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Facing "Growth Bankruptcy" Dilemma

2011/6/25 10:52:00 79

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Incomplete report on cash flow management of textile enterprises in China (Part Two)

Cash flow can explain the growth quality of an enterprise better than profit.

from

financial crisis

When the "cash is king" sentiment, to the current "cash cold" again struck, people increasingly can not ignore the surveying and mapping enterprise life cycle of weights and measures.

The "pure" cash flow is that it only exclude the non recurring income by calculating the operating profit, avoiding the use of increasing investment income and other non business activities to manipulate profits.

Accounting profit is determined according to accrual basis. It can be adjusted by early confirmation of sales, expansion of credit sale range or related paction, and cash flow is determined by the cash basis. All adjustment methods have no effect on increasing cash flow.

The quality of business cash flow can show its ability to cope with risks and rapid recovery.

One of the extreme misunderstandings is the opposite trend of corporate profits and cash flow, which is a high risk signal worthy of vigilance.

Foreign data show that 85% of bankrupt enterprises are profitable enterprises.

The largest in the United States.

Business enterprise

One year before the declaration of bankruptcy, W.T.Grant achieved a net operating profit of nearly US $10 million, providing us $about 20000000 in working capital and $600 million in bank loans. The company's stock is still selling at a price of 20 times its earnings.

However, the net cash flow has been negative for 5 years before its bankruptcy. Although there is a high profit, the company's cash can not pay a huge amount of production expenses and debt expenses, which eventually leads to "growth insolvency".

This "cash flow management examination report" survey results show that the listed companies are experiencing the "cash cold current", not only strength is rare, but also widely spread.

Excluding the financial sector A shares listed companies operating cash flow is only 26 billion 800 million yuan, or even lower than the single quarter data in 2008 when the financial crisis.

The proportion of the total operating cash flow to the main income of the listed companies based on manufacturing is -3%, the lowest level since the beginning of this century, and it is also a sudden situation in the first quarter of this year.

Excluding the 22 sectors of the financial sector, 11 industries have negative cash flows.

The severity of textile and garment industry is particularly significant. Cash flow is largely dissipated in accounts receivable, prepaid accounts and inventories. Operating cash flow accounts for -14.4% of main business income.

On the whole, a total of 41 listed companies in the textile and garment sector had different cash flow gaps in the first quarter of this year, accounting for 55.41%, while another 16 companies operating cash flow decreased, accounting for 21.62%.

That is to say, in the first quarter of this year, a total of 57 textile and apparel listed companies with deteriorating operating cash flow accounted for 77.03% of the total sector.

According to professional analysis, most of the listed companies in cash flow problems of textile and garment industry are concentrated on

industry chain

Terminal.

Upstream enterprises control the price of resources and resources, and more autonomy brings them together with operating cash flow. The middle reaches enterprises have a good pfer function, and the cash flow is relatively flexible. Downstream terminal enterprises are integrated by multiple factors and become the most impoverished communities.

Most of the top 10 enterprises with the largest cash flow shortfalls are in the field of clothing, home textiles and knitwear.

The 6 leading companies that were sampled and observed by the cash flow situation of the textile sub sectors of our country were good, but the cash flow was negative.

A few of them even showed signs of decline in the "double drop in profits and cash flows". Together with those "strong profits" and "cash flow drops", they were trying to demonstrate their ability to correct mistakes through the improvement of investment cash flow.

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Even if the cash flow of the 6 upstream and middle enterprises in our questionnaire survey is relatively stable, they also re examine the fund settlement system under the circumstances of "reduced capital stock", and formulate strict management measures for accounts receivable, ensure timely return of funds, strictly control the outflow of funds, strengthen the examination and approval control of large amounts of capital expenditures, compile company capital budgets, effectively and comprehensively arrange reasonable operation, and strive for a balance in financial management.

Interview record of 6 middle and upper reaches Enterprises

6 major textile sub edition "Qian Jin"