The Financial Analysis Of FAW CAR Co.,Ltd.

Financial statement analysis is an important part of financial management. It aims at offering reliable financial information for sound decisions by analyzing and comparing data that financial reports provide. And it helps to study all kinds of factors,which influence the economic profit. It also evaluates financial position and business achievement scientifically while forecasting the development trends of finance. Since financial analysis is introduced to China, it has experienced a rapid development and plenty of outcomes have been achieved too. As for the improvement made in financial analysis, two currents are concerned, one is theoretic research, such as research on some criterions, measuring systems and analyzing methods, the other is empirical research on some listed companies. However, most research being done is not on analysis about some specified companies, which is called case analysis, but research in the light of general phenomena. During the last two years, some global companies such as Xerox and some Chinese listed companies like Lantian Joint-stock were exposed financial scandals one after another, which shows the imperative to emphasize the importance of research on financial case analysis. With the slowly increase and much more competition in China's small car market, FAW CAR Company Limited (FAW-CC), being the mainstay industry in Jilin Province, has a sales descendent trend. I analyzed the financial condition of FAW-CC from 1997 to 2003 by a series of specific methods and summarized the trouble-shooting strategies for the existing problems. First, there is a fully analysis on the three major financial statements of FAW-CC. According to one of them, the balance sheets, we can see the structure and change of FAW-CC's assets and liabilities. Take the assets condition for instance; the fixed assets and current assets hold a bigger rate than the others do in FAW-CC's total assets. Long-term investment scale is increasing year by year while the income condition is worse. Inventories hold such a high rate that it affects quality of current assets. Another example is the condition of liabilities. According to the analysis of liability, account payable of short liability increases quickly. Through the analysis on FAW-CC's income statement, I find that its chief business revenue shows a descending trend after 1997 and an ascending trend after 2002. Also, the sales income and total income have the same direction. They present a drop before 2001 and a rise after 2001. Besides, I also find that return investment is negative in year 2000 and 2002. According to the analysis on FAW-CC's cash flow statement, I find that cash received and cash payments are mainly from managing activities. And, cash received and cash payment both presents ascending trend. Second, there is a fully financial analysis on FAW-CC. Based on the analysis of its reimbursing ability; I find that its liquidity ratio, quick ratio and cash rate were above the normal level, which shows a strong ability to repay short-term debts. After analyzing its debt ratio, we can learn that a small quantity of long-term liabilities as well as low liability rate also show a strong ability to fulfill long-run commitment. To analyze the ability to FAW-CC's operation, I find its account receivable turnover ratio, liquid assets turnover ratio, inventory turnover ratio, fixed assets turnover ratio and total assets turnover ratio are all descending in 1999 to 2001. This illustrates low efficiency and poor management in these years. From the data between 1999 and 2001, we know the profit ability of FAW-CC is falling. Third, there is a comprehensive analysis on FAW-CC's financial condition. We suggest that it should begin with improving profit making and capital operating in order to enhance management and reach better financial position. To speak in concrete terms, the enterprise should control its administrative expenses effectively to make considerable profit, reinforce assets management and raise assets'efficiency so as to advance the efficiency of the whole enterprise'assets running. At last, according to all the analysis on FAW-CC's financial condition, I submit some suggestions to offset the loophole in management. Among other things, the financial problems below should be solved as soon as possible: the first is increasing inventory management by adopting advanced methods of management. The second is enlarging the credit range to increase the sale scale. The third is enhancing the control of administrative expenses to gain a better profit. The last is improving R&D ability and buildup core-competition. All in all, I analyze the financial condition and resolve the problems that FAW-CC is faced with by the means of what I have learned in two years of...