Study On The Application Of The Residual Income Method In The Business Evaluation In Cosmetic Industry

After more than 20 years of rapid development,China's cosmetics industry has become more and more mature.Cosmetics brands created by cosmetics enterprises are also emerging in endlessly.China has become the world's largest emerging market.China's cosmetics market,with annual sales of 223.3 billion yuan in 2016,is expected to reach more than 400 billion by 2020.The average annual compound growth rate in the next five years is expected to be as high as 12%,and there is huge room for development.Investors are becoming more and more active in investing in cosmetics companies,the M & A among enterprises in cosmetics industry is becoming more and more intense.However,whether it is the investment in cosmetic enterprises or the management and development of enterprises themselves,it is necessary to have a clear understanding of the intrinsic value of cosmetics enterprises.Therefore,the evaluation of the intrinsic value of cosmetics enterprises needs to choose appropriate and effective evaluation methods.Firstly,this paper studies the methods of enterprise value assessment at home and abroad.In the empirical study of Residual income evaluation model,we find that its explanatory power to stock price is better than Dividend discount model and Discounted cash flow model,It is more accurate than the current mainstream evaluation model to evaluate the intrinsic value of the enterprise.Based on the analysis of the characteristics of cosmetic enterprises,it is found that the traditional evaluation method is not suitable for the intrinsic value evaluation of cosmetic enterprises in emerging industries.The evaluation based on residual income model can truly reflect the value of cosmetics enterprises.When the traditional residual income model is used directly to evaluate the enterprise value,the residual income of the enterprise is difficult to predict,and its assumption of indefinite operating period is obviously not in accordance with the actual situation,so it needs to be improved.By introducing DuPont analysis system,this paper uses enterprise accounting information to forecast surplus income,improves the accuracy of residual income prediction,and introduces the final price-to-book ratio to change the forecast period from infinity to finite period.Thus,the assumption of indefinite unreasonable operation is avoided,and the accuracy of residual income evaluation model is improved.On the basis of theoretical research,it is necessary to verify the applicability and rationality of the model through practice.This paper takes Shanghai Jahwa Corporation as a case study,it is a typical representative enterprise in Chinese cosmetics industry,and makes a detailed evaluation and analysis of its intrinsic value by using the improved residual income model.The evaluation results are 4.78% higher than the market value of Shanghai Jahwa Corporation,it belongs to the normal error range and the evaluation result is reasonable,which indicates that the model is suitable for the evaluation of the intrinsic value of cosmetics enterprises.This paper takes Shanghai Jiahua,a typical representative enterprise of Chinese cosmetic industry,as an evaluation case,which can be used for reference to evaluate the intrinsic value of Chinese cosmetic enterprises.