Structure and content of 1. financial statements

Financial statements are documents that reflect the results of operations and financial position of an enterprise prepared and published on a regular basis, including the balance sheet, profit statement, cash flow statement and notes. Different types and sizes of enterprises may have different accounting standards and reporting formats, but basically follow the following principles:

Balance sheet: Reflects the assets, liabilities and owner's equity of an enterprise at a particular date (usually year-end or quarter-end), reflecting the asset structure, capital structure and solvency of the enterprise.

Profit statement: Reflects the income, expenses and profits of an enterprise in a specific period (usually one year or one quarter), reflecting the profitability, cost control and efficiency improvement of the enterprise.

Cash Flow Statement: Reflects the cash income and expenditure of an enterprise in a specific period, reflecting the cash liquidity, cash flow structure and cash flow source of the enterprise.

Note: Additional explanations of significant items in the financial statements, including accounting policies, accounting estimates, significant events, related transactions, etc., increase the transparency and comparability of the financial statements.

The analysis method of 2. financial statements.

The financial statements are analyzed in the following ways:

Ratio analysis: By calculating the ratio between different projects, it reflects the performance of the enterprise in different aspects, such as profitability, solvency, operating capacity, etc. Commonly used ratios are net profit margin, asset turnover, current ratio, etc.

Trend analysis: by comparing the financial data of the same enterprise in different periods or different enterprises in the same period, reflecting the changes of the enterprise at different times or in different environments, such as growth rate, market share, etc.

Comparative analysis: By comparing the financial data of different enterprises in the same industry or region, it reflects the advantages and disadvantages of enterprises in the competition, such as profit level, cost structure, etc.

Predictive analysis: Through the use of mathematical models or statistical methods, based on historical data and related factors, to predict the future financial position and operating results of enterprises, such as revenue forecasts, profit forecasts, etc.

Investment Application of 3. Financial Statements

Financial statement analysis is an important part of investment due diligence, which can help investors assess and predict the value, risk and potential of the target enterprise from the following aspects:

Value assessment: By adjusting and discounting assets, income, profits and other items in the financial statements, calculate the intrinsic value or market value of the target enterprise and compare it with its stock price or trading price to determine whether it is overvalued or undervalued.

Risk assessment: Through the analysis of liabilities, cash flows, related transactions and other items in the financial statements, identify the various risks of the target enterprise, such as financial risk, market risk, legal risk, etc., and quantify or qualitatively rate them.

Potential forecasting: Through the analysis of cost, efficiency, innovation and other items in the financial statements, various opportunities, such as market opportunities, technology opportunities, management opportunities, etc., are identified and quantified or qualitatively expected.

4. Shangpu Consulting Service Customer Case

As one of the most leading and authoritative independent third-party research and investment and financing consulting institutions in China, Shangpu Consulting has rich experience in financial statement analysis and professional ability, and can effectively use financial data for value assessment, risk assessment and potential prediction when providing investment due diligence services to clients. The following are some examples of clients of Champ Consulting Services:

a certain well-knownPEWhen the institution makes investment due diligence on a new energy vehicle company, it entrusts Shangpu Consulting to conduct an in-depth analysis of the company's financial statements. Through the ratio analysis, trend analysis and comparative analysis of the enterprise's asset structure, profit level and cash flow, Shangpu Consulting found that the enterprise has high technical advantages and market share in the industry, but there are also high R & D costs and operating costs, as well as low net profit margin and net cash flow. Champ Consulting also usesDCFThe model, based on the historical data and industry forecast data of the enterprise, calculates the intrinsic value of the enterprise and compares it with its transaction price, providing customers with reasonable investment advice.

a certain well-knownVCWhen the institution makes an investment in a large medical health enterprise, it entrusts Shangpu Consulting to conduct an in-depth analysis of the financial statements of the enterprise. Through the ratio analysis, trend analysis and comparative analysis of the enterprise's revenue structure, cost structure, profit structure and other aspects, Shangpu Consulting found that the enterprise has a high growth rate and profitability in the industry, but also has a high proportion of related transactions and accounts receivable, as well as a low net cash flow. Champ Consulting also usesPEThe model, based on the historical data and industry forecast data of the enterprise, calculates the market value of the enterprise and compares it with its transaction price, providing customers with reasonable investment advice.

When a well-known merger and acquisition institution made an investment in a semiconductor enterprise, it commissioned Shangpu Consulting to conduct an in-depth analysis of the financial statements of the enterprise. Through the ratio analysis, trend analysis and comparative analysis of the company's assets and liabilities, profit and loss, cash flow, etc., Shangpu Consulting found that the company has high technological innovation and market competitiveness in the industry, but there are also high Financial risks and legal risks, as well as lower return on net assets and net cash flow. Champ Consulting also usesHOME/EBITDAThe model, based on the historical data and industry forecast data of the enterprise, calculates the enterprise value of the enterprise and compares it with its transaction price, providing customers with reasonable investment advice.

5. epilogue

Financial statement analysis is the core content of investment due diligence, which can help investors to understand the financial situation and operating results of the target enterprise comprehensively, objectively and accurately, so as to make reasonable investment decisions. This paper introduces the structure, content and indicators of financial statements, as well as how to analyze financial statements effectively, and how to use financial data for investment evaluation and forecasting.