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1、Financial Statement Analysis of SICHUAN CHANGHONG ELECTRIC CO., LTD【Abstract】A financial tsunami which had never been so violent over the past 100 years is confusing the whole world in 2008.Viewing from its nature,this financial storm was caused by the subprime crisis crisis.And the innovation of th
2、ose financial derivatives just aggravates this subprime crisis, transforming the regional crisis of American sub-loan into a severe global economic storm.The subprime crisis can also be regarded as a break-down of the bubble economy,which is overspreading to the high-level credit market. Subprime mo
3、rtgage loans and high-level housing loans are based on the same asset-backed real estate.【Key word】financial storm whole world sub-loan bubble economy1 / 29ContentsIntroduction11、Macroeconomic Situation22、Microcosmic Environment42.1 Aggregative Circumstance42.2 Market Environment43、Company Situation
4、64.1 Compute the Ratios74.1.1 Liquidity Ratio74.1.2 Asset Management Ratio74.1.3 Profitability Ratio84.1.4 Ratio Comparison84.2 Company Financial Strength94.2.1 Growth Ability104.2.2 Profitability104.2.3 The Vitality of Enterprises114.2.4 Enterprises Management Mechanisms114.3 SWOT & Strategy124.3.1
5、 Analysis of SWOT124.3.2 Strategy135、Conclusion156、Reference167、Appendix17Appendix 1 Assets Statement of CHANGHONG17Appendix 2 Assets Statement of KONKA A18Appendix 3 Balance sheet and Income statement19IntroductionIncorporated in 1958, CHANGHONG has grown into a rule maker and a content & service p
6、rovider at home and abroad, not a simple household appliance manufacturer. CHANGHONG engage in industries as digital TV, AC, refrigerator, IT, healthy communication, digital Audio-Visual, digital network, electrical power source, commercial electronics and petty appliance, etc. CHANGHONGs sales in 2
7、005 had hit RMB17.6 billion sales, as well as 29.4 percent amplitude compared with the same period last year. At the same time CHANGHONGs brand valued RMB39.861 billion which is honorably enrolled into the Worlds 500 Most Influential Brands. CHANGHONG belongs to Household electrical appliances manuf
8、acturing. In 1994, CHANGHONG stocks listed in Shanghai stock exchange. In 2005, the brand value of CHANGHONG reaching to 398.61 billion yuan to be the most valuable brands of China. So far, CHANGHONGs digital products have beening exported to more than 90 countries and regions. Because of the world
9、financial crisis interests the hold industry is seriously damaged. To have certain knowledge of CHANGHONGs true financial position, I will give you the analysis of CHANGHONGs financial statement below. And I shall limit myself to three aspects of the subject: Liquidity ratio, Asset management ratio
10、and Profitability ratio. To find out why the order reduction recently? and Why profitability seriously reduced? As we know, a ratio is an expression of the relationship of one item to another.A ratio can be expressed as a percent, rate, or proportion. Ratios are particularly important in understandi
11、ng financial statements because they permit us to compare information from one financial statement with information from anothere financial statement. For a ratio to be useful, however, the two amounts beiing compared must be logically related.1、 Macroeconomic Situation Affected by financial crisis,
12、 the United States, Europe, Japan and other developed countries come into recession, the consumer demand reducing and industry export under high pressure. Whats more the domestic market of real estate is sustained decline and the natural disasters to residents being adversely affect the demand of ho
13、me appliance. At the same time domestic economic growth is slowing and the diclining of resident expected income is the factors restrain the consumption of electrical appliances productsuch.From the international, since enterred September 2008, the U.S. financial markets crisis has never gone. As le
14、hman Brothers Holding Company went bankrupt, Bank of America pruchased Merrill Lynch, AIG Gorporate came to a crisis, all these consumingly shock the U.S. financial markets and drawn-out us subprime mortgage crisis into serious century-old financial crisis. Because of the financial crisis is still i
15、n sustainable development, the financial markets in the twinkling of an eye, crisis will stop where and where to? Great uncertainty surrounds global. Also, the crisis of the influence and effect is still uncertain. Based on the financial crisis of by fears of transition to the economic crisis, the g
16、lobal government succession or joint adopted a series of measures to strengthen the financial institutions to support and financial market.Over the financial institutions and through large injection currency monetary policy, also involves some adjustment system will be the content; the future develo
