Kingdee and Yonyon Financial Statement Analysis

Topics: Generally Accepted Accounting Principles, Revenue, Balance sheet Pages: 5 (1259 words) Published: May 17, 2015
Hong Kong University of Science & Technology
School of Business & Management
Department of Accounting
ACCT 5140 Financial Statement Analysis (Spring Semester 2015)

Program: MSAC
Subject: Case Study 2
Topic: Yonyou-kingdee 2010 comparison
Date: 2015/02/23

Group No.: 7

Name of student
Student ID
1.
ZENG, Xi, Sissi
20233079
2.
WANG, Shenglian, Lim
20222745
3.
YAO, Shuwei, Allie
20230039
4.
REN, Qianhui, Lora
20237659
5.
LU, Yang, Carson
20228969
6.
ZHAO, Xu, Grace
20232518

Question 1
Briefly compare the businesses of the two companies

As the two largest software developers in China, Yonyou and Kingdee provide similar products, including Enterprise Resources Planning, Customer Relationship Management and Software as Service, etc. On the other hand, there are certain differences about the business of these two companies. First of all, both companies were listed in 2010 and Yonyou was in Shanghai while Kingdee was in Hong Kong. As the leader in the software developer in the industry, Yonyou occupied 27.9% market share in 2010 with around 3 billion revenue and 347 million profits while Kingdee took 15.8% with around 1.5 billion revenue and 271 million profits. However, the revenue growth rate of Kingdee was much higher than that of Yonyou, 44% and 26.9%. Also, the profit of Yonyou decreased from 2009 to 2010 since the company increased investment and expanded business with rising cost. When it comes to business segment, sales of software products account for about 57% of sales of both company and Yonyou focused more on selling software solution and support services while Kingdee focused more on selling software implementation service. Last but not the least, Yonyou mainly targeted on the south part of China while Kingdee targeted on the northern part.

Question 2
Compare the two firms’ performance in 2010 (profit margin, ROA and ROE), based on bottom-line numbers.

Before Adjustment
Kingdee
Yonyou
Tota Revenue
1,436,621,000.00
2,978,826,039.00
Net Income
276,266,000.00
346,032,952.00
Total Assets
2,258,258,000.00
4,765,924,161.00
Total Equity
1,548,325,000.00
2,565,806,554.00

Profit Margin
19.23%
11.62%
ROA
12.23%
7.26%
ROE
17.84%
13.49%

The overall performance of Kingdee is better than Yonyou since the profit margin; ROE and ROA of Kingdee are higher than those of Yonyou. With a higher profit margin, Kingdee has a better profitability than Yonyou. Also the return on asset and the return on equity of Kingdee are higher than that of Yonyou. Even though the business of Yonyou is larger than that of Kingdee, Kingdee has a better performance in profitability.

Question 3

Kingdee capitalized most of software development cost, while Yonyou didn’t capitalize any before 2012. What is the answer to Q2 if Kingdee used the same accounting approach as Yonyou?

If Kingdee expense all the assets, the main financial data are as following:

2010
2009
Operating Profit - Unadjusted
300,618,000.00
219,240,000.00
Less: Assets Additions
183,329,000.00
125,016,000.00
Add: Amortization
91,590,000.00
66,958,000.00
Operating Profit – Adjusted
208,879,000.00
161,182,000.00
Finance Cost (Income) - net
5,597,000.00
(3,853,000.00)
Profit Before Income Tax
203,282,000.00
165,035,000.00
Income Tax (10%)
20,328,200.00
16,503,500.00
Net Income - Adjusted
182,953,800.00
148,531,500.00

Total sales
1,436,621,000.00
996,810,000.00

2010
2009
Total Asset - Unadjusted
2,258,258,000.00
1,762,123,000.00
Less: Assets Additions
183,329,000.00
125,016,000.00
Add: Amortization
91,590,000.00
66,958,000.00
Total Asset - Adjusted
2,166,519,000.00
1,704,065,000.00

2010
2009
Total Equity - Unadjusted
1,548,325,000.00
1,252,060,000.00
Less: Net Income - Unadjusted
276,266,000.00
213,414,000.00
Add: Net Income -...
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