Research On The Financial Risk Of Hualing Steel Enterprises Based On Financial Leverage Effect

In recent years,due to the overcapacity of traditional heavy chemical industries such as steel and coal,the state's implementation of supply-side reforms has proposed five major economic tasks: decapacity,destocking,deleveraging,cost reduction and shortcomings.Market-oriented debt-to-equity swaps,broadening the channels for social capital to participate in debt-to-equity swaps,and a series of positive and prudent deleveraging measures.The above reform measures are both opportunities and challenges for steel companies with high debts and high leverage.In the next few years,as a key period for the transformation and upgrading of steel companies,it is very important for the company to control and rationally utilize its financial leverage.The current general situation is that many companies blindly pursue the additional benefits brought by high leverage,but ignore the serious effects of the negative effects of financial leverage.Therefore,it is more theoretical and practical to analyze the financial risk of enterprises based on the financial leverage effect.This article adopts a case study method,and selects a typical high-leverage enterprise Hualing Iron and Steel Company as the research object to study the financial risk of the enterprise from the perspective of financial leverage effect.The article is mainly divided into the following five parts.The first part mainly discusses the topic selection background,research purpose and significance of the article,and sorts out related research on financial leverage effect and financial risk at home and abroad.Based on this,the research ideas,research contents,research methods and innovations of this article are put forward..The second part briefly introduces the theoretical basis of financial leverage effect theory and financial risk management theory,and further elaborates the relationship between financial leverage and financial risk.The third part mainly analyzes the financial risks under the negative effects of financial leverage.It briefly introduces the company's general situation,the company's debt financing situation,and basic financial conditions such as cash flow.It also calculates and compares the financial leverage effect of the company.The negative effects of financial leverage are more obvious,and there are problems such as short-term liabilities and poor cash flow.Based on this analysis,the financial risks faced by Hualing Steel under the negativeeffects of financial leverage are analyzed.The F-score model is used to quantitatively analyze the level of financial risks,and the causes of the enterprise's financial risks are analyzed in combination with the changes in the independent variable indicators of the F-score model.The fourth part proposes countermeasures against corporate financial risks,puts forward reasonable suggestions on corporate liability structure,risk management and control,etc.,to make up for loopholes and help companies to further reduce leverage and control risks.The fifth part summarizes the research results of this paper and points out the shortcomings of the research.Based on the case study of Hualing Steel,this article draws the following conclusions:Firstly,the utilization of financial leverage is not good,and the negative effect of financial leverage obviously leads to the high risk of short-term debt repayment and capital recovery.The mismatch between financial leverage and profitability is an important cause of financial risk.Specifically,since 2014,the financial leverage level of the enterprise has been as high as more than 80% for four consecutive years.In the same period,the profitability index of the enterprise has shown a trend of fluctuation and decline,and the total profit has reached a minimum of RMB 4 billion,which cannot make up for the fixed expenses caused by high leverage.The enterprise was once in a state of loss,and the positive effect of financial leverage has not been brought into play.Secondly,enterprises still need to continue to promote financial risk management and control.Although enterprises effectively reduced the leverage level through the market-oriented debt-to-equity swap program in 2018,financial risk control is a long-term process.Enterprises should conduct in-depth policy interpretation and market environment analysis,improve the sensitivity to changes in the external environment of enterprises,and cultivate the awareness of risk prevention in advance and actively respond to.At the same time,enterprises should also actively expand financing channels,seek diversified business transformation,and in combination with their own situation to improve the enterprise financial risk early warning mechanism,strengthen the internal control of enterprise working capital,to continue to promote the enterprise financial risk management and control to lay a solid foundation.The innovation and characteristics of this article are to identify and analyze corporate financial risks based on the perspective of financial leverage effects,and summarize their risk causes to propose practical risk control measures.At the same time,it provides a reference for the financial risk prevention work of high-liability and high-leverage enterprises.