Yangquan Coal Industry Co., Ltd.Financial Analysis And Evaluation

Financial analysis, an important component of enterprises’ production, operation and management, is not only an appraisal and analysis of enterprises’ financial situation and management results, but also a reflection of advantages and disadvantages during the production and operation as well as development trends, which provide important financial information to improve the financial management and to optimize management decision-making. Followed by analysis of balance sheet, income statement and cash flow statement of the enterprises, the capacities of solvency, profitability, operation and development are reasonably appraised, also the decision-making capacity of production and management is optimized, which makes the very purpose of financial analysis.Shanxi is a big province of coal, and YANGQUAN COAL INDUSTRY (GROUP) CO., LTD, as one of five major coal groups in Shanxi province, is the largest anthracite production base in China nationwide, ranking the108th among Top500Enterprises of China. In recent years, changes have taken place in energy production and consumption structure, but in terms of coal production and consumption, its ratio remains around70%. In a significantly long period of time in the future, coal will remain the main energy structure. The goal of YANGQUAN COAL INDUSTRY in the "Twelfth Five-Year Plan" is to vigorously carry out the strategy "strengthening both coal and chemical industries, achieving200billion in the scale of operation in5years", and to step into Fortune500Enterprise. The company, one of the seven key state-owned in Shanxi, is a typical representative in energy industry; therefore, the financial analysis as well as proposed suggestions on its future development are both of great practical significance.This paper first interpreted annual reports of the year2006to2010and announcements of YANGQUAN COAL INDUSTRY (GROUP) CO., LTD, and in the light of industrial standards, Shanxi Lanhua Sci-Tech Venture Co., Ltd and Datong Coal Industry Co., Ltd, analysed its financial status by approaches of comparative analysis, trend analysis, ration analysis, factor analysis and DuPont analysis, so as to learn about its position and make the corresponding appraisal. Then the paper focused on analysis of its capacities of solvency, profitability and development, and pointed out that the company is in a leading position among all in terms of assets and owner’s equities, with a respectively stable capital structure. Its capital expands rapidly, which makes itself rank high in energy industries. However, the capacity of solvency is below the average; the company has a low profitability capacity of production and operation due to the high operational cost; and as for current assets, affected by many factors like credit policies, the receivables turnover ratio is low, which, to some extent, affects returns ratio of current assets. Finally, the paper stated that before operational scale expansion, the company should reduce the percentage of debt financing while expanding capital, in order to optimize the capital structure and then ensure its solvency capacity. Moreover, control the production to reduce operation cost, and increase the gross margin, and formulate plans for receivables and collections regulations to speed up turnover of current assets so as to ensure its profitability.