ACCA F9 financial management partF partE

ACCA F9 financial management partF partE 超详细整理！

business valuation

• market efficiency
  • efficient market
    • allocative efficient(direct fund)
    • oprational efficient(minimal transaction cost)
    • information processing efficiency(relevant and avilable information)
  • inefficient market
    • not always an accurate reflection of valuation
      • 1.weak form(只反映过去信息)
        • future cannot be predicted by past
        • technical analysis is not work
        • the price is not always the intrinsic value of share, the fundamental analysis can be used to make abnormal gain by trading mispriced shares.
      • 2.semi form（过去和公开信息都反应）
        • cannot use public information
        • 内部信息（unpublished information is accessible to make gain）
      • 3. strong form efficiency(反应所有信息包括内部,任何信息都是正确的，无法造假， 只有公司盈利能力能够影响股价)
        • cannot use any information
        • insede dealing will be fined
        • by luck
        • 出现强有力市场原因：缺乏内部监管（lack of regulation）
• Business valuation
  • Asset based
    • booke value
      • 基于历史数据（unlikely to be reliable）
    • NRV(卖方接受最低价)
      • 忽略goodwill
    • replacement cost=Asset-liability（买方接受最高价）
      • 忽略goodwill
      • going concern basis
    • limitations
      • do not value what is been purchased,investors buy the company not for the asset but for the cash flow can generate
      • ignore the intangible asset
  • income based(适合大股东majority shareholder)
    • P/E
      • P/E*EPS*share amount
      • 适合unlisted company，适合大股东因为可以decide the devidend and retention
    • limitation:
      • assume market is inefficient, use the industry average P/E ratio
      • historical data don't take account of the future growth and impact
      • relative simplistic
    • Earning yield
      • 如果考虑了增长率则是：D0(1+g)/r-g
  • cash flow based(can be used for minortiy shareholder)
    • MV=D0/r (r是要求的return)
    • D0(1+g)/r-g
    • Mixed（复杂股息，先有固定收入再稳定增长可以用股利估值，反之则不行）
    • suitable
      • minority shareholder
      • company is in maturity stage with stable cash flow
      • used for existing managenment
    • limitation of dividend valuation model
      • require return will change
      • some companies not pay the dividend
      • assume investors are rational
      • Ke小于g ,会有negative
  • discounted cash flow basis(maximum value is equal to the PV of future cash flow)
    • suitable
      • Theoretically is the best valuation method,因为考虑了PV
      • Can be used to value part of a company
      • appropriate for valuing the cahs flow for the new ownership
    • limitation
      • hard to get the imformation
      • the discount rate , inflation may not be realistic
      • difficult in valuing company's worth beyond the period
      • difficult in choosing a time horizon
• debt
  • irredeemable debt
    • MV=intrest/Kd
  • redeemable debt
    • MV= Intrest+redemption value/Kd
      • 等于其利息折现+本金折现（有premium要加上premium，算利息时是年金系数，本金是PV系数）
  • convertible debt
    • 现根据股票的增长率算出每个债券所能转换成股票的价值（100能换几个股票*每个股票增长后的市值）
      • 比较大小，与redeemable计算方法一样只是最后收回的本金不同
  • preference（当成永续年金）
    • MV=dividend/k
• 注意是cum（to be paid）还是 ex（has been paid）,含权的话要加上第零年的利息

