财务报表分析的杠杆左右以及如何体现盈利性和值比率外文文献及翻译.docx
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财务报表分析的杠杆左右以及如何体现盈利性和值比率外文文献及翻译
FinancialStatementAnalysisofLeverageandHowItInformsAboutProfitabilityandPrice-to-BookRatios
DORONNISSIM,STEPHENH.PENMAN
ABSTRACT
Thispaperpresentsafinancialstatementanalysisthatdistinguishesleveragethatarisesinfinancingactivitiesfromleveragethatarisesinoperations.Theanalysisyieldstwoleveragingequations,oneforborrowingtofinanceoperationsandoneforborrowinginthecourseofoperations.Theseleveragingequationsdescribehowthetwotypesofleverageaffectbookratesofreturnonequity.Anempiricalanalysisshowsthatthefinancialstatementanalysisexplainscross-sectionaldifferencesincurrentandfutureratesofreturnaswellasprice-to-bookratios,whicharebasedonexpectedratesofreturnonequity.Thepaperthereforeconcludesthatbalancesheetlineitemsforoperatingliabilitiesarepriceddifferentlythanthosedealingwithfinancingliabilities.Accordingly,financialstatementanalysisthatdistinguishesthetwotypesofliabilitiesinformsonfutureprofitabilityandaidsintheevaluationofappropriateprice-to-bookratios.
Keywords:
financingleverage;operatingliabilityleverage;rateofreturnonequity;price-to-bookratio
Leverageistraditionallyviewedasarisingfromfinancingactivities:
Firmsborrowtoraisecashforoperations.Thispapershowsthat,forthepurposesofanalyzingprofitabilityandvaluingfirms,twotypesofleveragearerelevant,oneindeedarisingfromfinancingactivitiesbutanotherfromoperatingactivities.Thepapersuppliesafinancialstatementanalysisofthetwotypesofleveragethatexplainsdifferencesinshareholderprofitabilityandprice-to-bookratios.
Thestandardmeasureofleverageistotalliabilitiestoequity.However,whilesomeliabilities—likebankloansandbondsissued—areduetofinancing,otherliabilities—liketradepayables,deferredrevenues,andpensionliabilities—resultfromtransactionswithsuppliers,customersandemployeesinconductingoperations.Financingliabilitiesaretypicallytradedinwell-functioningcapitalmarketswhereissuersarepricetakers.Incontrast,firmsareabletoaddvalueinoperationsbecauseoperationsinvolvetradingininputandoutputmarketsthatarelessperfectthancapitalmarkets.So,withequityvaluationinmind,thereareapriorireasonsforviewingoperatingliabilitiesdifferentlyfromliabilitiesthatariseinfinancing.
Ourresearchaskswhetheradollarofoperatingliabilitiesonthebalancesheetispriceddifferentlyfromadollaroffinancingliabilities.Asoperatingandfinancingliabilitiesarecomponentsofthebookvalueofequity,thequestionisequivalenttoaskingwhetherprice-to-bookratiosdependonthecompositionofbookvalues.Theprice-to-bookratioisdeterminedbytheexpectedrateofreturnonthebookvalueso,ifcomponentsofbookvaluecommanddifferentpricepremiums,theymustimplydifferentexpectedratesofreturnonbookvalue.Accordingly,thepaperalsoinvestigateswhetherthetwotypesofliabilitiesareassociatedwithdifferencesinfuturebookratesofreturn.
Standardfinancialstatementanalysisdistinguishesshareholderprofitabilitythatarisesfromoperationsfromthatwhicharisesfromborrowingtofinanceoperations.So,returnonassetsisdistinguishedfromreturnonequity,withthedifferenceattributedtoleverage.However,inthestandardanalysis,operatingliabilitiesarenotdistinguishedfromfinancingliabilities.Therefore,todevelopthespecificationsfortheempiricalanalysis,thepaperpresentsafinancialstatementanalysisthatidentifiestheeffectsofoperatingandfinancingliabilitiesonratesofreturnonbookvalue—andsoonprice-to-bookratios—withexplicitleveragingequationsthatexplainwhenleveragefromeachtypeofliabilityisfavorableorunfavorable.
Theempiricalresultsinthepapershowthatfinancialstatementanalysisthatdistinguishesleverageinoperationsfromleverageinfinancingalsodistinguishesdifferencesincontemporaneousandfutureprofitabilityamongfirms.Leveragefromoperatingliabilitiestypicallyleversprofitabilitymorethanfinancingleverageandhasahigherfrequencyoffavorableeffects.Accordingly,foragiventotalleveragefrombothsources,firmswithhigherleveragefromoperationshavehigherprice-to-bookratios,onaverage.Additionally,distinctionbetweencontractualandestimatedoperatingliabilitiesexplainsfurtherdifferencesinfirms’profitabilityandtheirprice-to-bookratios.
Ourresultsareofconsequencetoananalystwhowishestoforecastearningsandbookratesofreturntovaluefirms.Thoseforecasts—andvaluationsderivedfromthem—depend,weshow,onthecompositionofliabilities.Thefinancialstatementanalysisofthepaper,supportedbytheempiricalresults,showshowtoexploitinformationinthebalancesheetforforecastingandvaluation.
