Analyzing

Financing Activities
BAB 3.
Liabilities (1)
• Financing Obligations that require future payment of money,
services or other assets.
• Outsider’s claims against a company’s present and future assets
and resources.
• Dapat dibedakan menjadi 2:
▪ Public Debt (contoh: Perusahaan menerbitkan bond)
▪ Private Debt (perusahaan meminjam ke bank)
• Bedanya dengan equity financing?
o Refers to claims of owners on the net assets of a company.
o Junior to creditors, meaning they are residual claim to all assets, once claims
of creditors are satisfied.
o Equity holders are exposed to the maximum risk associated with a company
but also are entitled to all residual returns of a company.
o Debt Financing memiliki fixed term. Ada bunga dan jatuh tempo yang suda
fixed.
Liabilities (2)
Current liabilities (1)

• Conceptually, companies should record all liabilities at the

present value of the cash outflow required to settle them. But
in practice, current liabilities are recorded at their maturity
value (not their present value), due to the short time period
until their settlement.
• Ada 2 jenis current liabilities:
1. Berasal dari Operating activities
• Taxes payable
• Unearned revenues
• Advances payments
• Accounts payable
• Other accruals, such as wages payable
Current liabilities (2)

2. Berasal dari Financing activities:

• Short term borrowing (lebih risky karena perlu pelunasan jangka pendek,
tetapi bunga biasa lebih rendah dari long term borrowing)
• Current maturities of long term debt
• Interest payable
• Revolving lines of credit (untuk membiayai working capital needs)
• Many borrowing agreements include covenant to protect
creditors.
• In the event of default, analyst should reclassify long-term
debt as a current liability.
Noncurrent liabilities (1)
• Obligations that mature in more than one year ( or the operating
cycle if longer than one year).
• Include loans, bonds, debentures and notes.
• Can take various forms. Their assessment and measurement requires
disclosure of all restrictions and covenants.
• Disclosures include:
o Interest rate
o Maturity dates
o Conversion privileges
o Call features
o Pledges collateral
o Sinking fund requirements
o Revolving credit provision
Bond(1)

Face value bond $100,000, interest 6% payable annually, jatuh tempo

3 tahun. 3 Skenario yang mungkin terjadi pada saat penerbitan.
Misalkan effective interest rate pada saat bond diterbitkan:
• 6%
• 3%
• 10%
Hitunglah Present Value Bond pada saat penerbitan!
Bond(2)
Bond(3)

• Jika menggunakan Fair Value Accounting, dan effective interest

rate pada akhir tahun pertama turun dari 10% menjadi 7%,
berapakah Present Value Bond yang akan disajikan di St.of
Financial Position?
Bond(4)

• Jadi, jika Anda membaca Exh. 3-1, semoga lebih paham.

• Tetapi harus diingat, bahwa untuk IFRS, long term debt tetap harus
disajikan dengan amortized cost, bukan Fair Value.
• Fair value accounting ini harap dipahami saja bahwa jika ada
penggunaan FV untuk penyajian long term debt, Anda paham
darimana angkanya dan perhitungan gain or loss nya.
Bond(5)

• Mengapa pemakaian IFRS tidak suggest pemakaian FV accounting

untuk penyajian Long term public debt?
• Jika suatu perusahaan credit rating nya memburuk setelah
menerbitkan bond, Fair value dari bond nya akan mengecil
dibanding maturity value (face valuenya). Tetapi penurunan Fair
Value dari bond ini justru akan membuat Perusahan mengakui
adanya “income” (karena dalam perhitungan akan muncul
adanya “Gain” dari penurunan FV Bond).
Analyzing Debt Financing (1)
• Amortized cost vs Face Value
o Besarnya amortized cost dan Face value dapat berbeda,
tergantung perbedaan stated rate dan effective rate pada saat
bond diterbitkan.
o Untuk Analyst, perhatikan:
✓ Untuk perhitungan ratio debt to equity Gunakan Face Value
(maturity value, Par
✓ Untuk membuat forecast cashflow value)
• Fair Value Accounting
o Reflects the present value of debt using current interest rates.
o Under normal conditions, FV measures the liquidating value of
the debt.
Analyzing Debt Financing(2)
▪ Berguna jika company ingin me-’retire’ debt nya sebelum jatuh tempo.
▪ But less useful as a measure of debt yang akan di hold hingga jatuh
tempo.
o Applying FV Accounting to debt can cause transitory unrealized
gains/losses to creep into reported income.
o Untuk Analyst:
✓ Identify these items
✓ Remove them when estimating sustainable income.
• Future Debt Retirement
o Untuk Analyst:
▪ Periksa future debt payment schedule, yang juga diperlukan untuk cash
flow forecasting.
▪ Evaluate whether a company has the ability to repay its debt when it
matures.
Analyzing Debt Financing(3)

• Unutilized Credit Lines

o Untuk working capital finance or bisa untuk long term finance?
• Protections:
o Lenders punya kontrak dengan borrowing company.
o Ada 3 cara protections:
1. Seniority
▪ The order in which different parties will be paid when a company’s business
dissolved.
2. Security/collateral
▪ Assets that are set aside during dissolution toe specifically satisfy a particular
claim.
Analyzing Debt Financing(4)

3. Covenants
• Persyaratan yang harus dipenuh oleh borrowing company.
• Ada 2 jenis:
1. Affirmative Covenants
▪ Actions that management needs to take to keep the debt in good
standing.
▪ Contoh: requirement that the company must file audited FS within a
specified time period.
2. Negative Covenants
▪ Limits management behaviors that might be harmful to the lenders
▪ Terdiri dari:
a. Constraints
Specify when a company has violated a covenants
Analyzing Debt Financing(5)
b. Penalty/restrictions
▪ Violating a covenants is ground for Technical Default which provides lenders
legal rights to demand immediate repayment of their debts.
▪ Detail mengenai ini dapat kita lihat dari notes to FS, debt agreements,
prospectus to debt issue.

