Study On Financial Strategies For Sustainable Growth Of Enterprises

1. The background and meaning of this researchGrowth and its management present special problems in financial planning, in part because many executives see growth as something to be maximized. They reason simply that as growth increases, the firm's market share and profits should rise as well. From a financial perspective, however, growth is not always a blessing. Rapid growth can put considerable strain on a company's resources, and unless management is aware of this effect and takes active steps to control it, rapid growth can lead to bankruptcy. Companies can literally grow broke. It is a sad truth that almost as many companies go bankrupt because they grew too fast as do those that grew too slowly. It is doubly sad to realize that those companies that grew too fast met the market test by providing a product people wanted and failed only because they lacked the financial acumen to manage their growth properly.At the other end of the spectrum, companies growing too slowly have a different but no less pressing set of financial concerns. As will become apparent, if these companies fail to appreciate the financial implications of slow growth, they will become potential candidates for takeover by more perceptive raiders. In either case, the financial management of growth is a topic worthy of close inspection.The idea of sustainable growth is not accepted by many enterprises'executives and has not become the conscious action by a lot of companies. The majority of specific studies on financial strategy for sustainable growth of enterprises are not systems and not very in-depth. So, the author will research on financial strategy of sustainable growth and elaborate the applications of sustainable growth model through cases. The author hopes that this essay can provide some helps for operating executives on managing growth. 2. The configuration and content of the thesisOn the whole, there parts make up of the thesis:Chapter 1: Introduction. This chapter puts the question which introduces the background and meaning, content and methods of research on financial strategies for a sustainable growth of enterprises.Chapter 2: Enterprises'sustainable growth theory in finance. This chapter introduces the conception of a company's sustainable growth and sustainable growth rate, assumptions and principles of the sustainable growth rate from a financial perspective. Four financial models on the sustainable growth rate are discussed. It listed the definition, assumptions, calculation formula and the significance respectively. This thesis select Higgins's model of sustainable growth as theoretical basis and list the four factors (profit margin, asset turnover, retention ratio and financial leverage) affecting the Higgins's sustainable growth rate, and lay the foundation for further analysis of the next chapter.Chapter 3: factor analysis of sustainable growth rate. This chapter detailed four factors (profit margin, asset turnover, retention ratio and financial leverage) of the sustainable growth rate. It summarizes the correlation in sustainable growth rate and the four factors. And, analysis the situation of actual growth and sustainable growth at every stage of a predictable life cycle of enterprises in general, and compare the differences between the two.Chapter 4: financial strategies for sustainable growth of enterprise. This chapter detail financial strategies of companies which too much growth or too little growth. For longer-term sustainable growth problems, some combination of the following strategies will be necessary: sell new equity, increase financial leverage, reduce the dividend payout ration, prune away marginal activities, outsource some or all of production, increase price, or merge with a"cash cow"and so on. When a company is unable to generate sufficient growth from within, it has some options: return the money to shareholders, buy growth, stock repurchase, seek new investment projects.Chapter 5: application and cases of sustainable growth rate. This chapter is about the application of the sustainable growth equation and cases of the sustainable growth. On the basis of the application of the sustainable growth rate equation, the author analysis the company whose sustainable growth rate exceeds actual growth and the company whose actual growth exceeds sustainable growth rate. The author computes sustainable growth rate and the actual growth with real financial data and analyzes their differences.Chapter 6: summary. This chapter is a summary section of this paper. A brief review content, and summed up the main conclusions and the main contribution.