterprises.

The indicators reflecting the analysis of development ability mainly include sales growth rate, total assets growth rate and capital accumulation rate. The bigger these indicators are, the better the development of enterprises will be, but we should also pay attention to the fact that some indicators are too high to reflect the negative. For example, if the sales growth rate is much higher than that of the same industry, it may indicate that enterprises overestimate the risk of income; If the growth rate of total assets is too high, we should pay attention to the relationship between quality and quantity of asset scale expansion and avoid blind expansion.

Comprehensive ability analysis is to combine the above four abilities and comprehensively analyze the operating conditions and financial achievements of enterprises. Dupont analysis system and Wall scoring method are mainly used.

Second, the role of financial statement analysis

Financial statement analysis is to meet the needs of different stakeholders who use information. The most basic function is to convert the data in financial statements into specific indicators and other accounting information, which can not only evaluate the past of enterprises, but also predict the future of enterprises, and play a connecting role in financial management. This paper mainly explains the function of financial statement analysis from the demand of different stakeholders for financial statement analysis.

The first is the operator. Through the analysis of solvency, operators can understand the debt level and capital structure of enterprises, which is helpful for operators to use debts reasonably and control the financial risks of enterprises. Through the analysis of operational capacity, operators can find the problems existing in the management of inventory, accounts receivable, current assets and fixed assets, which can help operators improve the management system of enterprise assets, implement improvements and make maximum use of assets. Through the analysis of profitability, and compared with the previous period or the same industry, operators can understand the income, costs, expenses and problems existing in the sales and procurement of enterprises, help operators adjust their sales strategies, improve the profitability of enterprises, expand market share, and at the same time arrange procurement reasonably and control costs. Finally, help business operators to improve the economic benefits of enterprises.

Secondly, investors, generally speaking, are most concerned about the profitability of enterprises. Looking at their development space, they especially hope that enterprises have sustainable competitive advantages and sustainable profitability, which is the key factor in deciding whether to invest. Through the analysis of financial statements, investors can understand the information related to investment decisions, evaluate investment risks and help investors choose the right plan.

Thirdly, creditors provide long-term and short-term debts to enterprises. For short-term creditors, they mainly pay attention to the short-term solvency of enterprises and the liquidity of cash, and whether they can repay the principal and interest at maturity; Long-term creditors not only care about the solvency of enterprises, but also pay attention to the profitability and development ability of enterprises, thus helping creditors to analyze whether the debts they provide to enterprises are safe and whether they need to be urged to repay them.

The fourth is the employees of the enterprise. Through the analysis of financial statements, employees can understand the operating conditions of the enterprise and whether it has a long-term sustainable development trend, which is helpful for employees to plan their careers.

The fifth is the relevant government departments. The government has multiple identities, both as a macroeconomic manager and a market participant. The government's attention to the analysis of financial statements varies from department to department. It is the finance and taxation department that pays more attention to the analysis of enterprise financial statements. Through the analysis of financial statements, the financial and taxation departments can understand the contribution of enterprises to the country or society and prevent enterprises from evading taxes.

Third, the limitations of financial statement analysis

(A) the limitations of the financial statements themselves

The first is the timeliness of data reflected in financial statements. When preparing financial statements, enterprise accountants mainly reflect the historical data of enterprises based on historical costs. Although through analysis, we can evaluate the future enterprise situation according to the past information to a certain extent, enterprises can't rely too much on these historical materials. The main reason is that the information displayed by historical data does not take into account the impact of inflation and prices. In the case of serious inflation, it is meaningless to analyze financial statements without adjusting historical data.

The second is the authenticity of the data reflected in the financial statements. One of the prerequisites for financial statement analysis to play its role is to require the data to be true and reliable. However, in the process of preparing financial statements, if the management wants to complete the established goals or meet the requirements of stakeholders, there will be the problem of preparing false financial statements, which will lead to the inconsistency between the financial statements prepared by enterprises and the actual production and operation conditions of enterprises, and thus the analysis of financial statements will also lead users to make wrong decisions.

Third, the comparability of data reflected in financial statements. Stakeholders will make decisions by analyzing financial statements, in addition to their own economic situation, they will also compare with other enterprises in the same industry. However, due to some provisions of accounting standards, different enterprises or the same enterprise will adopt inconsistent accounting methods in different periods, which makes comparability worse.

