Strategies For Dialysis Of Financial Strength Of Enterprises

Under the adverse effects of the current international financial crisis and the slowdown in domestic economic growth, large non-financial enterprises in China are facing different financial crises, exposing the fatal causes of heavy growth and heavy quality in the past, heavy business and light finance, heavy investment and low returns.

It shows that the asset liability ratio keeps high, the total debt is constantly increasing, the net assets are shrinking year by year, the financial expenditure is staggering, the business income is slowing down, the cash flow is tight, the profit falls down too much, and the total assets yield is very poor.

Reflecting and examining the path dependence of inertia and inertia developed in the past, Chinese enterprises must return their energy and enthusiasm to the track of strengthening physical fitness, eliminating floating and swelling, overcoming internal deficiency and filling blood, giving full play to their financial strength, especially the fundamental role of financial soft power, repositioning financial strength as an important part of their core competitiveness and prerequisites for sustainable development, ensuring strategic financial verification, financial support for business, correcting the mismatch of financial resources, and making every effort to accumulate financial strength.

Financial strength is a collection of controllable resources and financial resources integration capability of enterprises, and a concentrated expression of the economic strength of enterprises. It can also divide the financial strength of enterprises into two levels: "hard power" and "soft power".

Financial hard power is the total amount of financial resources that enterprises can use. It is expressed, quantifiable and measurable, including capital structure, debt structure, asset quality, market size and free cash flow, cost level, and matching ability of financial elements.

In view of the debt flow generated by debt leverage, it may bring double possibility to the debtor's future income and risk, and it is related to the free cash flow of the enterprise. Whether the debt financing constitutes a financial hard power depends on the marginal contribution of the debt and the solvency of the enterprise.

Capital structure is the static ownership of financial hard power of enterprises, which expresses the contrast relationship between net assets and liabilities assets.

Generally speaking, the higher the proportion of corporate net worth and the stronger the ability to resist risks, the greater the space for debt financing.

Asset quality and free cash flow constitute two important variables in the hematopoietic system of enterprises, and they are the source of financial hard power.

Assets that can produce stable and predictable cash flows are good assets. Relying on high quality assets, enterprises can not only compensate the fixed and variable cost of current consumption, but also create additional value, thus forming benefit accumulation.

The competition among enterprises is essentially the competition of asset quality.

This includes the competition of stock assets and the competition of incremental assets.

The competitive assets of enterprises are constantly better than those of stock assets.

Market size is the number and weight of enterprises in the industry.

Companies with high market share show strong financial strength, and at least have a continuous push in resource matching in R & D, manufacturing, marketing and after-sales services.

Despite the strength of the market scale, the cost control state constitutes a considerable balance, which will lead to two opposite results of scale economy or scale diseconomy.

Those companies who are promoting sales promotion are hard to fight to the end.

Further dialysis of the financial hard power of enterprises can be condensed into three aspects: "quantity, capital and profit".

"Quantity" includes asset quality and free cash flow.

"Profit" refers to the performance generated by the size of the market and the allocation of financial resources.

Taking quantity, capital and profit as the foundation, we should constantly balance each other in continuous accumulation, and make the three dimensions more flexible and growing.

If a company really wants to be stronger and bigger, it should strive to consolidate its financial foundation, stabilize its financial focus, accumulate its financial strength and accelerate its development moderately.

In Chinese enterprises, we find two kinds.

The tendency of "undue force": first, the radicalism tendency of "self forcibly" against the actual financial constraints, which is very large, but with little effect, can not cope with the severe market competition test; the two is the financial conservatism tendencies in the enterprises with abundant financial resources and growing up in the debt leverage, and "self intimidate", which has lost valuable development opportunities and missed the "magnitude" that enterprises should achieve.