Analyzing Protections
Perlu untuk diperhatikan analyst (both equity and debt analysis):
• Senior debt is less risky than junior debt.
• Secured debt is less risky.
• Secured debt is typically carries higher interest rate than unsecured debt (because only
the riskiest company issue secured debt).
• Covenants tend to act as early warning mechanisms for lenders
• Analyst should keep track:
• Actual covenant violations
• Should estimate covenant slack (margin of safety) -> a measure of how close a company is to
violating its covenants.
LEASE (1)
LEASE (2)
LEASE (3)
LEASE (4)

Illustrasi:

• Pertama kita akan hitung Present Value dari leasing ini pada Year 0,
dan membuat tabel seperti exhibit berikut.
• Kedua, menghitung depresiasi dengan straight line.
 LEASE (5)
Kolom
interest: 8% x
beginning
year liability

Kolom
Principal:
Payment
$2,505 -
interest
• Total lease liability pada awal 2005 didapat dari $2,505 x 3.99271 = 10,000
(pembulatan).
PV annuity, n=5
• Depresiasi per tahun 10,000/ 5thn= 2,000/ tahun. i=8%
LEASE (6)

• Bagaimana pengaruh leasing ini pada Income Statement dan St. of

Financial Position?

Total expense ini akan

mempengaruhi equity
(mengurangi) di St. of
financial position.
LEASE (7)

Perubahan equity
ini dapat dilihat
dari kolom total
expense
(akumulasi) pada
Income Statement
effect di halaman
6 ppt.
Analyzing lease (1)
Analyzing lease (2)
• Lease disclosure for Best Buy (exh. 3.5)
Analyzing lease (3)
• Converting Operating Lease to Capital Lease (Best Buy)
Analyzing lease (4)
Analyzing lease (5)

Dapat dilihat
bahwa solvency
ratio Best Buy sangat
berubah ketika kita
meng convert
operating lease nya
menjadi capital
lease!
Contingencies and Commitments (1)
Contingencies and Commitments (2)
Contingencies and Commitments (3)
Off-Balance-Sheet Financing (1)
Off-Balance-Sheet Financing (2)
Off-Balance-Sheet Financing (3)
Off-Balance-Sheet Financing (4)
Off-Balance-Sheet Financing (5)
Shareholders’ Equity (1)
Shareholders’ Equity (2)
Shareholders’ Equity (3)
Shareholders’ Equity (4)
Shareholders’ Equity (5)
Analyzing Capital Stock
• Items that constitute shareholders’ equity usually do not
have a marked effect on income determination.
• Analysis need to check the composition of capital
accounts and their applicable restrictions.
▪ This is because provisions can affect residual rights of common
shares, as well as the rights, risks and return of equity Investors.
o Provisions ini termasuk dividend participation rights, conversiong rights, and
a variety of options and conditions that characterize complex securities
frequently issued under merger agreements.
▪ It is important that analyst reconstruct and explain changes in
these capital accounts.
Shareholders’ Equity (6)
Shareholders’ Equity (7)
Accumulated Other Comprehensive Income
Book Value per Share (1)
• The book value of common stock is equal to the total
assets less liabilities and claims of securities senior to
common stock (such as preferred stock) at amounts
reported on the balance sheet (but can also include
unbooked claims of senior securities)
• A simple means of computing book value is to add up the
common stock equity accounts and reduce this total by
any senior claims not reflected in the balance sheet
(including preferred stock dividend in arrears, liquidation
premium, or other assets preferences to which preferred
shares are entitled)
Book Value per Share (2)

• Contoh:
Book Value per Share (3)
Relevance of Book Value per Share
Liabilities at the ‘edge’ of Equity (1)

• Convertible Debt
▪ Debt that can be converted into equity shares at maturity.
▪ Hybrid security-> combination of features of debt and equity.
▪ Allows the holder an option to convert at a fixed price.
(Conversion will occur only if the share price is higher than the
conversion price at maturity).
▪ Companies issuing convertible debt must separately account for
the liability (debt) and equity (conversion option) components
on the date of the issue.
Liabilities at the ‘edge’ of Equity (2)
▪ The amount allocated to liability is estimated by determining FV
of a pure debt security that is similar in every other respect to the
convertible security.
▪ Setelah itu, sisanya baru ke equity.

Contoh:
Liabilities at the ‘edge’ of Equity (3)

▪ Sometimes bond are issued with attached warrants on the

company’s equity. Entitle the holder to buy the underlying stock of the
issuer at a fixed exercise price until the expiration
date, similar to call option.

▪ Bonds and warrant are separate securities, dapat dijual terpisah.

▪ Bonds are accounted for liability, and warrants as equity at their
respective Fair Value, at the date of issue.
Liabilities at the ‘edge’ of Equity (4)

Redeemable Preferred Stock

• Equity securities (typically Preferred Stock) that possess
mandatory redemption provisions.

Require a company to pay funds at specific dates

• Redeemable PS are different from conventional equity

capital and should not be included in Stockholders’ equity
• Analyst: treat them as an obligation to pay cash at a
future date.
Liabilities at the ‘edge’ of Equity (5)
Minority Interest
• When a subsidiary is partially owned, stockholders’ equity
cannot be aggregated because the entire subsidary’s
equity does not belong to the parent.
Liabilities at the ‘edge’ of Equity (6)
Liabilities at the ‘edge’ of Equity (7)
Liabilities at the ‘edge’ of Equity (8)