Keywords: financial crisis, financial risk, early warning analysis
Strengthen enterprise financial risk management
Abstract:
Financial risk is a signal that can reflect the operating conditions of enterprises.
In an all-round way, it requires managers of enterprises to carry out it frequently.
Financial analysis, avoiding financial crisis, establishing financial early warning system and indicators, and making appropriate financial risk decisions. ..
Keywords: financial crisis. Financial risk. early warning system
1 looking at the financial crisis from the income situation of micro-enterprises
In recent years, Asia's economy is in turmoil, so we should guard against risks and establish an early warning system, both macroscopically and microscopically.
First of all, from the microscopic enterprise income, there are three levels: first, the operating income after deducting operating expenses such as operating costs, management expenses, sales expenses, sales taxes and surcharges; The other is the regular income after deducting financial expenses on this basis; The third is the sum of regular income and net non-operating income, that is, period income. If the enterprise has lost money from its operating income, it means that it is close to bankruptcy. Even if the income during the period is profitable, it may be due to the increase in net assets caused by non-main business or accidental events, such as the sale of securities and land held by hands. However, if the operating income is profit and the recurring income is loss, it can be said that there has been a crisis signal. This is because the capital structure of enterprises is unreasonable, the scale of borrowing is large and the interest burden is heavy. If both operating income and recurring income are profits, and the gains and losses during the period are losses, disasters and losses in selling assets may occur. If the problem is not too serious, it can be operated normally. If all three levels of income are profitable, it is a normal business situation.
2 Unreasonable capital structure is an important cause of the financial crisis
According to the balance sheet, the financial situation can be divided into three types: one is that the purchase of current assets is mostly raised by current liabilities, and a small part is raised by long-term liabilities; Fixed assets are raised by long-term self-owned funds and most long-term liabilities, that is, all current liabilities are used to raise current assets and all self-owned capital is used to raise fixed assets, which is a normal capital structure. Second, the accumulated balance in the balance sheet is scarlet letter, indicating that a part of its own capital has been swallowed up by losses, thus the proportion of its own capital in the total capital has decreased, indicating a financial crisis. The third category is that losses have eroded all their own capital and swallowed up some liabilities. This situation is insolvent and measures must be taken.
3 to guard against financial risks, the establishment of financial early warning analysis index system
However, the root cause of the financial crisis is improper handling of financial risks, which is the inevitable product of modern enterprises facing market competition, especially under the condition of imperfect development of China's market economy. Therefore, it is particularly necessary to strengthen financial risk management and establish and improve financial early warning system.
3. 1 Establish short-term financial early warning system and prepare cash flow budget.
Since the object of corporate finance is cash and its flow, in the short term, whether an enterprise can survive depends not entirely on whether it is profitable, but on whether it has enough cash for various expenses. The premise of early warning is that enterprises have profits. For stable enterprises, due to the overall stability of accounts receivable, accounts payable and inventory, the net cash flow generated by operating activities should generally be greater than the net profit. The preparation of enterprise cash flow budget is a particularly important part of financial management. Accurate cash flow budget can provide early warning signals for enterprises and enable operators to take measures as soon as possible. In order to accurately prepare the cash flow budget, enterprises should summarize the specific objectives, express the expected future income, cash flow, financial status and investment plan in quantitative form, establish an overall budget of enterprises, predict future cash receipts and payments, and establish a rolling cash flow budget with weekly, monthly, quarterly, semi-annual and one-year cycles.
3.2 Establish a financial analysis index system and a long-term financial early warning system.
For an enterprise, it is necessary to establish a long-term financial early warning system while establishing a short-term financial early warning system. Among them, profitability, solvency, economic benefits and development potential are the most representative indicators. Profit is the ultimate goal of enterprise management and the premise of enterprise survival and development. From the perspective of asset profitability:
Return on total assets = EBIT/average total assets.
It shows the profit level per yuan of capital and reflects the profit level of enterprises using assets.
Cost profit rate = operating profit/total cost.
It reflects that the higher the profit level of each yuan spent, the stronger the profitability of the enterprise.
