导图社区 CFA I 级corporate governance详图
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CFA I 级corporate governance详图
I summarised the corporate governance part in detail. hope it would help you in exam. tks
编辑于2021-01-15 18:30:01- CFA
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corporate governance0
introduction to corporate governance and other ESG considerations
stake-holder management
definition
shareholder theroy
stakeholder theroy
stakeholder groups
shareholders
board of directors
senior managers
employees
creditors
suppliers
principal-agent
hired to obey principle
while have conflict of interest
conflict between
shareholders and manager or directors
managers depend on firm perfomance
shareholders hold portfolio to avoid risk
information asymmetry
groups of shareholders
majority against minority
related party transaction
和自己公司做生意来获利
creditors and shareholders
equity holders prefer
more risks
while creditors have limited upside from good result
issuing new debt to increase risk
shareholders and other stakeholders
shareholder management
understanding of their interest
effective communications
infrastructure basement
legal infrustructure
contractual infrustructure
organizational infrustructure
governmental infrustructure
standard practices
required by corporate laws
including
annual general meeting
after the end of financial year
provide audited financial statement to SH
ordinary resolution
approval of auditor
election of directors
majority of vote
extraodinary general meeting
special resolution
merger or takeover
require amendment of corprate bylaws
supermajority of vote
2/3
3/4
called anytime
voting
proxy 代理投票
majority voting
一人投一个
cumulative voting
一人投多个，更有利于小股东
board of derectors and its committees
board structure
one tire board
single board of directors
internal directors
senior managers emoloyed by the firm
external directors/non-execitive directors
who are not company management
independent directors
have no other relationships
lead independent director
able to call ind dir meetings
two tire board
supervisory board
exclude executive directors
managemend board
executive directors
led by CEO
Staggered board
some board position election hold each year
defence of takeover
board responsibility
act in shareholders' interest
selecting senior management
strategic firection
approving capital structure change
reviewing company performance
planning for continuity of management
internal control and risk management
quality of audited financial report
board committees
audit committee
governance committee
norminations committee
提名高管候选
compensation/remuneration
高管薪资
risk committee
investment committee
factors affecting corporate governance
factors affect stakeholder relationships
market factors
activist shareholder
initiating shareholder lawsuits
seeking representation on the board of directors
proxy fight
tender offer
to takeover company
hostile takeover
conflict of interest
shareholder want to takeover
managers passes anti takeover measures
non-market factors
legal enviornment
common-law system
better protect shareholder and creditor
civil law system
沟通渠道
以前可以转移注意力
互联网发展后事件更易发酵
potential risk and benifits
risk of poor governance and stakeholder management
benifit part of stakeholder while harm others
accounting fraud
poor recordkeeping
choose lower-than-optimal risk
benifits of effective governance and stakeholder management
avoid legal risk
improve performance
factors
company ownership and voting structure
dual class structure
one class of shares may be entitled to several votes per share
founding shareholders
maitain control of the broad
composition of a company's board
whether they responsive to shareholder interests
management incentives and remuneration
concern if
remuneration plan offer greater
performance-based incentive pay is stable
means easy goals
not aligned with current company strategy
high relative to compareable companies in industry
composition of shareholders
relative strength of shareholders' right
if weak
the goal is hard to achieve
management of long term risk
external consideration on investment(ESG investing)
AKA
sustainable investing
responsible investing
socially responsible investing
how to use
negative screening
不投资污染，侵犯人权
positive screening
投资环保，保护人权
full integration
传统基本面分析中加入esg因素
themestic investing
投资esg goals
engagement/active ownership
用公司权力作为platform to promote esg
green finance
green bonds
overlay/portfolio tilt
risk factor/premium
Capital Budgeting
capital project
capital budgeting process
longer than a year
reasons
often involves the purchase of costly long term assets
apply to other corporate decisions
working capital management
strategic mergers and acquisiton
maximizing shareholfer value
four steps
1.idea generation
2.analysing project proposals
3.create the firm-wide capital budget
4.monitoring decisions and conducting a post-audit
