The Frame of FRS
Financial reporting & analysis
Balance Sheet
Income Statement
Cash Flow Statement
Reading 34 Corporate Governance and ESG: An Introduction
a. describecorporate governance;
Corporategovernance is the system of internal controls and procedures by whichindividual companies are managed.
通过一系列的机制最小化利益相关者之间的利益冲突。
b. describe acompany’s stakeholder groups andcompare interests ofstakeholdergroups;
1. 公司的利益相关者与股东的区别。利益相关者包括股东但不仅限于股东，它主要包括股东、债权人、管理层与普通员工、董事会、客户、供货商、政府类的监管机构等
2. 这些利益相关之间会产生利益冲突。
c. describeprincipal-agent and otherrelationshipsincorporate governance andthe conflicts that may arise in these relationships;
1. 委托人与代理人关系问题。代理人（管理层）出于自身利益的考虑，有可能不完全站在委托人（股东）的利益角度来管理公司。
2. 利益冲突
a) Shareholder vs. Manager/Director
b) Controlling shareholder vs. Minority Shareholder
c) Manager vs. Board
d) Shareholder vs. Creditor
e) Customer vs. Shareholder
f) Customer vs. Supplier
g) Shareholders vs. Government/Regulator
d. describestakeholder management;
1. 明确和了解利益相关者它们各个的利益与角色，维持好它们之间的关系。
e. Describe
mechanisms tomanage stakeholder relationships and mitigate associated risks;
1. General Meetings
2. Board of Director Mechanism
3. The Audit Function
4. Reporting and Transparency
5. Policies on Related-Party Transactions
6. Remuneration Policies
7. Say on Pay
8. Contractual Agreements withCreditors
9. Employee Laws and Contracts
10.Contractual Agreements with Customers and Suppliers
11. Laws and Regulations
f. describe functions andresponsibilities of acompany’s boardofdirectors and itscommittees;
1.董事会两个主要的职能：duty of care 和 duty of loyalty
2.董事会下属的委员会包括：audit committee、governance committee、remuneration orcompensation committee、nominations committee、risk committee、investment committee。
g. describemarket andnon-market factors
that can affect stakeholder relationships andcorporate governance;
1. market factors: Shareholder engagement、Shareholder activism、Competition and takeover
2.non-market factor: Legalenvironment、Media、Corporate governance industry
h. identifypotential risks of poorcorporategovernance andstakeholder management andidentify benefitsfrom effective corporate governanceandstakeholder management;
1. Risks of poor governance and stakeholder management
a) Weak control systems
b) Ineffective decision making
c) Legal,regulatory, andreputational risk
d) Default and bankruptcy risks
2. Benefits of effective governance and stakeholder management
a) Operational efficiency
b) Improved control
c) Better operating and financial performance
d) Lower default risk and cost of debt
i. describefactors relevant to theanalysis ofcorporate governance andstakeholder management;
1. Economic ownership and votingcontrol
2. Board of directors representation
3. Remuneration and company performance
4. Investors in the company
5. Strength ofshareholder’s rights
6.Managing long-term risks
j. describeenvironmentaland socialconsiderations ininvestmentanalysis;
做投资分析的时候，还应该考查环境性与社会性的因素。
k. describehow environmental, social,andgovernance factors may be used ininvestmentanalysis.
1. Negative screening：剔除某些公司
2. Positive screening：找出考虑了 ESG factor 的公司
3. Best-in-class approach：找出最好的
4. Thematic investing：考虑能源与环境因素
5. Impact investing：考虑社会性与环境性的影响因素
Reading 35 Capital Budgeting
adescribe the capitalbudgeting process and distinguish among the variouscategories ofcapitalprojects;
1. The capital budgetingprocess is used to determineand select (the most) profitable long-term (greater than one year) projects.
2. Replacement projects、Expansion projects、New products and services、Regulatory, safety and environmental projects (mandatory projects)、Otherprojects: pet projects, R&D
b. describe the basic principles ofcapitalbudgeting;
1. Decisions are based on cash flows, not accounting net income.
2. Timing of cash flow is crucial.
3. Cash flows are based on opportunity costs.
4. Cash flows are analyzed on an after-tax basis.
5. Financing costs are ignored.
c. explain how theevaluation and selection ofcapital projects isaffected by mutually exclusive projects, project sequencing,andcapital rationing;
1. mutually exclusive projects，互斥项目，两个项目不能同进行。
2. project sequencing，如果盈利情况好，项目一个接着一个做。
3. ]capital rationing，当只有有限的资金时，要使得总的公司价值最大化。
d. calculate and interpret net present value (NPV), internal rate of return(IRR), payback period,discounted payback period, and profitability index (PI) of a singlecapital project;
[if !supportLists]e. [endif]explain theNPVprofile, compare theNPV andIRRmethods whenevaluating independent and mutuallyexclusive projects,and describe theproblems associatedwith each of theevaluation methods;
1.对于独立项目，NPV 与 IRR 的结果是一致的。
3.对于互斥项目，NPV 与 IRR 可能会有冲突。
a) 项目的规模不同（CFO）
b) 现金流注入的时间点不同
4. 当现金流符号改变超过一次，可能产生多个 IRR 和没有 IRR 的问题。
f. describeexpected relations among aninvestment’sNPV, company value, andshare price.