PartE Business finance

• Source of finance
  • equity
    • AD
      • no obligation to pay dividend
      • don't to be repaid
    • DIS
      • high cost
      • dilute the control
      • dividends are not tax deductible
  • preference share（介于股和债之间）
    • 算gearing：debt/equity时 ，算作liability不算equity
    • AD
      • dividend is only optional
      • don't dilute the control
      • can be an alternative if there are limits to safe level of borrowing
  • method
    • right issue
      • AD：
        • simple and relative cheap
        • do not require prior consent of shareholders(无需股东同意)
        • 降低gearing，equity增多liability下降
        • matain the existing percentage ownership
          • shareholder have the flexibility to buy or not
      • Dis
        • sometimes indicate the problems of the company(总是发意味过于缺钱)
        • dilute control
    • TERP
      • =总市值/总股数（旧的+新的）
      • value of a right=TERP-issue price
      • value of a right per existing share=TERP-Issue price/几股旧的换几股新的 one for four 就是/4
    • share option
      • 当股东增持股票，财富无变化
      • 当股东卖出，获得value of a right ， 财富也无变化
      • 股东不增持，财富就会下降
    • placing(定向增发)
      • AD
        • cost lower because lower publicity
        • quicker
      • DIS
        • the regulator insists a restriction on selling(有封闭期不能卖出)
        • dilution
        • the spread of shareholders may be more limited
    • public offering(公开募集)
      • 需要investment underwriter(承销商——投行)所以更costly
    • stock exchange listing
      • private company can ge listed through IPO
      • AD
        • increase marketability of the company(增加公司流动性)
        • make it easier to make more equity finance from a large number of investors
      • Dis
        • become listed is expensive and time consuming
        • face a higher level of regulation
        • treat of takeover(恶意收购)
    • VC（venture capital）
      • unquoted company(无上市的公司)但 high potential ,VC给资金5-10年期待高回报
• Islamic finance
  • riba
    • is forbidden , moeny can't make profit
  • murababa（trade credit）
    • purchase goods immediately but deferred payment(立即购买递延支付)
    • bank gain the mark up(银行赚差价)
  • musharaka(VC)融资
    • 各方投入技术和capital， 并且根据资本投入分配利润和loss
  • mudaraba(equity finance) da-大-股权,da-打 打有钱人，有钱人处于劣势
    • 一个人出资（不能参与经营），其他人提供技术
    • 利润根据合同分配，亏损只亏出资方
    • 适合private equity investment
  • Ijara（lease finance）
    • lessor is responsible for the major maintenance and insurance
    • lessee is responsible for the day to day
  • sukuk（debt finance）
    • 会给出debt 标的物的equity（所有权）
    • 比一般债券时间更短
  • Islamic financeVSconventional finance
    • Islamic
      • requires risk and reward, economic benefit shared between the finance provider and user（共享风险与回报）
      • Riba is forbidden
      • finance instrument must have direct link with underlying tangible asset(必须与标的物挂钩)
      • must compliance with the Shariah law
    • conventional
      • do not require sharing of risk and reward
      • intrest is the main form of return
      • financial instrument can be asset backed or aseet based
• Finance for small and medium-sized entities(SMES)
  • difficulties
    • funding gap
    • maturity gap
      • 缺少中期资金
  • solving
    • business angles(天使投资人)
    • Government grants
    • making share marketable(中小板块)
    • tax incentives
    • VCT（venture capital trust）
    • suupply chian finance
• Cost of debts
  • cost of capital is company's view, required return is investor's view
  • WACC
    • 股权市值占比*成本+债权市值占比*成本
      • =(Ve/Ve+Vd)*Ke+(Vd/Ve+Vd)*Kdat
  • bank loan
    • Kdat=bank intrest*(1-T)
  • irreedemable debt
    • kdat=intrest*(1-T)/mv
  • redeemable bonds
    • (笔记P31)kdat=IRR
  • convertible
    • 同redeemable，不同的是要判断每张债券转化成股票的价值，赎回的金额选取高的那个
  • preference share
    • kp=dividend/MV
• cost of equity
  • 股利估值模型P0=D0*（1+g）/re-g
    • Kd=(D0*（1+g）/p0)+g
    • assumptions
      • invesetors only cash flow is dividend
      • dividend is paid perpetuity
      • growing at fixed rate
      • not suitable for zero dividend company
  • g=(增长了几年)根号下last dividend/first dividend后-1（给出年份用这个）
  • g=b*re(给出百分比用这个)
    • re=return on equity, b=1-DPS/EPS(1-dividend payout ratio)
• capital asset pricing model(CAPM)
  • risk
    • systematic risk:the risk that all the company in the same way
    • unsystematic risk:the risk that specific to individual companies
    • risk free of return:government debt
    • equity risk premium:风险越高收益越高
  • portfolio theory：reduce the risk by diversfying the investments
