Upload
kyros
View
60
Download
4
Embed Size (px)
DESCRIPTION
Chapter 14 - Raising Capital in the Financial Markets. Chapter 15 – Analysis and Impact of Leverage. Tujuan Pembelajaran 1. Mahasiswa Mampu untuk : Memahami sumber dana internal dan eksternal Memahami bauran pembiayaan yang cenderung digunakan perusahaan - PowerPoint PPT Presentation
Citation preview
1IIS
Chapter 14 - Raising Capital in the Financial Markets
Chapter 15 – Analysis and Impact of Leverage
2IIS
Tujuan Pembelajaran 1
Mahasiswa Mampu untuk:Memahami sumber dana internal dan eksternalMemahami bauran pembiayaan yang cenderung digunakan perusahaan Menjelaskan mengapa pasar keuangan timbul Menjelaskan komponen sistem pasar keuanganMemahami peran bankir investasi dalam perolehan modal Membedakan antara penawaran terbatas dan penawaran umum
3IIS
Pokok Bahasan 1
Sumber dana internal dan eksternalBauran sekuritas perusahaan yang dijual di pasar modalMengapa pasar keuangan munculPembiayaan perusahaanKomponen sistem pasar keuanganBankir investasiPenawaran terbatas dan Penawaran umum
4IIS
Tujuan Pembelajaran 2
Mahasiswa mampu untuk: Memahami perbedaan antara risiko keuangan dan risiko bisnisMenggunakan teknik analisis titik impas untuk berbagai jenis analisisMembedakan konsep keuangan dari leverage operasi, leverage keuangan, dan leverage gabunganMenghitung degree of operating leverage, financial leverage, dan combined leverage
5IIS
Pokok Bahasan 2
Risiko bisnis dan keuanganAnalisis titik impasOperating leverageFinancial leverageKombinasi operating leverage dan financial leverage
6IIS
Q: What are SECURITIES?
A: Financial Assets that Investors purchase hoping to
earn a high rate of return.
7IIS
Types of SecuritiesTreasury Bills and Treasury BondsMunicipal BondsCorporate BondsPreferred StocksCommon Stocks
Which of these are RISKY?Which promise HIGH RETURNS?Is there a relationship between RISK
and RETURN?
8IIS
Corporate FinancingSources
From 1999 through 2001, capital has been raised through the following sources:
Corporate Bonds and Notes 76.9%Equities 23.1%
9IIS
Movement of SavingsDirect Transfer of Funds
cash
securities
saver
firm
10IIS
Movement of SavingsIndirect Transfer using Investment Banker
securities
fundsfunds
securities
saver
investmentbanker firm
11IIS
Movement of SavingsIndirect Transfer using a Financial Intermediary
funds
intermediarysecurities
funds
firmsecurities
financialintermediary firm
saver
12IIS
Financial Market Components
Public OfferingFirm issues securities, which are made available to both individual and institutional investors.
Private PlacementSecurities are offered and sold to a limited number of investors.
13IIS
Financial Market Components
Primary MarketMarket in which new issues of a security are sold to initial buyers.
Secondary MarketMarket in which previously issued securities are traded.
14IIS
Financial Market Components
Money MarketMarket for short-term debt instruments (maturity periods of one year or less).
Capital MarketMarket for long-term securities (maturity greater than one year).
15IIS
Financial Market Components
Organized ExchangesBuyers and sellers meet in one central location to conduct trades.
Over-the-Counter (OTC)Securities dealers operate at many different locations across the country.Connected by Nasdaq system (National Association of Securities Dealers Automated Quotation system).
16IIS
Investment Banking
How do investment bankers help firms issue securities?
Underwriting the issue.Distributing the issue.
Advising the firm.
17IIS
Distribution Methods Negotiated Purchase
Issuing firm selects an investment banker to underwrite the issue.The firm and the investment banker negotiate the terms of the offer.
Competitive BidSeveral investment bankers bid for the right to underwrite the firm’s issue.The firm selects the banker offering the highest price.
18IIS
Distribution Methods
Best EffortsIssue is not underwritten.Investment bank attempts to sell the issue for a commission.
Privileged SubscriptionInvestment banker helps market the new issue to a select group of investors.Usually targeted to current stockholders, employees, or customers.
19IIS
Distribution Methods
Direct SaleIssuing firm sells the securities directly to the investing public.No investment banker is involved.
20IIS
Stock Issue Example:Our firm needs to raise approximately
$100 million for expansion. Our stock price is $20. We Select Merrill Lynch to underwrite the issue for a 2% underwriting spread.
