The Analysis Of Best Cash Conversion Cycle In Real Estate Industry From The Performance Of Enterprise

Because of the large demand of the funds and the long time of the cash use cycle, real estate industry is the typical capital intensive companies. As we known, the importance of the cash to real estate industry companies is similar to the blood of human beings. Fund is one of the most primary factors in the real estate industry. The faster of the cash flow speed and the higher of the funds use efficiency, the more wonderful corporate performance will be. "Cash conversion cycle" is the key indicators to evaluate the efficiency of the enterprise capital management. According to statistics, the cash cycle of real estate industry is too bad compared with other, which makes the question of how to improve the ability of enterprise’s cash management,become to be an inevitable problem of every real estate enterprises, and it also makes the following study more and more meaningful.In this paper, working capital management is analyzed to identify the economic rule of real estate industry and the effects of macro-control policies in real estate market. Based on the features of working capital management in the real estate industry and the shock of macro-control policies, we propose a measure of the cash cycle from the perspective of supply chain management.Considering our country existing working capital management performance evaluation system in order to cash cycle as the core of the defects, the influential factors of working capital to consider not only full, including accounts receivable, inventory and accounts payable, and the same constitutes the operating funds for other current assets and current liabilities, but no one include in. These deletions are vital for the management practice of understanding of the real estate industry, so this paper based on the original evaluation system is modified, the refinement of the driving factors, proposed the real estate industry cash cycle calculation formula. And then it can be more accurate and comprehensive to reflect the actual situation of working capital management of the real estate industry.This paper selects most of the listed companies from the year 2004 to 2013 in real estate industry area as the object of our study, which were issued in China’s two largest public stock markets. Through the research, we want to find what kind of relationship between the level of our ability to solve the company’s cash problem immediately and the profitability of the company.This study shows that the level of working capital management measured by cash cycle imposes a significant impact on the performance of real estate companies, and there exists an optimal cash cycle.These results can be the reference for the operating funds management of the enterprises in the real estate industry companies, the lending decisions from the external financial institutions and the macro-control of the real estate industry. We also find that there occurs greater volatility in the cash cycle, and working capital management is distorted heavily by macro-control policies in the short term, indicating that the existing macroeconomic regulation with the feature of an administrative intervention plays a negative role in the healthy development of the real estate industry.Finally, we make three suggestions based on our analysis results, including from the macroeconomic regulation and control, the industry development and the enterprise operations requires. We want to help the companies improve their ability of cash management and get a satisfactory business performance in the end.