Research On Diagnosis Of YQ Bus Company’s Financial Difficulties

Most of our country’s public transport enterprises have serious financial losses becauseof the contradiction between the social public welfare character and the marketing economyoriented system. For Example, there is big gap between the income from bus fares and thecost. Bus fares have been the same for11years, however, the bus operating costs, such aslabor costs, fuel costs, vehicle purchase and maintenance costs, bank loan interest,management fees, which ascend a lot with the rising of the CPI. On another hand, thegovernment subsidies have been delayed. Those reasons lead the public transport enterprisesmaking ends meet; For insufficient income to maintain operating cash flow, the publictransport enterprises can only rely on bank lending, which results in annual losses and highasset-liability ratio; The drivers flow away because they can not endure the low-income andheavy work burden anymore., which lead the problem that no one to drive the car. With theimplementation of urban development strategy of public transport priority, the publictransport enterprises face a new round of opportunities and challenges. Yet, to achievesustainable development, the financial difficulties formed before must be analyzed and solvedout first. YQ bus company, as the largest and most influential public transport enterprisecurrently in Guangzhou City, is also facing serious financial difficulties. Through analyzingYQ Bus Company’s development history and the existing financial management system, thispaper wants to analyze YQ bus company’s financial difficulties and try to solve it out.At first, this paper describes the company’s development history, the existing financialmanagement system, the government financial subsidies which have been received alreadyand the problem about the existing subsidies system. YQ bus company’s financial difficultiesare mainly in these aspects. Firstly, its ticket revenues are insufficient to cover the operatingcosts; secondly, there is limited space to compress the internal management; thirdly,asset-liability ratio is too high, however, the cash flow is inadequate; lastly, the company hastoo much financial losses to develop.Next this paper analyzes the reason of how the YQ bus company’s financial difficultieshave formed through interviewing the company’s manager and analyzing its financial data orreports. The reasons are as follows. Firstly it is because of the historical burden left by thecompany’s reform; including cash flow shortage due to insufficient subsidies of monthlyticket, high-quality resources has been split out many times, the big amount of bad assetsresulting from historical issues, the additional burden by implementing government specificpolicies. Secondly it is because the company’s undertakes the social responsibility; including the public transport fares remain unchanged for11years and other social welfare burden.Thirdly there is still much space to lift management efficiencies, such as enlarging businessdevelopment skills and income-generating capacity, strengthening the cost control capabilityand also refining and carrying out the institutionalized the management.After diagnosing the reasons of the company’s financial difficulties, this paper proposes afew suggestions to solve out the financial difficulties. Firstly, further reforms to solve outhistorical issues through applying reasonable special subsidies from government, outsourcingand spin-off some services and focusing on workers’ interests to achieve a reasonable slimfinance. Secondly, strengthening management to increase revenue by optimizing the routenetwork resources, informational and intelligent scheduling, promoting intelligenttransportation systems, innovating other means to increase revenue. Thirdly controllingoperating costs through institutionalization management, internal cost control measures andauditing. Lastly the company needs to make suggestion to the Government about morereasonable financial subsidies mechanism combing the actual situation of the bus industry andthe company.