DuPont system is a practical financial ratio analysis system. The following is the graduation thesis of DuPont's financial analysis that I arranged for you. I hope you like it!
Title: Improvement and suggestion of DuPont's financial analysis system.
Dupont's financial analysis system is conducive to comprehensively evaluating the business performance of enterprises and finding out the crux of restricting the development of enterprises. However, with the development of the times and the constant change of the market environment, the defects of DuPont financial analysis system are increasingly exposed, which makes the traditional DuPont analysis system unable to fully meet the requirements of accurate analysis of enterprise finance. After analyzing the shortcomings, this paper puts forward some suggestions for improvement according to the challenges faced by the traditional DuPont analysis system, and briefly expounds the advantages of the improved DuPont analysis system.
Keywords:: advantages of DuPont's improved financial analysis system
I. Problems and consequences of DuPont's financial analysis system
1, DuPont analysis system does not include the important factor of asset cost. Dupont's analysis system has defects that can't be ignored, because it doesn't include the important factor of asset cost. Enterprises must bear the corresponding asset cost by raising capital from shareholders, that is, the lowest rate of return that enterprises can obtain from existing assets and meet investors' expectations. If enterprises only take net profit as the standard to measure shareholders' wealth and ignore the existence of asset cost, it will lead enterprises to blindly invest and pursue short-term profits, which will adversely affect the long-term development of enterprises.
2. The net interest rate of equity is single. Simply using the net interest rate of equity as an index to reflect the operating ability of enterprise operators will often lead operators to make wrong investment decisions in pursuit of high profits and high social evaluation of enterprises, which will damage the actual interests of enterprises while increasing the net interest rate of equity. When the financial situation of an enterprise is at a low point, operators often choose a project that can only improve the net interest rate, even if it will bring losses to the enterprise, so as to achieve the purpose of improving the performance of the enterprise. However, this kind of wrong decision can only bring the unfavorable situation of "profit" on the surface and "loss" on the actual.
Moreover, as the core index of DuPont analysis, the net interest rate of equity is not true enough compared with the cash flow index, and it is easy to be manipulated by the company. The cash flow statement is prepared on the cash basis, which can reduce the space for human manipulation. Therefore, cash flow analysis can evaluate the quality of income and the ability to obtain cash, predict the future cash flow of enterprises and accurately judge the solvency of enterprises.
3. The "total assets" and "net profit" for calculating the profit rate of total assets do not match. Total assets are the rights enjoyed by all asset providers, while net profits are exclusively enjoyed by shareholders, which is mismatched. Because the net interest rate of total assets does not match the "input-output", this indicator cannot reflect the actual rate of return. In order to improve the ratio, both numerator and denominator should be readjusted.
4, can not effectively meet the needs of enterprises to strengthen internal management. On the one hand, Dupont analysis mainly uses the relationship between the main financial indicators such as shareholder's return on equity, net interest rate on assets and equity multiplier to comprehensively analyze the financial situation of enterprises. These data mainly come from the past financial statements of enterprises, and are actually used to analyze the past financial situation of enterprises. On the other hand, the data used in this method mainly comes from financial statements, which fails to make full use of management accounting data such as cost analysis data and risk analysis data, which is not conducive to strengthening internal control of enterprises.
5. Failure to reflect the business risks and financial risks of the enterprise. In the fierce market competition, business risks are inevitable, which will lead to financial risks. For example, poor product sales or lower product prices will cause uncertainty to the income of enterprises; Higher interest rates will increase financial expenses and financing costs, thus affecting corporate profits and causing financial risks. In the current increasingly fierce market competition, risk analysis needs more attention.
6, can not reflect the economic and technical indicators of listed companies. Such as the share of shareholders' equity, net assets per share, and current income of minority shareholders in the consolidated income statement. In the existing DuPont financial analysis system, there are some problems with the return on net assets as the core index, which does not fully meet the requirements of maximizing the wealth of shareholders of listed companies. The maximization of shareholders' wealth is the confirmation of the future value of an enterprise, taking into account the time value and risk factors, while the return on equity is a reflection of the financial statements under the accrual basis, which cannot fully measure the shareholder value.
7. The data used in the existing DuPont system are all from the balance sheet, income statement and profit distribution statement, and do not reflect the cash flow of enterprises. Profit indicators play a connecting role in financial analysis system, but the financial information provided by profit indicators is far weaker than cash flow. Because in practice, cash flow is very important for the smooth operation of enterprises, and cash flow information is an important basis for financial analysts to make accurate judgments on the financial situation of enterprises. Through cash flow analysis, financial analysts can obtain important information such as source, structure and quantity. Cash flow enables them to make a correct judgment on the real efficiency of operating assets and the ability to create cash, so as to understand the solvency of enterprises and infer the future financial development trend of enterprises.
Second, improve DuPont analysis system from multiple angles.
1, according to the index.
For listed companies, earnings per share, net assets per share and net interest rate of shareholders' equity are the three most important financial indicators, and securities information institutions regularly publish the list of listed companies ranked according to these three financial indicators. Based on the financial goal of maximizing the interests of shareholders of listed companies, the most important financial indicator "earnings per share" which can best reflect the management ability of the boss company is selected as the core indicator. According to the relationship among earnings per share, net assets per share and return on net assets, the original model is decomposed and adjusted as follows:
Earnings per share = net assets per share × net interest rate of shareholders' equity
Earnings per share is the most important financial indicator to measure the profitability of listed companies. It reflects the profitability of common stock and is an important financial indicator that affects the stock price of listed companies. Under normal circumstances, if the earnings per share are the largest, it means the maximization of shareholders' wealth. Therefore, earnings per share meet the financial management goal of maximizing shareholders' wealth.
