Financial Analysis Of Luzhou Laojiao Co.,Ltd. Based On Harvard Analytical Framework

Liquor has a long history which can be traced back to thousands of years in China.Liquor plays an important role in the development of the Chinese nation and has a huge consumer group.From 2003 to 2012 was the "golden decade" for the development of liquor industry.In 2012,the income of the liquor industry increased nearly 8 times compared with ten years ago.However,in 2012,the government strictly restricted official consumption of liquor,which made the liquor industry into a downturn.After nearly three years of deep adjustment,the liquor industry began to recover and entered a new normal of steady development.When the liquor industry is undergoing great changes,a comprehensive analysis of the enterprise can help the stakeholders understand the situation of the enterprise more clearly,and then make reasonable decisions.Traditional financial statement analysis is limited to financial data,it is not comprehensive and objective when facing the complex situation of liquor industry.As a large liquor listed company,Luzhou Laojiao Co.,Ltd.has a certain representativeness among Chinese liquor enterprises.Therefore,this paper uses the Harvard analysis framework to analyze Luzhou Laojiao Co.,Ltd.in a qualitative and quantitative way.Firstly,this paper elaborates the relevant theories of Harvard Framework,and then makes a concrete analysis of the company from four aspects: strategic analysis,accounting analysis,financial analysis and prospect analysis.In the strategic analysis,PEST analysis and Porter’s Five Forces Model are used to analyze the liquor industry at macro and micro levels.SWOT analysis is used to analyze the advantages & disadvantages of Luzhou Laojiao Co.,Ltd.and the opportunities & threats existing outside the company.In the accounting analysis,this part evaluates the rationality of the accounting policies and accounting estimates of key accounting subjects in Luzhou Laojiao,and analyzes the company’s investment in scientific research.In the financial analysis,this part analyses the solvency,profitability,operation ability,growth ability and cash flow of Luzhou Laojiao Co.,Ltd.from 2013 to 2017,and selects Kweichow Moutai,Wuliangye and Yanghe for horizontal comparison.In the prospects analysis,this part analyzes the operation prospects and financial prospects of Luzhou Laojiao,and then gives corresponding suggestions.Through the research in this paper,we can find that the liquor industry in China is developing towards a more stable and standardized direction,and it has good economic and technical support.The competition of high-end liquor market is comparatively stable,but the competition of middle & low-end liquor market is fierce and its buyers have stronger bargaining power.Although the threat from potential entrants to the liquor industry is small,the threat from alternatives such as beer and wine cannot be ignored.Luzhou Laojiao covers a wide range of products and and has the advantages of geography,craft and technology,but it has problems such as chaotic marketing system and imperfect internal control.Through the accounting analysis,it is found that the policies of key accounting subjects in Luzhou Laojiao are reasonable and the financial data is reliable.Moreover,the company attaches great importance to research and development,and its investment in this area is increasing year by year.Through the financial analysis,it is found that the company’s financial indicators have shown a trend of decline and recovery in the recent five years,which is consistent with the situation of liquor industry.In the horizontal comparison,Luzhou Laojiao has strong solvency and operation ability,but its profitability and growth ability are relatively weak,which need to be improved.Through the prospects analysis,Luzhou Laojiao’s development strategy in 2019 has started to take effect,and its future operation is very safe.As a whole,it has a good outlook.Based on the above research,this paper puts forward some suggestions for managers of Luzhou Laojiao,such as improving incentive mechanism and financial decision-making system,increasing investment in research and development,making full use of "Internet +",and appropriately increasing the equity ratio.Corporate creditors can be confident in the company’s solvency;while investors need to weigh the company’s capital security and low profitability,and make investment decisions based on their own circumstances.In addition,this paper can provide reference value for other liquor companies in the transformation period,and also enrich the practical application of Harvard analytical framework.