Research And Evaluation Of Financial Performance Of The National Railway System

The railway system has always been one of the most important infrastructures in ourcountry and has played an irreplaceable role in the perspective of economic development,social harmony and stability. Throughout history, the government has put in lot efforts toensure a healthy development and improve the capability of our railway system. Moreover,the government has increased its budget for railway system and shown more determinationsin reforming after China became a member of World Trade Organization (WTO) which leadsto increased competitive pressure from other transportation industries. However, compared tothe continuously expansion in construction and operation scale, the financial performance ofrailway system is not satisfying such like loss in profit or loss statement and high liability toasset ratio in recent years. Therefore, an analysis and research on the financial performance ofrailway system is indeed necessary. This report will comment and analyze the nationalrailway system from the perspective of evaluation of financial performance. As the analysisshows, the overall financial performance of railway system has been decreasing for the pastnine years. One of the most significant factors is the negative effect of pricing mechanism. Inaddition, macroeconomic policy, public welfare transportation and limited access to capitalmarket are also the factors which lead to such financial underperformance. Considering thesefactors, this report provides several suggestions which aim to improve the overall financialperformance of railway system; therefore, helps the railway system to improve its strengths,better compete with other transportation industries in the market and make furthercontribution to China’s economic growth.This report is divided into six chapters. At beginning, there is a short introduction aboutthe significance and background of the evaluation of financial performance including briefreviews of relative domestic and international research papers. Moreover, a summary ofresearch content and analysis technique will be provided at the end of this chapter. Thesecond chapter provides a summary of the national railway system including its economiccharacteristics and history of development. It also introduces relevant concepts and ouranalysis methods for financial performance evaluation. Chapter Three: Selection of KeyPerformance Indicators and Measurement of Weights. This chapter points out the importanceof the selection of Key Performance Indicators (KPIs) and explains the meaning of eachindicator. It also provides detailed introductions of three major analyze methods such likeregression analysis and component analysis. Chapter Four: Comments and Evaluation offinancial performance. This chapter starts with building a financial performance evaluationframework in railway system based on previous research results and its unique characteristics.Furthermore, it analyzes and selects statistic data from railway system annual reports within a ten years time frame starting from2003and builds a comprehensive index based on ourresearch results. Discussions are focused on five major factors such like payback ability,profitability, operation capacity and sustainability. It concludes that the overall financialperformance of the national railway system is suffering a decline trend. Chapter Five: Factorsof Financial Underperformance. This Chapter focuses on the discussions of possible factorswhich caused the decline of financial performance. These factors include macro environment,governance policies, pricing mechanism, public welfare transportations and liability issues.Chapter Six: Recommendations on Further Improvements. This chapter provides theoreticalrecommendations which could potentially help improve the financial performance of railwaysystem based on factors discussed.