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发表于 2011-7-13 16:38
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Thanks elcfa...
Just picking from your example which seems counter intuitive and that is where analysis of financial statements come to fore:
"1. BS Before setting up SPE
Notes receivable 100 Equity 100
Total assets 100 Total Liabilities and equities 100"
Plain vanilla BS. Simple assumption that the company had equity of 100, cash 100 and thereafter cash was lent / invested in bonds and thus notes receivable
Here, EV of the company (assuming MV of assets / notes receivable is equal to 100) is 100 after discounting all the risks including illiquidity, default, interest rate / price, reinvestment risk etc. In future MV will fluctuate so will EV. No brainer here, its all market determined. But if assets are not traded, analysts may have to put a discount for risks stated above. Though as of now EV reflects as 100 is books of accounts should be adjusted on a timely basis
"2. The company now "sells" the Notes receivable for say 90 to an SPE and gets 90 in cash. The BS would look like:
Cash 90 Equity 90
Total assets 90 Total Liabilities and equities 90"
The company gets rid of all associated risks assuming that SPV has no recourse to the company in any case. So 10 is the price company pays to transfer all the risks. So immediate EV at 90. Subsequently value of the company may go up, may be > 100, as there is no risky assets on the company's BS and on the assumption how this cash will be utilised?
"3. Cash 90 Loan payable 100
Notes receivable 100 Equity 90
Total assets 190 Total Liabilities and equities 190"
Another way to look, Equity and notes receivable remains same at 100, and new assets (cash) and new liabilities (Loan payable) created at 90. Assuming loan payable and notes receivable mature together, 90 goes to pay loan payable and 10 remains as cash with the company (assuming no charges, fees etc.)
Even if EV reflects at 190 in books of accounts, analysts may discount it. From analysis point of view, loan payable and Notes receivable gets netted off. So Equity 100, Cash 90 and notes receivable 10. Unlike case 2 above, immediate EV may be 100 from analysis point of view but the risk of default still remains with the company and value of the company may subsequently go down below.
I believe above makes sense (value case 2 > case 3) as done by companies practically to pass on the risk and thus show increased value of company.
In examples above, there is no debt so EV = MV of equity |
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