Financial Risk Assessment Of Chinese Real Estate Enterprises

Since the1980s, China launched the reform of the housing system the development of real estate industry is rapid. Real estate has become the pillar industry which has great effect on economics and livelihood. It seems that the real estate price bubble will no longer exist because of the reduction of people’s enthusiasm on investment of real estate and the impact of monetary tightening. However, the buyers demand is not disappeared. The real estate enterprise still has great opportunity to develop. At this point, every enterprise is facing the problem that how to survive in such a competitive situation. Above all risks, the financial risk is the most serious one which can lead a company to liquidation. Therefore, it is essential for real estate enterprise to assess their financial risk and help them adjust their financial structure in time to avoid getting into trouble.This paper has six parts. The first part is introduction. This part introduces the research background and the significance of this research through microeconomic and macroeconomic aspect. This part describes the purpose of the research in four aspects which are investors, operators, regulators and creditors. In addition, the first part describes the research idea and framework through both text and graphic form.The second part is the literature review and theoretical basis. This part mainly reviewed some financial risk research from other countries and analyzed financial risk relative theory. The second part is the theory basis for the entire research.The third and fourth part analyzed the cause and characteristic of financial risk and claimed that financial risk assessment analysis can effectively reflect a real estate enterprise’s financial risk. In this paper, I used the factor analysis method to build the real estate debt risk assessment model to assess the financial risk of real estate industry in China. I analyze100sample enterprises for their financial data from2010to2012. According to the result, the solvency and growth factor has the most effect on an enterprise’s debt risk and profitability effect more on strong company while solvency effect more on weak company.The fifth part picked some top ZS real estate enterprise for financial indicators analysis which makes the result in previous research more concrete. Also the later part presents control methods according to case analysis.The contribution of this paper is that it presents some effective assessment model which is adjusted to be more suitable for our country’s situation. Also, the use of factor analysis method eliminates the correlation and multirole linearity indexes and extract factor which can reflect enterprise’s probability, solvency, operation efficiency, growth ability and capability of gaining cash flow. The weighted average assessment method eliminates the outer affection and enabled horizontal comparison between corporations.As government introducing macro control policies, real estate industry will face a huge adjustment. Therefore, the assessment of financial risk for real property industry becomes significant to government, corporation and investors.The insufficient part of this paper is that the research is mainly from microeconomic aspect and lack of consideration of affection of macroeconomic policy.