For solvency, there are liquidity ratio and asset-liability ratio. If the liquidity ratio is too high, it will make the liquidity lose the opportunity of reinvestment. Generally speaking, it is best for productive enterprises to be around 2, and the asset-liability ratio is generally 40~60%. When the return on investment is greater than the loan interest rate, the more loans, the more income and the greater financial risk.
Asset profitability and solvency are two major indicators of enterprise financial evaluation, and the level of economic benefits directly reflects the management level of enterprises. Among them, indicators reflecting asset operation include accounts receivable turnover rate and balance rate of production and sales.
Balance rate of production and marketing = product sales output value/total industrial output value
For the development potential of the enterprise, choose sales growth rate and capital preservation proliferation rate. In this paper, the improved efficiency coefficient method is used to comprehensively evaluate the enterprise, and several values are specified for each selected evaluation index, one is satisfactory and the other is not allowed. The single efficiency coefficient of each index is designed and calculated, and the weight of each index is determined by Delphi method. The average value obtained by weighted arithmetic average or weighted geometric average is the comprehensive efficiency coefficient. This method can be used to quantify the financial situation of enterprises. .
However, in order to adapt to unexpected needs and opportunities, enterprises should be able to take effective measures to change the direction and time of cash flow, which is financial flexibility. Mainly related to the net cash flow generated by the business activities of enterprises. Indicators reflecting financial flexibility include: the ratio of working capital to total assets, the repayment rate of principal due to debts, the ratio of actual net assets to tangible long-term assets, accounts receivable and inventory turnover rate, among which:
Repayment rate of matured debt principal = net cash flow generated from operating activities/(matured debt principal in current period+cash interest expense)
The ratio of actual net assets to tangible long-term assets is calculated as follows
(Assets-liabilities-loss of pending assets-uncompensated loss-potential loss)/(net fixed assets+construction in progress+long-term investment).
From a long-term point of view, an enterprise can stay away from the financial crisis, and it must have good profitability, and the stronger its ability to raise funds and pay off debts. These indicators are:
Net cash ratio of total assets = (net cash flow from operating activities+dividends or profits received+cash interest expenses+income tax cash)/average total assets.
Net cash sales rate = net cash flow generated by operating activities/net sales income.
Return on shareholders' equity = net profit/average shareholders' equity.
Although the above indicators can predict the financial crisis, fundamentally speaking, the risks of enterprises are caused by debts, and enterprises that operate entirely with their own capital have only operational risks and no financial risks. Therefore, in order to determine the debt ratio by weighing the financial risks of debt management, we should compare the asset return rate and debt capital cost rate of debt management. Only when the former is greater than the latter, can we guarantee the repayment of principal and interest at maturity and realize the financial leverage income; At the same time, we should also consider the solvency, that is, how much cash the enterprise has or how strong the liquidity of assets is; Rational allocation of debt capital among projects. The assessment indicators are: the ratio of long-term liabilities to working capital, the rate of return on assets retention and the ratio of debt equity. These include:
Debt-to-equity ratio = average total liabilities/(average market value of shareholders' equity-intangible assets-loss of pending assets)
3.3 Take appropriate risk strategies according to the actual situation.
After the establishment of the risk early warning index system, if there is a backlog of products, a decline in quality, an increase in accounts receivable, an increase in costs, etc., enterprises should make clear the corresponding feasible risk management strategies to reduce the degree of harm. In the face of financial risks, we usually adopt the strategies of avoiding risks, controlling risks, accepting risks and dispersing risks. Among them, the risk control strategy can be further divided into preventive control and inhibitory control according to the control purpose. The former refers to determining the possible losses in advance and putting forward corresponding measures to prevent the losses from actually happening. The latter is to take measures for possible losses and minimize the degree of losses. Due to the development of market economy, it is a way for enterprises to use financial leverage to raise funds for debt management. From a large number of examples of debt management, it is not difficult to draw some lessons: mistakes in business decision-making, blind investment, and failure to conduct serious financial analysis and market research in advance are the reasons for the mistakes. Although moderate debt is a necessary way for enterprise development, it must be based on its own funds. If the debt capital in the capital structure is too large, it will inevitably lead to a vicious circle. At the same time, the solvency of enterprises is the most sensitive indicator of debt management. Only from the perspective of solvency, the lower the debt ratio, the stronger the solvency of enterprises, but it may not be reasonable. For example, the interest rate of corporate borrowing is less than the profit rate. Enterprises should make full use of the benefits of debt management. The reasonable degree of debt management in different industries is different, which is generally about 0.2 in the primary industry, 0.5 in the secondary industry and 0.7 in the tertiary industry.