follow up and summarize
catagories
replacement project to maintain the business
replacement ptojects for cost reductions
expansion projects
new product and market development
mandatory projects
other project
basic principle
decision are based on cash flows not accounting income
incremental cash flows
sunk cost
externalties
may affect other project
cannibalization
sign of cash flow
change only once
conventional cash flow pattern
-+
has more than one changes
unconventional cash flow pattern
-+-
cash flow are based on oppotunity cost
oppo cost should be included in the project cost
the timing of the cash flow
保证资金链不断裂
cash flows are on after-tax basis
financing costs are reflected in the project's required rate of return
affected by
independent vs. mutually exclusive project
independent project
every project are unrelated
mutually exclusive
only one in a set of project can be implemented
project sequencing
实行顺序
unlimited funds vs. capital rationing
unlimited
钱多，positive NPV 都可
capital rationing
钱少，需筛选
methods
NPV
discount rate:
cost of capital
positive NPV can increase shareholders' wealth
decision for independent project:
keep positive, abandon negative
NPV profile
x:discount rate
y:corresponding NPVs
crossover rate
2 projects' NPVs are equal
project line intersect because of a difference in the timing of the cash flow
pro and con
advantage
it is a direct measure of the expected increase in the value of the firm
weakness
does not include any consideration of the size of the project
IRR
is the discount rate when
NPV=0
PV(inflow)=PV(outflow)
decision rule:
1.determine the required rate of return
normally firm's cost of capital
2.if IRR
>ROR, accept
<ROR,reject
hurdle rate
minimum IRR
pros and cons
advantage
it measures profitability as a percentage
weakness
the possibility of producing rankings of mutually exclusive projects different from those from NPV analysis
may have a multiple IRRs or no IRR
Payback period
years to recober the initial cost of an investment
越小越好
pros/cons
pro
unconsiderate terminal or salvage value
con
good method of project liquidity
discounted payback period
可用计算器
profitability index
the ratio of the present value of future cash flows to initial cash outlay
if PI
>1,accept
the NPV must be positive
the IRR must be greater than discount rate
<1,reject
conflicting project rankings
NPV rules, because
it measures the expected increase in wealth
reinvest in IRR is unrealistic
relations between NPV, company value and share price
in theroy:+NPV will increase stock price
in reality: more complex because stock price related to expectation
Cost of Capital
Weighted Average Cost of Capital(WACC)
basic definitions
aka
marginal cost of capital(MCC)
component cost of capital
cost of capital of each components
cost of debt
kd
rate at which firm can raise new debt
yield to maturity on existing debt
before-tax
kd(1-t)
after-tax cost of debt
explain
market interest rate(YTM) on new(marginal)debt
not the coupon rate on the firm's existing debt
kps
cost of preferred stock
kce
cost of common equity
can be viewed as oppotunity cost
calculations
WACC=Wd(Kd(1-t))+Wps*Kps+Wce*Kce
cost of debt capital
2.YTM unavailable: matrix pricing
yield- to-maturity approach
debt-rating approach
add together
cost of noncallable,nonconvertible preferred stock
Kps=Dps/P
Dps=preferred dividends
P=market price of preferred
cost of equity capital
1.CAPM
Kce=Rf+beta(E(Rmkt)-Rf)
the dividend discount model approach
P0=D1/Kce-g
D1=next year dividend
Kce=required rate of return on common equity
g=firm's expected constant growth rate
Kce=D1/P0+g
calculate g
growth rate
g=(retention rate)(return on equity)=(1-payout rate)(ROE)
bond yield plus risk premium approach
Kce=bond yield+risk premium
target capital structure
based on the firm's target capital structure
or the industry average capital structure
WACC and the investment opportunity schedule
the intersect point is optimal capital budget
when ios>wacc, accept
project cost of capital
project beta
pure-play method
based on the equity beta of a publicly traded firm which have similar project
larger leverage, larger beta
beta asset = beta equity *
beta project=beta asset *
challenging issues
estimated using historical returns data
the estimate is affected by which index is chosen to represent the market return
estimate may need adjustment sinse betas are believed to revert toward 1
estimated beta of small firms may be to adjusted upward to reflect risk inherent in small firms that is not captured by the usual estimation methods
cost of equity
country risk premium
sovereign yield spread
yield of developing country's government bonds-
treasury bonds of similar maturities
Kce=Rf+beta[E(Rmkt)-Rf+CRP]
marginal cost of capital(MCC)
the cost of raising an additional dollar of capital
MCC schedue have a upward slope
breakpoint
