Case 1: Financial Analysis of Wushang Group's 2000 Interim Report

In this case, we mainly analyze the solvency and profitability of the Group's 2000 Interim Financial Report from the perspective of investors.

(I) Corporate Strategy Analysis

1. Industry Analysis. Wushang Group is a large group of companies mainly engaged in commercial retailing and integrating real estate, property management and catering services. Wuhan is one of the few domestic four-legged retail industry situation, the competition is extremely fierce; industry concentration, the degree of product differentiation is low, the market bargaining power is poor. Therefore, enterprises must pay full attention to management in this kind of business competitive environment and utilize this soft resource to create advantageous competitiveness.

2. Analysis of the enterprise's competitive strategy - large-scale expansion around the main business, seeking diversified investment in new projects. 2000 interim financial report of the enterprise group disclosed that the adjustment of its competitive strategy focuses on:

First of all, proactively make strategic adjustments:

(1) Adjustment of the commercial structure around the main business. main business to adjust the commercial structure.

(2) Adjusting the industrial structure, maintaining the dominant commercial industry, and downturn in the real estate industry, and seeking new high-efficiency industries.

(3) Adjust the asset structure, implement asset reorganization, and vigorously get rid of and revitalize non-performing assets.

Second, vigorously carry out sales expansion activities, make full use of the resources of the intangible assets of the enterprise, and improve economic efficiency.

Again, strengthen the system construction, improve the management level.

But at the same time, in the spring of 2000, Hu Bingxin, who created the "Wuguang business model," suddenly resigned. Financial analysts with a keen sense of smell will find that the management system of Wushang Group will have more friction in the short term, and will lose some of its competitive advantage as a result.

So, it can be assumed that Wushang Group has recognized that there are too much investment in the enterprise group, the pressure on capital is relatively large, there are loopholes in the management system of the enterprise group and other problems, and has taken effective measures to alleviate the problem, but such a huge financial burden in the short term will not immediately disappear.

(II) Specific Indicators of Accounting Analysis

Comparing the financial reports of 1999 and 2000, it can be found that on the whole, the accounting policies and system norms applied by the enterprises are more reasonable, and the comparability of accounting information with that of the same industry is relatively high. At the same time, the enterprise's accounting policy also gives us some other information: for example, the company group from January 1, 1999 onwards to implement the accounting standard of impairment provision, in the annual report of 1999, a large number of bad debt provision, but for the enterprise's long-term investment, short-term investment, inventory and so on did not extract the provision for impairment, and in fact, in some of the holdings of real estate development and operation of the enterprise's investment in the In fact, the investment in part of the holding real estate development and management enterprises in 1999 has shown signs of loss, so, in the 2000 interim financial report is not free from the suspicion that the burden of loss is not balanced. In, for example, administrative expenses January-June 1999 for about 50 million yuan, while January-June 2000 close to 10,000,000 yuan, combined with a comparison of the enterprise group's before and after the external borrowing, investment status, we can find the speed of the enterprise's external expansion and corporate capital stock between the tension between the conflict, and so on.

(C) the operation of the financial statement analysis

The following we combined with the Wushang Group's 1999 annual report and the 2000 interim report from the solvency, profitability of the two aspects of the enterprise's conventional financial statement analysis.

Wushang Group solvency, profitability financial indicators list

First, the enterprise solvency analysis is mainly from the cash payment ability, short-term solvency and long-term solvency three aspects.

1, cash payment ability analysis. 1999 end of wu shang group cash current liabilities ratio of 0.0738, the first half of 2000 for 0.1061. Although the index has improved, but obviously the cash ratio is still very low, the company almost do not have the ability to use cash to pay the debt due.

2, short-term solvency analysis. From the information in the table, we can see that the liquidity ratio of Wushang Group's assets is much lower than the reasonable value (the normal value is generally considered to be 1), indicating that when the debt is due, it is difficult for the company to repay the principal and interest through the realization of assets, and in its place can only be replaced by operating income and external financing.

3, long-term solvency analysis. Wushang Group's debt operating ratio is extremely low, mainly because the company is used to using low-interest current liabilities, not accustomed to the use of higher-cost, stable source of long-term liabilities; at the same time, the interest coverage multiple is very high, so the ability to repay the principal and interest is still relatively strong.

Analyzing the indicators of cash payment ability, short-term solvency and long-term solvency, Wushang Group's debt-servicing situation is caught in a difficult situation. On the one hand, the shareholders' equity capital is strong, and the long-term debt-servicing ability is extremely guaranteed, and at the end of 1999, the share capital was 510 million shares, and the long-term liabilities were less than 200 million yuan; on the other hand, once the long-term liabilities are gradually transformed into the current liabilities, the enterprise will not be able to pay for them. This indicates that the operation status and profitability of the enterprise's assets are in great danger, and the emergence of this situation has a greater relationship with the enterprise's short-term consciousness and behavior and the enterprise's poor level of asset management.

Secondly, profitability is mainly analyzed by using five economic efficiency indicators: net cost and expense ratio, profit margin of main business, internal return on assets, return on foreign investment and return on net assets.

1, the first half of 2000 Wushang Group cost and expense net interest rate than the end of 1999 increased significantly, indicating that the profitability of the enterprise greatly enhanced, the ability to control costs and expenses also enhanced.

2, the main business profit margin indicators reflect the profitability and competitiveness of the enterprise's main business itself. Only when the main business develops steadily can an enterprise realize sustainable growth in net profit. Wushang Group through the commercial structure, industrial structure, asset structure adjustment, the main business - business in the development of the first place, so that the main business profit margin in the first half of 2000 compared with the end of 1999 increased more than seven times.

3. The low rate of return on internal assets of the enterprise indicates that there are big problems in the management and operation of internal assets of the enterprise. Such as inventory and accounts receivable turnover is slow, the assets are idle and wasteful, etc. are directly affecting the profitability of the internal business.

4, Wushang Group's foreign investment business has been unsatisfactory. On the one hand, due to historical reasons, investment decisions before 1999, such as real estate investment mistakes; on the other hand, it may also be after 1999, the new investment projects have not yet occurred after the benefits of its external investment yield has been negative.

5, return on net assets by the level of profitability of operating activities and the efficiency of own capital utilization of two factors. Wushang Group through the expansion of the main business, improve the profitability of the main business, but the low return on foreign investment, internal asset operating efficiency and other reasons ultimately led to the return on net assets is not ideal.

So, despite the general downturn in the commercial industry, the net cost and expense margins have increased significantly, the main business profit margins have grown at a high rate, and although Wushang Group's internal return on assets is also low, it is still much higher than the return on foreign investment. Therefore, only from the point of view of profitability, Wushang Group should be tightly focused on its commercial business to expand externally, rather than blindly follow the so-called high investment risk, high return on investment projects.