The Financial Analysis Report On Wanhua Chemical Company

The analysis of financial statements is also called financial analysis. It provides a basis of management decision-making for users of financial reports through collection of the relevant data and collation of the enterprise financial accounting report. It is a comprehensive comparison and evaluation of the financial position, operating results and cash flow situation. Because of the differences of interests, the different users of the financial statements constitute the main body of the financial statement analysis. The analysis of financial statements should not only meet the needs of internal management decisions, but also meet the needs of enterprises and the related interest group decisions. They make a decision based on the conclusion after analysizing the financial statements. In this paper, by using the Harvard Analysis Framework of strategic analysis and financial analysis of the organic combination, the author unifies the qualitative analysis and the quantitative analysis, effectively compensates for the limitations of the simple analysis of financial statements, and provides a good tool for the modern financial analysis. Harvard Analysis Framework includes strategic analysis, accounting analysis, and financial analysis. Therefore, in this paper the author combines Harvard Analysis Framework with the analysis of Wanhua chemical company, and further applies to the polyurethane industry.Wanhua polyurethane chemistry company limited was established on December20,1998. After the reform of Shandong province, it was the first listed joint-stock company. The company’s financial situation is typical. Therefore, as a case study, this author, using Harvard analytical framework to analyze the company’s financial situation, helps to strengthen the Harvard analytical framework for the practical application, and provide further references for the development of Wanhua polyurethane chemistry company limited. Through the financial statements analysis to identify problems and make appropriate recommendations for the Wanhua chemical company, the author hopes to be able to provide effective suggestions for the development of polyurethane industry in China.This paper is divided into six chapters. The first chapter is the introduction, including the background, meaning, methods, content, and innovation of the research. The second chapter is the basic theoretical analysis, including the definition and methods of the analysis of financial statements as well as the analysis steps of Harvard analytical framework. The third chapter is the strategic analysis of Wanhua chemical company, including the company profile, the analysis of PEST, the whole industry and SWOT. The fourth chapter is the accounting analysis including the identification of key accounting policies, assess policy flexibility, evaluation and accounting policies. The fifth chapter is the financial analysis. It includes the trend analysis, the ratio analysis, and the cash flow analysis. The sixth chapter is research findings and recommendations.In this paper the author argues that the Wanhua chemical company is in a leading position in the Chinese market with a good growth prospects because of the large total market share and the core competencies. It adopted accounting policies and the estimation of the company were realistic in the past, so that the accounting policies were sound and flexible. The company has ramped up investments and increased productivity with sustained and stable profitability, so that the development of the company is rapid and strong. The long term equity investments, notes receivable and accounts receivable, liquid assets of the corporation embodied in the asset structure are not ideal. Due to the substantial decline in the ability of short-term solvency, the ability of long-term solvency also has a tendency to diminish year by year, and its asset management is inefficient with an increasing financial risk.On the basis of the conclusions of the analysis, the author puts forward recommendations for the development of polyurethane industry:firstly, the company should improve the management of notes receivable and accounts receivable, and focus especially on the long-term recovery and the management of receivables. If the company does not attaches great importance to high notes receivable and accounts receivable, it may result in slow recovery of accounts payable and untimely repayment. Secondly, the company should pay close attention to changes in business conditions and risking insolvency. The corporation should have expected whether inputs and outputs are reasonable or not. Thirdly, the company should enhance the liquidity of assets and attach great importance to the recovery of funds in order to reduce liability risk. Improving the liquidity of assets is related to the company’s normal business operations and the rational use of funds, thereby it may weaken the liability risk of company. Fourthly, the company should pay attention to reasonable investments, and control the amount of investment in research and development funds to reduce the risks of them. So the company can be developed step by step. The company should increase investment in research and innovation. At the same time, it should pay attention to controlling development momentum. Also, it should think whether the diversified development promotes the further development of it or not deeply. Fifthly, the depreciation period is too long for the upgrading of machinery and equipment, so the corporation should shorten the depreciation of machinery and equipment, using accelerated depreciation method of calculating depreciation.The author hopes to make further study and analysis on Harvard Analytical Framework, and apply Harvard Analytical Framework to the particular industry and the typical enterprises in order to improve the financial analysis.