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UNIVERSITY OF FINANCE-MARKETING
FACULTY OF FINANCE AND BANKING
CORPORATE FINANCE
ANALYSIS
Lecturer: Dr. Nguyen Thi Nhu Quynh
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CHAPTER OBJECTIVES
CHAPTER 1 After completing this chapter, students will be able to:
- Understand the concept of corporate financial analysis (CFA).
- Understand the purpose of CFA.
OVERVIEW OF - Describe the process of CFA.
CORPORATE FINANCE ANALYSIS - Apply methods of financial analysis to a company's financial
performance.
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COURSE CONTENT 1.1. CONCEPT AND PURPOSE OF CORPORATE FINANCIAL
ANALYSIS
1.1 Concept and Purpose of Corporate Financial Analysis
1.1.1. Concept
1.2. Subjects and Procedures of Analysis
1.3. Analysis Methods
1.1.2. Purpose
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1.1.1. CONCEPT 1.1.1. CONCEPT
Corporate financial analysis is the process of deeply examining the
Corporate financial analysis involves using financial data (via
contents, structure, and mutual impacts of financial indicators to evaluate
financial indicators) to evaluate and identify potential, risks, and to
the financial situation of a business. This is done by comparing the targets
gain a deeper understanding of all business activities. This helps
set by the company or with other businesses in the same industry, thereby
make appropriate decisions aligned with the objectives of relevant
making decisions and proposing appropriate management solutions
parties.
Corporate financial analysis involves using financial data to assess the
operational efficiency of a business and make recommendations for Is corporate financial analysis the same as analyzing financial
improving future operations statements of businesses?
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1.1.2. PURPOSE
The corporate manager Investors Employees Banks State regulatory agencies.
Propose effective financial Career orientation Minimize risks in credit Assessing the impact of state
Make sound
management solutions to and job security provision activities policies to adjust and
investment decisions
increase the value of the improve the mechanism
business
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1.1.2. PURPOSE 1.2. OBJECTIVES AND ANALYSIS PROCEDURE
In summary, corporate financial analysis is a useful tool for determining
1.2.1. Objectives
economic value, assessing the strengths and weaknesses of a business, and
identifying causes (both objective and subjective). This helps stakeholders
make and select decisions that align with the goals they care about.
1.2.2. Analysis procedure
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1.2.1. OBJECTIVES
1.2.1. OBJECTIVES
The subject of financial analysis in enterprises is the financial activities of Documents used include:
businesses, including: [Link] statements
[Link] sheet
Costs, pricing, and business performance
[Link] statement
Financial structure (Asset and capital structure)
[Link] flow statement
Efficiency of capital utilization in the enterprise
[Link] to financial statements
Liquidity and solvency [Link] accounting reports
Cash flow [Link] plans of the enterprise
Risks in business operations [Link] information
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1.2.2. ANALYSIS PROCESS 1.3. ANALYSIS METHODS
Identify analysis indicators
1.3.1. Methodology
Overview evaluation of the current • Compare over time
state of analysis indicators • Compare with companies in the same
industry
Analyze factors affecting • Quantitative factors
analysis indicators • Qualitative factors
1.3.2. Method in business analysis
• Streng, weaknesses
Evaluate analysis indicators • Causes
Make decisions
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1.3.1. METHODOLOGY 1.3.1. METHODOLOGY
Examine financial events in their dynamic state and
Examine financial events in their dynamic state and development
development
Analyze each component of financial indicators to Example: In 2019, the ROE of Hoa Phat Group (HPG) was 16.84%.
examine the impact of factors on the analyzed indicator.
Can you determine if this rate is high or low?
Consider financial indicators in their relationships,
providing evidence between those indicators and others.
