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(i)
What exactly is interest? Is money making money? Those who have thrown their money into the water for the sake of high interest rates must figure this out. In fact, interest is part of the profit, money itself does not create money, does not increase in value on its own, and can only be generated in the process of putting it into production.
I have always proposed that in accounting, wages and interest should be regarded as profit distribution items, and there is a balance at the end, which is the final residual distribution right of the entrepreneur; if there is no negative balance, it is the entrepreneur who uses his own money (or financing) to advance wages and interest. In this way, we see if the problem is clearer.
Pipe band boss: Teacher Ma is right, interest is the cost of occupying funds, but the premise is that the investment can generate profits.
Sun Xusheng is not a big V: From the perspective of the enterprise, it is like this, but isn't the salary also a cost?
Ma Jinghao: Whether wages are costs or profit distribution, this requires a breakthrough in thinking. Wages are essentially earned, not liabilities, but a profit distribution (that is, wages should not be deducted from the income statement). If you can't understand this for the time being, it doesn't matter, I'll add a few more words to you here. Since people who engage in political economy do not understand accounting, the greatest fallacy in wages in modern times is to regard them as costs and expenses, so that wages do not seem to be earned, and they have become liabilities in accounting, workers are creditors, and business owners are debtors, so that the simple truth that wages are earned through the "amazing leap" of sales is completely erased, which is the evil result of not treating wages as profit distribution.
(ii)
Enterprises are not as long as they can borrow money or be "masters", you must have the ability to borrow money, that is, at least the return on total assets is greater than the interest rate on liabilities. The level of return on total assets is an important basis for determining whether a company should borrow money to operate. The return on total assets should generally ≧5% or ≧ one-year bank lending rate. When the total asset yield (before EBIT) is greater than the debt interest rate, the use of debt financing can bring positive financial leverage effect, the company will obtain greater returns; when the total asset yield (before EBIT) is less than the debt interest rate and greater than zero, then the financial leverage generated by the debt operation will have a negative effect, the consequence is that the business owner bears greater additional losses, these additional losses are the financial risks of the enterprise, when the money is not paid, it will even trigger a break in the capital chain, resulting in the bankruptcy of the enterprise.
Duo Yuxi: Why do you understand as soon as you say it.
Hu Yidao, all the way to the north: If the return on total assets continues to be less than the risk-free interest rate, then the company's continued operation is destroying value.
Ma Jinghao: To introduce you to the concept of "Ponzi interest", when part of the cash paid by an enterprise for interest comes from the cash inflow from financing activities, this is Ponzi interest. Such enterprises will eventually go bankrupt due to the break of the capital chain.
(iii)
Finance expenses are mainly net interest expenses and may be positive or negative. We can roughly judge the capital and cash flow status of the enterprise from the total amount of financial expenses. The financial cost is negative, which generally indicates that the enterprise has sufficient funds and holds a large amount of cash to manage the financial management; on the contrary, the financial expense is positive, which generally indicates that the enterprise is tight on funds, and even more mortgage borrowing, borrowing new to repay the old, which can be described as a double day of ice and fire. The ratio of financial expenses to net profits can be used to analyze the company's debt repayment pressure, if the ratio of financial expenses to net profits is greater than 1, it means that the company's financial expenses have eaten a lot of profits, to a certain extent, it has become a bank worker, debt repayment pressure is large, and its solvency is greatly weakened. For these companies, investors should pay attention to the trend of their financing costs and financing channels in recent years.
Shenzhen Banker: Mr. Ma's report subject analysis is always so simple and easy to understand, and financial expenses are one of the most commonly concerned subjects when reading statements.
liUzhAAA: Teacher, I think interest expense accounts for more than 10% of net profit.
(iv)
【How to judge the double high deposit and loan of a listed company?】 1. High deposits: In general, as long as the monetary funds / total assets > 25%, it can prove that the company's capital is sufficient and the deposit is high, but whether the monetary funds are real or not can not be taken lightly. We can judge by analyzing the average value of interest income and monetary funds under the financial expense account (the sum of the value at the beginning of the period + the value at the end of the period /2), the monetary funds of the listed company are placed in the bank even if it is a current period, we temporarily calculate according to the interest rate of 2%, if the average value of the interest income / monetary funds * 100% <2%, it proves that there may be a problem with the monetary funds, the company may not have so much money, and the monetary funds are fake. 2. High borrowing: How to judge that a company has high borrowing? We can judge by analyzing the ratio of interest expense to the company's net profit under the financial expense, if the interest expense/ net profit > 15%, it proves that the company borrows a lot, which is an empirical value, and the interest on the loan accounts for 15% of the net profit, which means that the company's borrowing data is too large. If the number of deposits and loans of a listed company is high, it can basically be judged that there is a phenomenon of double high deposits and loans, because since the company is so rich, it will not borrow so much money.
Mongolian small iron pot: If it is mainly demand, even if most of the funds are deposited in a 7-day agreement, it is difficult to reach 2% of the deposit interest rate, right? 1.5% is not bad.
Folded Angel: That means less money.
Zhuge Humble: Teacher Ma, the articles on your WeChat public account have been read almost all the time. Benefit.
Ma Jinghao: You can definitely become a good CFO.
(5)
The so-called interest protection multiple refers to the extent to which the total profit without deduction of borrowing interest can cover the borrowing interest, and the calculation formula is: EBIT / interest expense, that is, (net profit + interest expense + income tax expense) / interest expense. The interest protection multiple should be at least greater than 1, and the higher the multiple, the stronger the long-term solvency of the enterprise. If the interest protection multiple is too low, it indicates that the safety and stability of the enterprise's debt repayment are at greater risk. One of Buffett's stock selection criteria: the interest protection multiple of non-financial enterprises is generally higher than 7 times.
Judging from the cases of domestic debt default enterprises, the interest protection multiple can better measure the solvency of the enterprise, and the issuer's interest protection multiple is more than 2, and the probability of default within one year is extremely small; while the interest protection multiple is below 2, the probability of default increases significantly. Therefore, in financial analysis, it is necessary to pay attention to the risk that issuers of public bonds with interest protection multiples of less than 2 may default materially, especially those issuers that rely heavily on borrowing new to repay the old.
However, there are also limitations in the interest protection multiple, its molecules and denominators are based on the caliber of profits, and the actual payment of interest needs to pay real cash flow, if the profit and operating cash flow divergence is larger, the indicator is high, can not mean that the enterprise has enough cash to repay the interest.
Buffett is very fond of companies whose interest expenses are very low to EBIT and therefore have a high interest protection multiple, very much like companies with low debt or even zero debt, and hate high debt companies. This is reflected in the low balance sheet and a high interest protection multiple on the income statement.
Ma Jinghao: Interest protection multiple = (net profit + interest expense + income tax expense) / interest expense, because the net profit is not clear. In practice, it is recommended to use the cash interest protection multiple = net operating cash flow before EBIT (net cash flow from operating activities + cash paid by business tax + cash paid for interest) ÷ interest expense.
The sun came out V: Teacher Ma said very reasonable, because in addition to the water depth (authenticity), there is profit is based on sales revenue - cost - taxes and fees, but sales income is not necessarily converted into cash, in many cases into accounts receivable, from a realistic point of view, The calculation method proposed by Teacher Ma has a higher degree of protection, taught, thank you.
Explain deep financial logic in concise language, such as the article gets your approval, I hope you read it to show encouragement. It is not easy to adhere to the original for a long time, many times want to give up, persistence is a kind of faith, focus is an attitude, accompanied all the way, together with the heavens and the earth, thank you.