    • 系统行风险无法消除，CAPM 假设每个人都是perfect portfolio，所以只考虑了系统性风险
  • beta：衡量系统性风险
    • ke=无风险回报率+系统性风险的风险溢价对应回报率=risk free+beta*(整个市场回报率-risk free)
  • AD
    • consider only systematic risk
    • relationship between the required return and systematic risk in a quantitative way（定量方式研究关系)
    • 比DVM好因为考虑了系统性风险
  • DIS
    • perfect market assumptions
    • well-diversified portfolio assumptions
    • beta is not always constant
  • project specified discount rate
    • business risk 和financial risk
      • all equity无financial risk
    • asset beta/ungeared beta Equity beta/ geared beta
    • Ba=Ve/Ve+Vd*（1-T）*Be
      • 1.去杠杆（求Ba）用的是公司的 2.加杠杆 （求Be）用的是新项目的 3.CAPM
        • 行业变化，用新行业的Ve和Vd求新的Ba
        • all equity：Ba=Be
        • 已经给了新的Ba无需去杠杆，已经给了新项目的额Be无需加杠杆
  • marginal cost and WACC
    • MCCis additional cost , the return must be compared with the marginal cost of capital and not the average cost. when the expected return higher than required can be accepted
• capital structure
  • operation gearing=contribution/PBIT financial gearing=Debt/Equity
    • high gearing： the firm not only failing to make a return to shareholders, but also failing to meet the intreset cost obligation
    • 一般用MV计算，preference算作liability
      • MV=数量*单价 book value=share capital+ reserves
  • intrest cover ratio=PBIT/intrest payment
  • capital structrue theory
    • MV=cash flow/WACC
      • traditional structure认为有最佳结构:一个个试验
        • assumptions：business risk is constant 无税无交易成本
        • 非线性Not linear WACC线下后上升，公司市值先上升，在债券用到顶点时，市值下降
      • MM without tax（linear relationship between cost of equity and financial risk）
        • regardless of debt level 公司MV 不会变，WACC和Kd是两条直线
        • assumption：完美资本市场，no cost of financial distress and liquidation
      • MM with tax
        • Kdat可以抵税，WACC线性下降，Kd不变，公司市值线性上升
          • 用债越多越好
  • Pecking order theory（融资优序理论）先内后外，先债后股
    • minimize issue cost 2. information asymmetrical 3. minimize time and expense
  • Factors influence the choice of finance
    • 1.cash flow 2. risk 3.availability and maturity 4 ease of issue
• dividend policy
  • dividend and retained earnings
    • use retained earnings as the source of of finance, shareholders will get fewer dividends
  • dividend theory
    • residual theory(剩余理论)：项目有正NPV的时候才会支付dividend
      • if there are positive NPV , paying dividend will reduce the potential shareholder wealth.
    • dividend irrelevancy theory :MM认为dividend is irrelevancy， 只有profit影响企业价值（大题中不写关于MM理论的）
  • dividend relevancy:dividend declared can be interpreted a signal from directors to shareholders about the future propects of the film
    • due to information asymmetry
    • a cut of dividend may be treated by investors as signaling that the future propects of the company is weak
  • Factos influence dividend policy
    • legal and other restrictions
      • in accordance with the statuory requirement
    • liquidity
    • profitability
      • the company need to have enough retained earning to finance
    • the need for finance
    • the level of financial risk
    • signaling effect
      • depend on the dividend expectations of the market
    • clientele effect(族群效应)
      • different investors have different needs relating to income or capital growth
    • liquidity peference（流动性偏好）
  • dividend policy
    • zero dividend
    • stable growth
      • well-running company and high growth rate
    • constant dividend
    • constant payout ratio
  • other approaches
    • bonus issue(scrip issue)送股，没有收到资金
      • indicate confidence in future earning increases
        • 股票数量增多，EPS会下降
    • scrip dividends
      • 可以选择cash还是more shares
    • share repurchase
      • unsure the sustainability of a possible increase in the normal cash dividend
      • 偶尔用一次
      • 股价会上升，gearing也会上升
      • prevent takeover(反恶意收购)
    • 股东只能投票降低股息而不能投票增加股息
• long-term
  • risk of default(违约), might force the company liquidation
  • restrictive convenants
  • fixed charge or floating charge as collateral
  • intrest is tax deductible
  • cheaper than equity finance
    • don't dilute the control
• fixed charge or floating charge as collateral(固定浮动抵押)
• short-term
  • overdraft（透支）
    • flexbility
    • cheapness
    • risk of reduction in overdraft limit
  • short-term loan
    • certainty(loan agreement)
    • cheapness(比overdraft还要低)
    • Restrictive convenants(限制性条款)
    • instalment might be required(分期付款)
• risk of repayment at very short notice