1. NPV 为正可以增加股东价值，公司股价增加。
Reading 36 Cost of Capital
a. calculate and interpret theweighted average cost ofcapital(WACC) of a company;
WACC = wdrd(1—t) + wprp+ were
b. describehow taxes affectthecost ofcapital from different capital sources;
1. 由于税盾作用，rd (1— t) 后面不要忘记乘以（1 - t）
c. describe theuse oftarget capital structure inestimatingWACC and howtarget capital structure weights may be determined;
1. 在计算 WACC 的时候，我们优先使用公司的目标资本结构。如果找不到目标资本结构，可以使用当前的资本结构，基于市值进行计算。
d. explain how themarginal cost ofcapital andtheinvestment opportunity scheduleare used to determinethe optimal capital budget;
e. explain themarginal cost ofcapital’s role indeterminingthenet present value of aproject;
在计算 NPV 的时候，WACC 作为公司的资本成本。
f. calculate andinterpret thecost ofdebt capital usingtheyield-to-maturity approach and thedebt-rating approach;
YTM approach: PO = PMT1 + PMT2 +⋯ + PMTn + FV
Debt-rating approach: 使用相似评级、相似期限的债券收益率作为债务税前成本的参考。
g. calculate andinterpret thecost ofnoncallable, nonconvertible preferred stock;
h. calculate and interpret the cost of equity capital using the capital asset pricing model approach, the dividenddiscount modelapproach, and thebond-yield-plus risk- premium approach;
i. calculate andinterpret thebeta and cost ofcapital for a project;
a. Select the comparable.
b. Estimate thecomparable’s beta. Βequity
c.Unlever thecomparable’s beta.
βasset
= βequity
{ 1 }, D/E, t = comparable company’sdebt-to-equity ratio and its
d. Lever the beta toreflect the project’s financial leverage.
j. describe uses ofcountryriskpremiums inestimating thecost of equity;
re= E(Ri)
= Rf+ β [E(Rmkt)
- Rf+CRP]
注意CRP 是加在括号里面的。
k. describe the marginalcost of capitalschedule, explain why it may be upward-slopingwithrespect toadditional capital, andcalculate andinterpret its break-points;
Break point =Amount of capital at which the component’s cost of capitalchanges Weight of the component in the capitalstructure
l. explain anddemonstrate thecorrect treatment offlotation costs.
1. 筹资费用应该在期初扣减。
2. NPV= (CFO— flotation costs) + PVof CF1+ PV of CF2+ …+ PVof CFn
Reading 37 Measuresof Leverage
e. define and explain leverage,business risk, sales risk, operating risk, and financialrisk and classify a risk;
1. 杠杆会增加公司现金流及盈利的波动性，增加公司的风险。杠杆是由于固定成本的存在而产生的，fixed operating cost 产生了 DOL，而 fixed financing cost 产生了 DTL。
2. 风险主要分为 business risk 与 financial risk，而 business risk 又包括了 sales risk 与 operating risk。
a) 销售风险（Sales risk）是指公司产品的价格与销量的不确定性。
b)经营性风险（Operating risk）是指其它因素使得经营收入产生不确定性，主要为固定的经营性费用导致。
c) 固定费用相比可变费用所占比重越大，公司的经营性风险也越大。
f. calculate andinterpret thedegree ofoperating leverage, thedegree offinancial leverage, and thedegreeoftotal leverage;
DOL = Percentage change in operating income Percentage change in units sold
DOL = Q(P–V)
DFL = Percentage change in net income Percentage change in
operating income
DFL = Q(P–V)–F
DTL = Percentage change in net income Percentage change in the number of units sold
DTL = DOL × DFL = Q(P–V) Q(P–V)–F–€
g. analyze theeffect of financialleverage on acompany’s net income andreturn on equity;
1. 利用债务融资产生的利息费用会降低净利润。
2. 财务杠杆可能会增加公司的违约风险，但却可以增加 ROE。
h. calculate thebreakeven quantity of sales anddeterminethecompany's net income atvarious sales levels;
1. 盈亏平衡点, QBE ，使得公司净利润为零的销售量。(销售收入等于总成本)
2. QBE = thefixed operating costs + the fixed financing costs the price per unit – the variable cost per unit = F + € P – V
i. calculate and interpret theoperating breakeven quantityof sales.
