Study On Working Capital Management Risk Evaluation And Control

In the whole process of business operations,investment,and financing,the risks exist objectively,and they cannot be avoided and ignored by companies and their stakeholders when dealing with transaction activities and transactional relationships between them.Working capital,as the "flowing blood" of an enterprise,is inextricably linked to the company's financial risks.Therefore,the combination of working capital management and financial risk research has important practical value.Kangmei Pharmaceutical is a leading Chinese medicine company with good operating performance.Its expansion rate is extremely fast.Its operating income has increased from 2.37 billion in 2009 to 21.64 billion in 2016,an increase of more than 9 times.For this reason,this article takes Kangmei Pharmaceutical as an example to study the risk of working capital management in the process of rapid expansion.It also has certain reference significance.First of all,based on the risk concept of the working capital demand protection ability,this paper designed a set of evaluation system for the management risk of working capital.And in order to comprehensively consider all the influencing factors,this paper uses AHP to design a comprehensive evaluation system for the management risk of working capital.Then,based on the risk assessment system for working capital management designed in the previous section,after reviewing Kangmei Pharmaceutical,we found that Kangmei Pharmaceutical should focus on risk management,and its risks mainly come from the following aspects:(1)Self-cultivation of Chinese herbal medicines and The expansion of the real estate business will increase the cash backflow cycle,thereby increasing the working capital demand risk;(2)The large increase in trade income will lead to a substantial increase in its main business income,but the trade business needs large cash flow support and will increase its operations.The risk of capital requirements;at the same time,the fluctuations in the prices of medicinal herbs will also increase their risks;(3)The planning of Kangmei Pharmaceutical's cash holdings is unreasonable,which reduces the return rate of its total funds and increases the demand for working capital;(4))Kang Mei Pharmaceutical's large amount of debt will reduce its ability to raise debt,and thus increase the supply of working capital.Thirdly,based on the analysis of the management risk of Kangmei Pharmaceutical's working capital,this article puts forward the following suggestions for Kangmei Pharmaceutical:(1)Under the circumstances that the demand for working capital of Kangmei Pharmaceutical has increased,it can be used for the development and cultivation of Chinese herbal medicines.The properties in the property are mortgaged to banks for financing,which in turn increases the supply of working capital and reduces the overall risk;(2)Kangmei Pharmaceuticals can use its advantages in the trade of medicinal materials to provide medicine traders from traditional Chinese medicine traders to herbal medicine trading services.The transformation of the role of the business,which in turn reduces the inherent risks posed by the trading business;(3)Finance Department should strengthen the cash management,making use of idle funds to improve the profitability of funds;(4)In the case of extension continued in the business cycle,to increase the proportion of long-term funding,in the long-term debt and equity financing,equity financing is preferred;(5)Improve the business status of tradition Chinese medicine decoction pieces and increase their core competitiveness so as to achieve long-term development.Finally,this paper summarizes the design of the risk assessment system and the analysis of the case,and then explains the deficiencies in the research.Finally,it puts forward the outlook for the research on the management risk of future working capital.