4 Strengthen the risk management of financial activities
Under the condition of market economy, fund-raising activities are the starting point of enterprise production and operation activities. Improper management measures will make the use efficiency of raised funds have great uncertainty, which will lead to the risk of raised funds. There are two main channels for enterprises to raise funds: one is owner's investment, such as capital increase and share expansion, after-tax profit distribution and reinvestment. The second is to borrow money. For the owner's investment, there is no problem of repayment of principal and interest, which can be used for a long time and freely controlled, and its risk only exists in the uncertainty of use efficiency. As for the borrowed funds, while gaining the benefits of financial leverage, enterprises borrow funds through debt management, which brings the possibility of losing their solvency and the uncertainty of income. There are several specific reasons for financing risk and its prevention: the risk of interest rate fluctuation increasing the financing cost of enterprises, and once the funds above the average interest level are raised, remedial measures such as repaying debts in advance can be taken. In addition, there are fund organization and scheduling risks, operational risks and foreign exchange risks.
After an enterprise obtains funds through fund-raising activities, there are three investment methods: first, investment in production projects, second, investment in the securities market, and third, investment in business activities. However, investment projects do not always produce expected returns, which leads to the uncertainty of reducing the profitability and solvency of enterprises. For example, if the investment project cannot be put into production on schedule, it will not be profitable, or even if it is put into production, it will lose money, which will lead to the decline of the overall profitability and solvency of the enterprise. Although there is no loss, the profit level is very low, and the profit rate is lower than the bank deposit rate in the same period; Or although the profit rate is higher than the bank deposit rate, it is lower than the current capital profit rate of the enterprise. Because of risk aversion, the part of the extra return required by investors that exceeds the time value of funds is used to repay the investment risk, which is called income. When making investment risk decision, its important principle is not only to dare to make venture capital to obtain excess profits, but also to overcome blind optimism and adventurism and avoid or reduce investment risks as much as possible. What we should pursue in decision-making is the best combination of profitability, risk and robustness, or let the principle of robustness play the role of balancer between profitability and risk.
The third link of enterprise financial activities is capital recovery. Accounts receivable is an important aspect of capital recovery risk, so it is necessary to reduce its cost. Its cost is: 1) opportunity cost, which is usually expressed by interest income of securities. 2) Accounts receivable management cost, 3) Bad debt loss cost. Accounts receivable accelerate the cash outflow, although it makes the enterprise generate profits, but it does not increase the cash of the enterprise. On the contrary, it will enable enterprises to advance unrealized profits and tax expenses with limited working capital and accelerate cash outflow. Therefore, the management of accounts receivable should be strengthened in the following aspects: 1 Establish a stable credit policy. Determine the credit rating of customers and evaluate the solvency of enterprises. 3. Determine the reasonable proportion of accounts receivable. 4. Establish a sales responsibility system.
Income distribution is the last link of enterprise financial cycle. Income distribution includes two aspects: retained income and dividend distribution. Retained income is the source of scale expansion, and dividend distribution is the requirement of shareholders' property expansion. They are interrelated and contradictory. If the enterprise expands rapidly and the scale of sales and production develops rapidly, it needs to acquire a large number of assets, and most of the after-tax profits are retained. However, if the profit rate is high and the dividend distribution is below a certain level, it may affect the stock value of the enterprise, thus forming risks in the income distribution of the enterprise.
To sum up, in enterprise management, enterprises should establish a financial crisis early warning index system, strengthen the risk management of financing, investment, capital recovery and income distribution, and maximize the interests of enterprises.
References:
[1] Wu Shaoping and Li Xiaoyan on the determination of financial crisis early warning analysis indicators, Financial Science 2000:116 ~17.
[2] Gu Xiao 'an Enterprise Financial Early Warning System Construction Finance Series 2000: 765 ~ 7 1
[3] Financial Cost Management CPA Textbook 2000 relevance: graduation thesis,