Financial Analysis and Net Profit Prediction about Shanghai Jahwa Corporation

Abstract

Implementing financial analysis by financial ratios is a reliable approach to comprehend a firm’s condition. Besides that, Dupont analysis is a way which regards return on equity as the core ratio of the system and decompose the core into an equation that consists of three other ratios. Forecast of net profit can assist investors in making investment decision. In this work, representative financial ratios are selected and divided into four groups that indicate four main abilities severally. Line charts are produced to show variation tendency of the enterprise’s four main abilities. Dupont analysis of the company is expressed by frame diagram and factor analysis is used to measure different ratios’ degree of influence on return on equity respectively. This research applies weighted average growth rate and average increment speed to increase rate’s calculation. After calculating, two results of predicted net profit are attained and compared with average predicted net profit of authorities. On the whole, Jahwa’ s condition worsened in the first three years, but it bottomed up and rose in the latest year. Net profit margin on sales is the main factor that cause return on equity’s rise through the latest two years while equity multiplier has no impact on its change. As for net profit forecast, using weighted average growth rate to calculate has closer result with authorities’ prediction than using average increment speeds.