17、pment of the global financial caused some long-term effects. At present, the financial crisis has to global economic entity that produceda great impact in 2008, as well as the world economy has slowed sharply, downside risks increase step by step, and the prospect is much more uncertainty. Forecaste
18、d for global economic growth, in 2009 2.2%, developed economies fell 0.3% economic 2009, the U.S. economy which will be negative, Eurozone two major economies 0.7 per cent in Germany and France respectively with negative 0.8% 0.5%.Also, the crisis of the influence and effect is still uncertain. Now
19、from the present domestic, it is the home appliance industry development period. In the situation of the current financial crisis, knowing the situation, controlling the direction, giving detailed analysis of the effects of home appliances and the future development trend whatever for the long-term
20、development and the breakthrough concrete work of Chinese home appliances has the positive guidance.2、Microcosmic Environment2.1 Aggregative CircumstanceIn 2008, CHANGHONG went though a much more severe objective environment than other electrical appliances manufacture enterprise: 512 wenchuan earth
21、quake, natural disasters and the global financial crisis, which caused many adverse effects to CHANGHONG. In 2008, the business income of CHANGHONG did not reach the anticipated profits and compared with the same period in 2007 it was a sharp decline.2009, the country has issued a series of economic
22、 stimulus policy, the company will hold the market opportunities, like home appliances going to the countryside and home appliance settled herdsmen action plan, the reconstruction and so on, to ensure the products such as color television, refrigeratory in the forefront position. 2.2 Market Environm
23、entIn 2008, compared the demand of domestic appliance market with export market the growth is slow and insipid. As well as the unbalanced supply and demand of aggravated intensity plus the global economic recession, almost all the appliances are oversupplied. Each big appliance sales chain enterpris
24、es carry into the low price competition to depress the profit space, which made the prices continue to fall and profits of manufacturers can be foreseen completely. Fortunately, the related policies on stimulating domestic demand which create new markets to most of the electrical appliances manufact
25、ure enterprise.In 2008, price competition is still the main means of competition, but with the competition, the profit space of all stages of home appliance industry is compressed, as well as the ability to ruduce price. More and more companies have realized by price competition can neither establis
26、h core competitiveness, nor a long-term development direction. Therefore, many appliances enterprise increased the investment into technology, to developing new high technology content product, and referred to the difference of the product as the development of the enterprise in the long-term plan.
27、At the same time companies seek new market demand (such as central air conditioning), establish new economic growth point (into such as appliances and other similar industry), in order to realize the sustainable development of the enterprise.3、Company Situation In 2008, the company faced with the se
28、vere macroeconomic situation and the increasingly fierce competition in the market environment.Surronding the goals and tasks which constituted by the directorate, CHANGHONG try to overcome 5.12 earthquake of wenchuan, natural disasters and the global financial crisis caused by economic environment
29、deterioration to a series of adverse effects. And under the annual direction of benefit, efficiency&cooperation ,the staffs in r&d, production, sales , the operation of efficiency and management innovation adopted various measures and has achieved good effect. The company continued having a healthy
30、and the benign development trend. 1During the reporting period, the company operating revenue was 279.30 billion yuan, which increased 20.14% year-on-year; the profits was 2.90 billion yuan, which reduced 34.95% year-on-year; the companys net income was 263 million yuan, whice reduced 42.17% year-on
31、-year and attributable 0.31 billion yuan to shareholders that reduced 91.59% year-on-year. Although the company business income had a big increase during the reporting period, but due to 512 2008 wenchuan earthquake and the global financial crisis since the last quarter of 2008, company fails to rea
32、ch the board of directors which the company business income reach to 300 million yuan2. Compared with the same period last year, the company sales revenue target profit appeared drastically descend. 4、Ratios 4.1 Compute the Ratios 4.1.1 Liquidity RatioCHANGHONGLiquidity ratioCurrent ratio = Current