What type of issue is this?It’s a negotiated purchase.
21IIS
Stock Issue Example:Our firm needs to raise approximately
$100 million for expansion. Our stock price is $20. We Select Merrill Lynch to underwrite the issue for a 2% underwriting spread.
How many shares will be sold?$100,000,000 / $20 = 5 million new shares of common stock.
22IIS
Stock Issue Example:Our firm needs to raise approximately
$100 million for expansion. Our stock price is $20. We Select Merrill Lynch to underwrite the issue for a 2% underwriting spread.
What are the flotation costs?Underwriting spread: 2% of $100 million = $2 million.Issuing costs: printing and engraving costs; legal, accounting, and trustee fees.
23IIS
Stock Issue Example:Our firm needs to raise approximately
$100 million for expansion. Our stock price is $20. We Select Merrill Lynch to underwrite the issue for a 2% underwriting spread.
What are the risks?The investment bank accepts the risk of being able to sell the new stock issue for $20 per share. If the stock price falls, the investment bank could lose money.
24IIS
Regulations:The Primary Market
The Securities Act of 1933 Firms register with the Securities Exchange Commission (SEC). SEC has 20 days to review.
SEC may ask for more information.The firm cannot solicit buyers during the review period but can advertise.
25IIS
Regulations:The Secondary Market
The Securities Exchange Act of 1934Established the SEC.Exchanges must register with SEC.Company information must be available to the public.Insider trading is regulated.
26IIS
Regulations:Recent Developments
Securities Acts Amendments of 1975Created National Market System.Eliminated fixed brokerage commissions.
SEC Rule 415Allows Shelf Registration
27IIS
Operating LeverageFinancial Leverage
Chapter 15 – Analysis and Impact of Leverage
28IIS
What is Leverage?
29IIS
What is Leverage?
30IIS
Two concepts that enhance our understanding of risk...
1) Operating Leverage - affects a firm’s business risk.
2) Financial Leverage - affects a firm’s financial risk.
31IIS
Business Risk
The variability or uncertainty of a firm’s operating income (EBIT).
32IIS
Business Risk
The variability or uncertainty of a firm’s operating income (EBIT).
FIRMEBIT EPSStock-holders
33IIS
Business Risk
Affected by:Sales volume variabilityCompetitionProduct diversificationOperating leverageGrowth prospectsSize
34IIS
Operating Leverage
The use of fixed operating costs as opposed to variable operating costs.A firm with relatively high fixed operating costs will experience more variable operating income if sales change.
35IIS
EBIT
OperatingLeverage
36IIS
Financial Risk
The variability or uncertainty of a firm’s earnings per share (EPS) and the increased probability of insolvency that arises when a firm uses financial leverage.
37IIS
Financial Risk
The variability or uncertainty of a firm’s earnings per share (EPS) and the increased probability of insolvency that arises when a firm uses financial leverage.
FIRMEBIT EPSStock-holders
38IIS
Financial Leverage
The use of fixed-cost sources of financing (debt, preferred stock) rather than variable-cost sources (common stock).
39IIS
EPS
FinancialLeverage
40IIS
Breakeven Analysis
Illustrates the effects of operating leverage.Useful for forecasting the profitability of a firm, division, or product line.Useful for analyzing the impact of changes in fixed costs, variable costs, and sales price.
41IIS
Quantity
$
Total Revenue
42IIS
Costs
Suppose the firm has both fixed operating costs (administrative salaries, insurance, rent, property tax) and variable operating costs (materials, labor, energy, packaging, sales commissions).
43IIS
Quantity{
$
Total Revenue
Total Cost
FC
Q1
+
-
} EBIT
44IIS
Quantity{
$
Total Revenue
Total Cost
FC
Break-evenpoint
Q1
+
-
} EBIT
45IIS
Operating Leverage
What happens if the firm increases its fixed operating costs and reduces (or eliminates) its variable costs?
46IIS
Quantity
{
$
Total Revenue
Total Cost= FixedFC
Break-evenpoint
}
Q1
+
-
EBIT
47IIS
With high operating leverage, an increase in sales
produces a relatively larger increase in operating
income.
48IIS
Quantity
{
$
Total Revenue
Total Cost= FixedFC
Break-evenpoint
}Q1
+
-
EBIT
49IIS
Quantity
{
$
Total Revenue
Total Cost= FixedFC
Break-evenpoint
}Q1
+
-
EBIT
Trade-off: the firm has
a higher breakeven point. If sales are not high enough, the firm will not meet its fixed
expenses!
