Research On The Control Of Financial Risks In Xiangdian Group

Financial risk is the unpredictable and uncontrollable factor, which cause theexpected return doesn’t match the real financial return, during the corporationfinancial management activities including financing, investing, fund collecting andincome distributing. Financial risks can probably lead to economic losses. As China’sReform and Opening, the prevention and control of financial risks are becoming moreand more important through the improvement of market economy. Therefore,enterprises pay more attention to risk management in order to better developmentcapacity and profitability. Consequently, analyzing corporation financial risks andstudying the origins of financial risks through appropriate method have a greatsignificance for corporation’s rapid and healthy development. Firstly, this paperintroduces the relevant theories about financial management, the relevant concepts offinancial risks, the classification and origins of financial risks. Secondly, we find theorigin of financial risks in Xiangtan Electric Manufacturing Group through analyzingthe relevant financial statements and financial system.Based our analysis, we find that the financial risks of Xiangtan ElectricManufacturing Group are as followings: capital structure is not reasonable; currentliability is comparable more; accounts receivables are large and increasing rapidly;the independence of internal audit is weak; the management of subsidiary companiesneed to be stronger and so on.Finally, based on the present status of financial risks, we suggest XiangtanElectric Manufacturing Group could take the following steps to prevent and controlfinancial risks. Firstly, group should improve the whole risk conscious and pay greatattention to financial risks. Secondly, group need to better the financial structure,assuring the ratio of liabilities and long-term capital structure are appropriate. Thirdly,corporation should improve management structure and increase the independence ofinternal audit. Fourthly, group should change the marketing strategy and better thecapacity of fund-collecting. Lastly, group need to strengthen the management ofsubsidiary corporations so as to prevent the financial risks. It can be said that themeasures mentioned above can certainly do good to the financial risk management ofXiangtan Electric Manufacturing Group if they will all be put into practice properly.