The Investment Of Financial Decision Analysis Of Hunan Xiangtou High-tech Venture Capital Investment

Project investment is a significant strategy for enterprises to obtain economic benefits. The main feature which differentiates venture capital from general project investment lies in that it is highly uncertain. Thus, financial decision making is critical to venture capital investment institutions which can greatly reduce speculative risk and enhance the yield rate of investment.Under the current situation of global economic integration, venture capital investment is playing more and more important role in accelerating the growth of a country’s national economy and is nurturing a large quantity of high-tech enterprises which are to get high yield rate and can also promote the development of a large number of related industries and can provide many jobs. Venture capital research abroad is on the maturity. However, due to the imperfection of capital market and blocked channel of equity exit, venture capital institutions in China should establish a set of decision-making system according to the actual situation instead of indiscriminately copying theories from abroad. Whether the project invested is to yield benefits is a concern in the decision-making system. Thus, financial decision making is a key factor concerning the determination of whether a project is worthy of investment.This thesis starts with analysis of venture capital and related theories of financial decision-making. It follows with analysis of financial risks facing venture capital institutions, focuses of financial decision-making in different phases and steps for making financial decisions. Based on theories, the thesis makes an analysis of Hunan Xiangtou High-tech Venture Capital Investment to Boyun New Materials. In2001, Hunan Xiangtou High-tech Venture Capital Investment made a primary investment to Boyun New Materials at the beginning of its establishment. In2004, after further observation and analysis, Hunan Xiangtou High-tech Venture Capital Investment increased its investment. This thesis focuses on analyzing their financial decision-making during Hunan Xiangtou High-tech Venture Capital Investment’s two investments. We can find out that Hunan Xiangtou High-tech Venture Capital Investment, as a venture capital institution, makes investment in high-tech enterprises or enterprises with growth potential. To analyze with the traditional method of financial decision-making, we will probably missing some management flexibility. It may lead to the elimination of enterprises which will get a high yield rate in decision-making. The thesis summarizes the success and shortcoming of the financial decision-making of Hunan Xiangtou High-tech Venture Capital Investment during its investments in Boyun New Materials. Then, the thesis proposes a systematic, full range of financial decision-making system need by venture capital institutions in making project investment.The thesis argues that, given the particularity of venture capital industry, venture capital institutions need value appraisement of enterprises with appropriate method of real options, in addition to traditional methods of analyzing business potential. It may reduce the risk of failure and improve our chances of investment success.