33、assets / Current liabilities= 17586260088 / 14541374787 =1.21Quick ratio =（Current assets-Inventory）/ Current liabilities=（17586260088-6647777877）/14541374787=0.75KONKALiquidity ratioCurrent ratio = Current assets / Current liabilities = 7737909442 / 5312817151 =1.46Quick ratio =（Current assets-Inve
34、ntory）/ Current liabilities=（7737909442 - 2539786348）/ 5312817151 = 0.994.1.2 Asset Management RatioCHANGHONGInventory turnover = Cost of sales / Inventory =17760285336/6647777877 = 2.67Total asset utilization = Sales / Total assets = 21466453825 / 12537236671 =1.71KONKA Inventory turnover = Cost of
35、 sales / Inventory = 7334806973 / 2539786348= 2.89Total asset utilization = Sales / Total assets = 9026727739 / 9279511705= 0.974.1.3 Profitability RatioCHANGHONGProfit margin on sales = Profit before tax / sales= 321175476 / 21466453825= 0.01Return on total assests = Profit before tax / total asset
36、s = 321175476 / 12537236671 = 0.03KONKAProfit margin on sales = Profit before tax / sales = 35165040 / 9026727739= 0.03Return on total assests = Profit before tax / total assets= 235165040/9279511705= 0.034.1.4 Ratio ComparisonTable（4.1-1） Compare the ratio between CHANGHONG & KONKAChanghongKonkaInd
37、ustry standardsCurrent ratio1.211.461.22Quick ratio0.750.990.99Inventory turnover2.672.892.03Total asset utilization1.710.971.19Profit margin on sales0.010.030.15Return on total assests0.030.020.03The raito comparison in the table above suggests that CHANGHONGis in reasonably good shape financially3
38、.The current ratio is close to industry standards, It suggests that CHANGHONGs short-term obligations can be covered with its short-term assets.Although the quick ratio is slightly below the industry figures and is less than the commom guideline for an acceptable quick ratio of 1:1, but it appears a
39、dequate.Higher turnover rates result in shorter collection periods.Both CHANGHONG & its competitor KONKA are much higher than the industry figures that means it should not be a problem .Total asset utilization is much higher than the industry averages and Konka,and that is a good sign,so CHANGHONG n
40、eed to keep it. The Profit margin on sales is 1% and the Return on total assests is 3% both the figures are very low.That means that the industry of CH & K earned little for every ￥100 invested in assets4.It need the the joint effort of all the industry.4.2 Company Financial Strength During the repo
41、rting period, the company operating revenue was 279.30 billion yuan, which increased 20.14% year-on-year; the profits was 2.90 billion yuan, which reduced 34.95% year-on-year5; the companys net income was 263 million yuan, whice reduced 42.17% year-on-year and attributable 0.31 billion yuan to share
42、holders that reduced 91.59% year-on-year. Although the company business income had a big increase during the reporting period, but due to 512 2008 wenchuan earthquake and the global financial crisis since the last quarter of 2008, company fails to reach the board of directors which the company busin
43、ess income reach to 300 million yuan. Compared with the same period last year, the company sales revenue target profit appeared drastically descend 6. 4.2.1 Growth AbilityTable（4.2-1） Growth Ability of CHANGHONGItemIndicatorsFormulaNumericalBad Medium GoodAnalysis and EvaluationSales growthRate of i
44、ncreased revenue Increased sales /Sales of last year11.0Although sales, additional value, total capital, etc, but the profit rate is higher in related low efficiency.Profit growthRate of increased profitIncreased profit /Profit of last year20.3Total assets growthRate of total assetsIncreased total g
45、rowth /Total assets of last year15.24.2.2 ProfitabilityTable（4.2-2） Profitability of CHANGHONGItemIndicatorsFormulaNumericalBad Medium GoodAnalysis and Evaluationratio of profit to main work salesratio of profit to net main work salesOperating Profit/ Sales7.8%All the margins are reduced tendency, c
46、annot ensure profit retained result, internal financial systemratio of profit to total assetsratio of profit to total assetsOperating Profit/ Total assets8.0ratio of profit to total assetsratio of profit to total assetsProfit/ Sales0.9%4.2.3 The Vitality of EnterprisesTable (4.2-3) The Vitality of E
47、nterprises of CHANGHONGItemIndicatorsFormulaNumericalBad Medium GoodAnalysis and EvaluationTotal capital is to effectivelyTotal capital turnoverSales/ Total assets1.10Due to the increase in capital invested funds by deteriorating tendencies in, especially in the inventory and capital overstock funds recyclingFixed assets are availableFixed asset turnoverSales/ Fixed assets2.01The number of the inventory assetsInventory turnover periodInventory/ Average of monthly turnover9.34.2.4 Enterprises Management MechanismsTable (4.2