2. From the perspective of financial statements
(1) Introduce the sustainable development financial analysis system into DuPont financial analysis system. The financial analysis system of sustainable development is introduced into DuPont's financial analysis system, with sustainable development ratio as the core index, profitability as the core competitiveness of enterprises and good dividend policy as the support. According to the internal relationship among profitability ratio, asset management ratio and debt management ratio, the financial status, operating results and profits of enterprises are analyzed and evaluated in a comprehensive system, thus making up for the shortcomings of DuPont's financial analysis system. Therefore, the financial analysis system of sustainable development is:
Dividend payment rate = total cash dividends paid ÷ net profit after tax.
Retained income ratio = net profit-total cash dividends paid ÷ net profit
Sustainable development rate = net profit-total cash dividends paid ÷ average net assets 100%= return on net assets (1- dividend payment rate) = net interest rate of main business × return on total assets × equity multiplier × retained earnings ratio.
(2) Introduce the cash flow statement into DuPont's financial analysis system. The data of traditional DuPont financial analysis system comes from balance sheet and income statement, but does not use the information provided by cash flow statement. After introducing the cash flow analysis. The data of DuPont analysis system comes from three kinds of statements of the company, which makes the financial analysis more comprehensive and comprehensive.
3. From the perspective of enterprise value
Cultivating the sustainable development ability of enterprises and overcoming short-sighted behavior are the foundation of enterprise development. The value of an enterprise includes not only financial benefits but also social benefits. If any enterprise wants to develop continuously, it should not only optimize its financial indicators, but also improve its comprehensive competitiveness. As an individual of society, enterprises are independent of and dependent on society, and must bear corresponding social responsibilities. In enterprise financial management, the ultimate goal of the company is to maximize its own value. However, when evaluating its own value, not only the above financial indicators, but also the social competitiveness indicators are indispensable. (1) customer satisfaction index. (2) Environmental responsibility indicators. (3) Integrity indicators. (4) Staff team responsibility indicators.
4. Improve it from the perspective of cost behavior.
In order to make better use of internal accounting data in management accounting and improve the financial situation of enterprises, the related concepts of cost behavior can be introduced into DuPont's financial analysis method. Through the use of DuPont financial analysis method to find ways to improve the situation of enterprises, and make DuPont financial analysis method play a role in predicting and controlling costs in advance, the specific details are as follows:
Return on shareholders' equity = net asset rate × equity multiplier = net sales rate × asset turnover rate × equity multiplier = margin of safety × marginal contribution rate × (1-income tax rate) × asset turnover rate × equity multiplier.
Safety margin = safety margin ÷ estimated sales volume = (estimated sales volume-guaranteed sales volume) ÷ estimated sales volume
Marginal contribution rate = unit marginal contribution ÷ unit price = (unit price-unit variable cost) ÷ unit price
Three, the main advantages of the improved DuPont analysis system
1 can promote the further development of enterprise management accounting. Dupont's financial analysis system uses the accounting information after management accounting adds cost behavior to promote the further development of enterprise management accounting; Decomposing the net profit rate of sales into safety marginal rate, marginal contribution rate and income tax rate is beneficial for enterprises to make short-term business decisions by using DuPont analysis method according to management accounting data. Cost can be divided into variable cost and fixed cost, and effective measures can be taken to reduce the cost of different characteristics by combining the attributes of variable cost and fixed cost.
2. Revealed the influence of income tax on the return on net assets. After introducing tax indicators into DuPont analysis, it can be seen that the change of income tax has a direct impact on the return on net assets, from return on assets = return on assets ÷ owner's equity ratio, return on assets = sales profit rate × asset turnover rate, and sales profit rate = (net sales-cost-income tax) ÷ net sales. With the decrease of income tax, the return on equity will increase, and with the increase of income tax, the return on equity will decrease.
3, can accurately and timely reflect the enterprise's financial situation and its abnormal fluctuations. The financial risks faced by enterprises can not be ignored. When the financial situation of an enterprise endangers its survival and development, there should be reasonable indicators to attract the attention of the management authorities. Enterprise financial personnel need to know the changes of enterprise financial status in time to adapt to the changes of environment and formulate and adjust enterprise financial strategy in time, which requires the indicators in financial management system to reflect the small and instantaneous changes of financial status. Dupont's improved financial analysis system from the perspective of financial statements meets this requirement, and decomposes the profit rate of net assets into operating indicators and cash return rate of net assets. From the perspective of cash flow statement, the authenticity and reliability of enterprise's book profit reflect the quality of enterprise's profit, which is helpful to judge whether the enterprise manipulates book profit and can more accurately reflect the profitability of the enterprise.
4. Make a reasonable evaluation of the business performance of the enterprise. Dupont's improved financial analysis system from the perspective of enterprise value links financial benefits and social benefits, and combines them to evaluate the business performance of enterprises. Whether managers or grass-roots employees of enterprises, their contributions to enterprises are different. Only by making a reasonable evaluation of each member's performance and recognizing their performance can we fully mobilize their enthusiasm and continue to contribute to the development of the enterprise. This makes full use of the existing social resources of the enterprise and makes a comprehensive and reasonable evaluation of the performance of the enterprise from a higher angle.
References:
[1] sheets. Reflections on the improvement of DuPont's analytical calculation method [J]. Inner Mongolia Science and Technology, 2006, (2 1):33-34.
[2] Liu Zhengjun, Wu Yonglan. On the development of DuPont financial analysis system [N]. Xiangtan University, 2006, (7).
[3] China Institute of Certified Public Accountants. Financial cost management [Z]. Economic Science Press, 2008, (4).
;