occurs when cost of any component change
flotation cost
fees charged by invesment bankers when a company raises external equity capital
incorrect treatment
add in the rate to calculate
correct treatment
a cash out flow in CF0
Measures of Leverage
definitions
leverage
the amount of fixed cosrs a firm has
fixed operating cost
building lease
equipment lease
fixed financing cost
interest payment on debt
business risk
risk associated with operating income
sales risk
operating risk
financial risk
debt
when leverage rise, effect on
net income decrease
return on equity could increase or decrease
rate of change on ROE would increase
degrees of leverage
degree of operating leverage
Q=quantity of units sold
P=price per unit
V=variable cost per unit
F=fixed cost
S=sales
TVC=total variable costs
notes
the denominator in this form is operating earnings(EBIT)
degree of operating leverage for a company depends on the level of sales
卖越多，杠杆越小
degree of financial leverage
ratio of the percentage change in net income(or EPS) to the percentage change in EBIT
when there is no leverage,DFL=DOL=1
degree of total leverage
DTL=DOL*DFL
breakeven quantity of sales
definition
breakeven quantity
level of sales to cover all fixed and variable cost
quantity of sales that revenue equal total cost
where net income is 0
contribute margin
price-variable cost per unit
operating breakeven of sales
Working capital management
Source of liquidity
primary souurce of liquidity
used in normal day-to-day operations
including
trade credits from vendors
lines of credit from bank
effective cash flow management
secondary sources of liquidity
can change finacial structure
including
short-term or long live assets
negotiating debt agreements
filing for banckruptcy and reorganizing the company
factors influcing liquidity position
drags on liquidity
delay or reduce cash inflows
increase borrowing costs
pulls on liquidity
accelerate cash outflows
liquidity comparision between peer companies
ratios
current ratio
current asset/current liabilities
the higher, the higher ability to pay short-term bills
if less than 1
negative working capital(current assets-current liabilities)
probably facing a liquidity crisis
quick ratio
without inventory
receivable turnover
credit sales/average receivables
good if close to industry norm
number of days recivables
good if close to industry norm
if high, customer pay bill too slow
if low, company too strict to have customer
inventory turnover
COGS/average inventory
number of days of inventory
payable turnover ratio
purchase/average trade payables
number of days of payables
working capital effectiveness
operating cycle
the average number of days that it takes to turn raw material into cash proceeds from sale
=days of inventory+days of receivables
cash conversion cycle
aka net operating cycle
trun the firm's cash investment in inventoru back into cash
太高不好，说明投资远超working capital
daily cash position
available uninvested cash balance that could
make routine purchase
pay expenses as they come due
affected by
typical cash inflow
cash from sales and collections of receivables
cash received from subsidiaries
tax refunds
borrowing
typical cash out flow
payments to employees and vendors
cash transferred to subsidiaries
payments of interest and principal on debt
investment in securities
taxes paid
dividneds paid
short term securities
include
US Treasury bills
short term federal agency securities
bank certificates of deposit
banker's acceptance
time deposit
repurchase agreements
commercial paper
money market mutual funds
adjustable rate preferred stock
yield calculation
%discount
discount basis yield(bank discount yield)
money market yield
bond equivalent yield
managements
cash management investment policy
investment policy statement
accounts receivable management
aging schedule
inventory management
inventory level
low
lost sale due to stock-out
high
carrying cost
leaded by
increasing average day's inventory,or
decreasing inventory turnover
misleading if across industry
e,g, grocery and art gallary
accounts payable management
pay too early
affect turnover
pay too late
damage relationship
discount
"2/10 net60"
get 2%discount if pay in 10 days, due in 60 days
cost of not taking discount
如果不在折扣期付清，则越晚越好
source of short-term funding
from banks
lines of credit
used by large company
uncommitted line of credit
committed(regular) line of credit
more reliable
bank charge fee
less than a year
interest rate in terms of reference rate like LIBOR
revolving line of credit
banker's acceptance
used by export firms
factoring
actual sale of receivables at a discount from their face values
non-bank
small firm
finance companies for short term funding
higher cost
large firm
issue short term debt called commercial paper
sells to investor(direct placement)
sells through dealer(dealer-placed paper)
interest cost is less than bank