Thus, when examining a financial indicator, it is necessary to place it
Draw conclusions and observations about the analyzed within a specific time and context.
indicators and propose solutions to address unresolved
issues
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1.3.1. METHODOLOGY 1.3.1. METHODOLOGY
Study of Financial Indicators in the Dialectical Relationship Between
Analyze each component of financial indicators to examine
Each Indicator and Others
the impact of factors on the analyzed indicator
Example: Dupont Analysis for Hoa Phat Company:
Financial Asset
Net Profit Margin
Năm ROE Leverage Turnover
(EAT/S)
(A/E) (S/A)
2016 33.28% 19.93% 1.67 1.00
2017 24.74% 17.34% 1.64 0.87
2018 21.18% 15.46% 1.93 0.71
2019 16.84% 11.76% 1.86 0.77
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Draw conclusions
1.3.1. and observations about analytical indicators and
METHODOLOGY
propose solutions to unresolved issues. 1.3.2. METHODS IN Comparison
BUSINESS ANALYSIS
Method
It is necessary to correctly identify the key causes affecting the analysis
results to draw accurate conclusions and propose appropriate and
effective solutions.
Balanced Relationship Exclusion Method
Method
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[Link].
Purpose: To COMPARISON METHOD
clarify the differences or unique characteristics to help
Principle:
[Link]. COMPARISON METHOD
Principle 1: Choosing standards for comparison
analysts evaluate changes in the scale of operations, asset structure, sources
Basis for comparison
of capital, etc., of a business. From there, analysts can grasp financial trends (Original data)
in the future.
Industry data (or
Content: Past data Planned data
peer companies)
•Horizontal Analysis: Analyzing financial indicators and their fluctuation
trends between reporting periods.
Trends in Plan
•Vertical Analysis: Analyzing the correlation between financial indicators Efficiency level
fluctuations completion rate
within each reporting period.
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[Link]. COMPARISON METHOD [Link]. COMPARISON METHOD
Principle 2: Conditions for comparison (Indicators must be used Principle 2: Conditions for comparison (Indicators must be used
consistently) consistently)
Example:
Regarding time: Consistency is required across three aspects:
In the year 20XX, the after-tax profits of Company A and Company B were
•The same economic content and calculation methods
100 million VND and 150 million VND, respectively.
•The same units of measurement
Which company operates more efficiently?
•The same duration or equivalent time points
A. Company A
Regarding space: Indicators must be standardized to the same scale and
B. Company B
business conditions.
C. It depends on something
D. ...
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[Link]. COMPARISON METHOD [Link].
AbsoluteCOMPARISON
comparison METHOD
Principle 3: Comparison techniques
Absolute figures: Represent the scale and volume of an economic indicator
Absolute comparison in a specific spatial and temporal context.
Comparison Purpose: To observe changes or fluctuations in the scale and volume of the
Relative comparison
techniques analyzed indicator (does not reflect quality or efficiency).
Average comparison It is necessary to distinguish between point-in-time absolute figures
and time-period absolute figures.
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[Link]. COMPARISON METHOD
Relative comparison [Link]. Exclusion Method
Meaning: Determine the level of influence of factors on the analyzed
indicators.
Relative figures: Indicators that reflect the comparative relationship
Principles: What are qualitative
between two absolute economic indicators of the research subject.
•Factors must have a proportional factors? Quantitative
relationship with the analyzed factors?
Purpose: Unlike absolute figures, relative comparisons allow analysts to
indicator.
understand the structure, relationships, growth rate, trends, and fluctuation
•Ordered in the sequence:
patterns of economic indicators.
quantitative factors first, qualitative
factors later.
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How to Identify Quantitative or Qualitative Factors
Analysis is needed in each specific relationship.
•Example 1:
Cost of direct materials (DMC) to produce one product = Consumption rate
of DMC to produce one product × Unit price of DMC
•Example 2:
Total consumption of DMC to produce one product = Number of products
produced × Consumption rate of DMC to produce one product
•Example 3:
Total DMC cost = Number of products produced × Consumption rate of
DMC to produce one product
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× Unit price of DMC
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