Booking System Of Real Estate Development Project And The Value Of Cash Flow

In this paper, the domain of real estate development project which we discuss is the perpetual developed activity under real estate pre-sale system. This investigation is concluded from the raw data of the "Water Image City", in combination with other relevant public information. The "Water Image City" project is a real estate business which has been developed by our company in Emeishan City this year.From the financial data of "Water Image City" development project, we found out that there were three basic financial features in it:The low added value (low sales margins), the high rate of return (high return on capital) and a large number of fund balances in the project account. Then we illustrate their generality with some references.We investigated the relationship among these financial features by the Du Pont finance model. The high return rate of real estate project is achieved by high-input-output ratio of capital leverage from the low added value. This ratio is inevitably based on the present pre-sale system. The massive sale income returns premature, which is put into the current project immediately. The premature sale’s income not only creates a high input-output ratio, but also creates a financial phenomenon with larger amount in the real estate development projects account, which is called "project surplus funds". "Project surplus funds" usually tend to be the capital fund in the next circle of real estate development, and thus derived from the external value of real estate development projects.In the same project conditions, the different ways of collection and payment leads to different input-output ratio, also leads to different amount of surplus funds. Therefore, the financial goal of add-value could be realized by cash flow management. It’s necessary to create a financial evaluation model on real estate business to compare which is better on different cash flow managements. The value-add goal of this model is all of the project value, includes internal value and external value.The goal of real estate development project is capital return. The basic study unit is capital amount. Different financial behaviors make different cost and supply of capital amount. So we can get a financial evaluation model of value-add. We evaluate the degree of efficient use of capital funds by using capital efficiently coefficient (the true amount of capital/equity capital volume); we evaluate the sale income contributions on the project by using the internal leverage coefficient (the true amount of capital/actual amount of capital expenditures); we use external leverage coefficient (the amount of surplus capital/real capital stock) to describe the excess investment capacity on the next development project, which is made by the current project.In summary, there are three paths to achieve the value-add goal, increasing revenue and reducing the amount of capital expenditures as well as optimizing the amount of real capital. We proved those by analyzing the financial date of the "Water Image City" project. Thus, we proposed the financial evaluation of sub-indicators in real estate development, and study their relationship and changing range.In conclusion, the management goal of real estate development is cash flow add-value, the value of real estate development includes internal value and external value, on real estate development project, the mainspring of the persistence is the internal value, and the possibility of the persistence is the external value. Through analyzing the business history, we can decide the financial value-add ability of the real estate company by its capital cost and supply.