Fourth, financial statements reflect the problem of incomplete data. Due to the particularity of some assets, there is no way to reflect them in financial statements according to accounting standards, such as intangible assets that cannot be measured, which will lead to incomplete data reflected in financial statements and deviation between the book value and the actual value of enterprise assets. At this time, the enterprise situation reflected by the analysis of financial statements is not comprehensive enough.

(B) the limitations of financial statement analysts

The personnel who analyze the financial statements of enterprises are generally completed by the financial department, because financial personnel have certain accounting knowledge, can read financial statements and analyze financial statements with indicators. However, due to strong professionalism, most of them are analyzed from the financial point of view, without combining the management point of view of enterprises. Secondly, different financial personnel will have different understandings of financial risks, so the conclusions of financial statement analysis will be different, and even the opposite will happen.

(C) the limitations of financial statement analysis methods

There are three main methods to analyze financial statements: ratio analysis, comparative analysis and trend analysis. The most commonly used method in financial statement analysis is ratio analysis, which analyzes the solvency, profitability, operational ability, development ability and comprehensive ability of enterprises through the calculated indicators. However, the ratio analysis method has its own defects. First, based on historical costs, there is a lag. Second, it is only the use of data indicators, not combined with the actual situation of the enterprise itself.

(D) the limitations of enterprise management attention

Due to the rapid development of economy, most enterprises in China have begun to analyze financial statements, but many enterprises simply modify a few figures in the monthly financial statement analysis report, without analyzing the overall actual situation of the enterprise. Enterprises have not established a system related to financial statement analysis to guide and supervise, and the indifference of management directly leads to the ineffectiveness of financial statement analysis and fails to play its due role.

Fourth, improve the analysis strategy of financial statements

(A) improve the financial statements

First of all, enterprises should invite accounting firms to audit financial statements every year, which can reduce the risk of material misstatement in financial statements to a certain extent, because the audit report shows that there is no risk of material misstatement in financial statements, which reflects the authenticity and objectivity of financial statement data.

Secondly, enterprises should consider the timeliness of financial statement data, and financial personnel should provide accounting information to stakeholders who use financial statements in a timely manner, and at the same time, combine various analysis methods to improve the practicability of analysis reports, so that stakeholders who use financial statements can make timely and correct decisions.

Finally, enterprises should make full use of the notes to financial statements and appropriately increase the depth and breadth of disclosure. Notes are explanations made by enterprises to help stakeholders better understand the contents of financial statements. Notes contain a wide range of contents and reflect more information than the four statements. Therefore, increasing the degree of disclosure can make financial information more sufficient and improve the usefulness of information. In the analysis of financial indicators, combined with the relevant information in the notes, in-depth and detailed research is carried out to help stakeholders fully understand financial information and make correct decisions.

(B) improve the comprehensive quality of financial statement analysts

Enterprises need to improve the comprehensive quality of financial statement analysts, attach importance to their training, not only strengthen their professional study, but also understand the overall strategy, operating conditions and business processes of enterprises from the management level. At the same time, financial personnel should strengthen communication with management and, if possible, communicate with other stakeholders to understand their needs for financial statement analysis, so as to provide useful financial statement analysis reports.

(C) improve the financial statement analysis system

Enterprises need to consider financial indicators and non-financial indicators when using index analysis, that is, quantitative analysis and qualitative analysis are combined to conduct comprehensive analysis. In the process of quantitative analysis, reduce the subjectivity of financial analysts and use computer technology to enhance the accuracy of index analysis; In the process of qualitative analysis, the market share, product qualification rate and customer satisfaction are analyzed from the perspective of enterprise management, and the financial related indicators are adjusted more feasible and reasonable. At the same time, in addition to the analysis of financial statements mentioned above, we should also pay attention to the analysis of development factors such as enterprise innovation ability and business strategy.

(D) Improve the awareness of financial statement analysis.

Enterprise management should recognize the role of financial statement analysis, take financial statement analysis as a key point of enterprise management, formulate a system, coordinate the cooperation between various departments and financial departments, and put forward the requirements of financial statement analysis, so that financial personnel can understand the overall situation and responsibilities of the enterprise, thus improving the position of financial statement analysis in enterprise management and improving economic benefits.

Verb (abbreviation of verb) abstract

To sum up, financial statement analysis is very important to the development of enterprises, and financial statement analysis is a continuous dynamic process. This paper points out the limitations of the current financial statement analysis, but some measures can be taken to improve it, and finally provide more timely and accurate information for stakeholders to meet their needs.