Thepaperproceedsasfollows.Section1outlinesthefinancialstatementsanalysisthatidentifiesthetwotypesofleverageandlaysoutexpressionsthattieleveragemeasurestoprofitability.Section2linksleveragetoequityvalueandprice-to-bookratios.TheempiricalanalysisisinSection3,withconclusionssummarizedinSection4.
1FinancialStatementAnalysisofLeverage
Thefollowingfinancialstatementanalysisseparatestheeffectsoffinancingliabilitiesandoperatingliabilitiesontheprofitabilityofshareholders’equity.Theanalysisyieldsexplicitleveragingequationsfromwhichthespecificationsfortheempiricalanalysisaredeveloped.Shareholderprofitability,returnoncommonequity,ismeasuredas
Returnoncommonequity(ROCE)=comprehensivenetincome÷commonequity
(1)
Leverageaffectsboththenumeratoranddenominatorofthisprofitabilitymeasure.Appropriatefinancialstatementanalysisdisentanglestheeffectsofleverage.Theanalysisbelow,whichelaboratesonpartsofNissimandPenman(2001),beginsbyidentifyingcomponentsofthebalancesheetandincomestatementthatinvolveoperatingandfinancingactivities.Theprofitabilityduetoeachactivityisthencalculatedandtwotypesofleverageareintroducedtoexplainbothoperatingandfinancingprofitabilityandoverallshareholderprofitability.
1.1DistinguishingtheProfitabilityofOperationsfromtheProfitabilityofFinancingActivities
Withafocusoncommonequity(sothatpreferredequityisviewedasafinancialliability),thebalancesheetequationcanberestatedasfollows:
Commonequity=operatingassets+financialassets-operatingliabilities-Financialliabilities
(2)Thedistinctionherebetweenoperatingassets(liketradereceivables,inventoryandproperty,plantandequipment)andfinancialassets(thedepositsandmarketablesecuritiesthatabsorbexcesscash)ismadeinothercontexts.However,ontheliabilityside,financingliabilitiesarealsodistinguishedherefromoperatingliabilities.Ratherthantreatingallliabilitiesasfinancingdebt,onlyliabilitiesthatraisecashforoperations—likebankloans,short-termcommercialpaperandbonds—areclassifiedassuch.Otherliabilities—suchasaccountspayable,accruedexpenses,deferredrevenue,restructuringliabilitiesandpensionliabilities—arisefromoperations.Thedistinctionisnotassimpleascurrentversuslong-termliabilities;pensionliabilities,forexample,areusuallylong-term,andshort-termborrowingisacurrentliability.
Rearrangingtermsinequation
(2),
Commonequity=(operatingassets-operatingliabilities)-(financialliabilities-financialassets)
Or,
Commonequity=netoperatingassets-netfinancingdebt(3)
Thisequationregroupsassetsandliabilitiesintooperatingandfinancingactivities.Netoperatingassetsareoperatingassetslessoperatingliabilities.Soafirmmightinvestininventories,buttotheextenttowhichthesuppliersofthoseinventoriesgrantcredit,thenetinvestmentininventoriesisreduced.Firmspaywages,buttotheextenttowhichthepaymentofwagesisdeferredinpensionliabilities,thenetinvestmentrequiredtorunthebusinessisreduced.Netfinancingdebtisfinancingdebt(includingpreferredstock)minusfinancialassets.So,afirmmayissuebondstoraisecashforoperationsbutmayalsobuybondswithexcesscashfromoperations.Itsnetindebtednessisitsnetpositioninbonds.Indeedafirmmaybeanetcreditor(withmorefinancialassetsthanfinancialliabilities)ratherthananetdebtor.
Theincomestatementcanbereformulatedtodistinguishincomethatcomesfromoperatingandfinancingactivities:
Comprehensivenetincome=operatingincome-netfinancingexpense(4)
Operatingincomeisproducedinoperationsandnetfinancialexpenseisincurredinthefinancingofoperations.Interestincomeonfinancialassetsisnettedagainstinterestexpenseonfinancialliabilities(includingpreferreddividends)innetfinancialexpense.Ifinterestincomeisgreaterthaninterestexpense,financingactivitiesproducenetfinancialincomeratherthannetfinancialexpense.Bothoperatingincomeandnetfinancialexpense(orincome)areaftertax.3Equations(3)and(4)producecleanmeasuresofafter-taxoperatingprofitabilityandtheborrowingrate:
Returnonnetoperatingassets(RNOA)=operatingincome÷netoperatingassets(5)
and
Netborrowingrate(NBR)=netfinancingexpense÷netfinancingdebt(6)
RNOArecognizesthatprofitabilitymustbebasedonthenetassetsinvestedinoperations.Sofirmscanincreasetheiroperatingprofitabilitybyconvincingsuppliers,inthecourseofbusiness,tograntorextendcreditterms;creditreducestheinvestmentthatshareholderswouldotherwisehavetoputinthebusiness.Correspondingly,thenetborrowingrate,byexcludingnon-interestbearingliabiliti