50IIS
Breakeven point (units of output)
QB = breakeven level of Q.F = total anticipated fixed costs.P = sales price per unit.V = variable cost per unit.
Breakeven Calculations
QB = FP - V
51IIS
Breakeven point (sales dollars)
S* = breakeven level of sales.F = total anticipated fixed costs.S = total sales.VC = total variable costs.
Breakeven Calculations
S* = F VC S
1 -
52IIS
Analytical Income Statement
sales- variable costs- fixed costs operating income- interest EBT- taxes net income
53IIS
Degree of Operating Leverage (DOL)
Operating leverage: by using fixed operating costs, a small change in sales revenue is magnified into a larger change in operating income.
This “multiplier effect” is called the degree of operating leverage.
54IIS
DOLs = % change in EBIT% change in sales
change in EBIT EBITchange in sales sales
=
Degree of Operating Leveragefrom Sales Level (S)
55IIS
If we have the data, we can use this formula:
Degree of Operating Leveragefrom Sales Level (S)
Q(P - V) Q(P - V) - F
=
DOLs = Sales - Variable Costs EBIT
56IIS
What does this tell us?
If DOL = 2, then a 1% increase in sales will result in a 2% increase in operating income (EBIT).
Stock-holdersEBIT EPSSales
57IIS
Degree of Financial Leverage (DFL)
Financial leverage: by using fixed cost financing, a small change in operating income is magnified into a larger change in earnings per share.
This “multiplier effect” is called the degree of financial leverage.
58IIS
DFL = % change in EPS% change in EBIT
change in EPS EPSchange in EBIT EBIT
Degree of Financial Leverage
=
59IIS
Degree of Financial Leverage
DFL = EBIT EBIT - I
If we have the data, we can use this formula:
60IIS
What does this tell us?
If DFL = 3, then a 1% increase in operating income will result in a 3% increase in earnings per share.
Stock-holdersEBIT EPSSales
61IIS
Degree of Combined Leverage (DCL)
Combined leverage: by using operating leverage and financial leverage, a small change in sales is magnified into a larger change in earnings per share.
This “multiplier effect” is called the degree of combined leverage.
62IIS
DCL = DOL x DFL
Degree of Combined Leverage
= % change in EPS% change in Sales
change in EPS EPSchange in Sales Sales
=
63IIS
Degree of Combined Leverage If we have the data, we can use this formula:
DCL = Sales - Variable Costs EBIT - I
Q(P - V) Q(P - V) - F - I
=
64IIS
What does this tell us?
If DCL = 4, then a 1% increase in sales will result in a 4% increase in earnings per share.
65IIS
What does this tell us?
If DCL = 4, then a 1% increase in sales will result in a 4% increase in earnings per share.
Stock-holdersEBIT EPSSales
66IIS
In-class Project:Based on the following information on
Levered Company, answer these questions:
1) If sales increase by 10%, what should happen to operating income?
2) If operating income increases by 10%, what should happen to EPS?
3) If sales increase by 10%, what should be the effect on EPS?
67IIS
Levered Company
Sales (100,000 units)$1,400,000
Variable Costs $800,000Fixed Costs
$250,000Interest paid
$125,000Tax rate
34%Common shares outstanding 100,000
68IIS
EPS
Financialleverage
OperatingIncomeSales
Operatingleverage
Levered Company
69IIS
Degree of Operating Leverage from Sales Level (S)
1,400,000 - 800,000 350,000
= 1.714
=
DOLs = Sales - Variable Costs EBIT
70IIS
EPSOperatingIncomeSales
Operatingleverage
10%17.14%
Levered Company
71IIS
Degree of Financial Leverage
DFL = EBIT EBIT - I
= 350,000 225,000
= 1.556
72IIS
EPS
Financialleverage
OperatingIncomeSales
10%15.56%
Levered Company
73IIS
Degree of Combined Leverage
DCL = Sales - Variable Costs EBIT - I
1,400,000 - 800,000 225,000
= 2.667
=
74IIS
EPS
Financialleverage
OperatingIncomeSales
10%26.67%
Operatingleverage
Levered Company
75IIS
Sales (110,000 units) 1,540,000 Variable Costs (880,000) Fixed Costs (250,000) EBIT 410,000 ( +17.14%) Interest (125,000) EBT 285,000 Taxes (34%) (96,900) Net Income 188,100 EPS $1.881
( +26.67%)
Levered Company10% increase in sales
76IIS
Penutup
Tugas