1. QOBE = F
Reading 38 Dividendsand Share Repurchases: Basics
a. describeregular cash dividends,extradividends, liquidating dividends,stockdividends,stock splits, andreverse stock splits, including theirexpected effect onshareholders’ wealth and acompany’s financial ratios;
b. describe dividendpayment chronology,including thesignificance ofdeclaration, holder-of-record, ex-dividend, andpayment dates;
1. 这几个重要时间点的顺序如上图所示。
2. 在 ex-dividend 这天及之后买入股票不享有分红的权利。
c. compare share repurchase methods;
1. 公开市场回购
2. 固定的价格回购固定的股票数目
a) 固定价格的要约回购
3. 拍卖。针对现有股东的要约回购方式，但不以固定的价格而是给出一个可接受的价格区间。
4. 直接协商
d. calculate and compare theeffectof ashare repurchase onearnings pershare when
1) the repurchase is financed with the company’s excess cash and 2)the company uses debt to finance the repurchase;
1. Using borrowed funds (external financing)
a) EPS / P (Earnings yield) > after taxcost of funds, EPS increases.
b) EPS / P < after tax cost of funds,EPS decreases.
e.calculate theeffect of ashare repurchase onbookvalue per share;
1. Market price (P) > BVPS, BVPS decreases.
2. Market price (P) < BVPS, BVPS increases.
f. explain why acashdividend and ashare repurchase ofthe sameamount are equivalentinterms of theeffect onshareholders’ wealth, all else being equal.
在其它条件不变的情况下，现金股利与股票回购具有等效作用。
Reading 39 Working CapitalManagement
g. describe primary andsecondary sources of liquidity andfactors that influence acompany’s liquidity position;
1注意区分流动性的主要来源与次要来源。
2. Primary source 为公司以较低成本获得最易得的资金，例如，银行账户里的现金及短期比较容易变现的资金。
3. Secondary source 可能意味着公司的不良财务状况，获得流动性的成本较高。例如，
a) Negotiating debt contracts.
b) Liquidating assets.
c) Filing for bankruptcy protection and reorganization.
h. compare acompany’s liquiditymeasures withthose ofpeer companies;
注意掌握几个衡量流动性比率的财务指标
current assets
Current ratio = current liabilities
Quick ratio = cash+ short-term marketable securities + receivables
current liabilities
Receivables turnover = credit sales average receivables
Number of days of receivables=365 receivables turnover
Inventory turnover = cost of goods sold
average inventory
Number of days of inventory= 365 /inventory turnover
Payables turnover = purchases averagetrade payables
i.evaluate working capital effectiveness ofa company based on its operating and cash conversioncycles andcompare thecompany’s effectiveness withthatof peercompanies;
1. Operating cycle = number of days of inventory + number of daysof receivables
2. Net operating cycle (cash conversion cycle) = number of days of receivables + number of daysof inventory – number of days of payables
j. describe how differenttypes of cash flows affect a company’s net daily cash position;
1. 现金管理的目标是 net daily cash position 不为负。
2. 主要的现金注入和支出。
k. calculate and interpret comparable yields onvarious securities, compare portfolio returns against astandard benchmark, andevaluate acompany’s short-term investment policy guidelines;
Percentage discount from face value (% discount)=face/value–price face value
Holding period yield = face/value–price price
l. evaluate acompany’s management of accounts receivable, inventory, and accountspayable over time andcompared topeer companies;
对应收账款、存货及应付账款的管理
1. 应收账款的管理主要参考账龄分析表及应收账款周转天数。
2. 存货的管理主要参考存货周转率与存货周转天数。
3. 应付账款的管理主要参考应付账款周转天数。
a) 应付账款的管理需要充分利用 trade discount，2 / 10 net 60，如果在 10 天之内付款，可以享受 2%的折扣。如果公司没有采用这种付款方式，则应该在 60 天之内付全款。
m. evaluate thechoices ofshort-term fundingavailable to acompany andrecommend afinancing method.
公司短期筹资来源有哪些？
1. 对于信用水平较好的大公司主要的方式有
a) Uncommitted line of credit
b) Committed (regular) line ofcredit
c) Revolving line of credit
2. 小公司及信用状况不良的公司可以使用非银行途径的筹资方式。
3. 信用良好的大公司可以发行商业汇票进行债务性融资。
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