Research On The Causes Of Financial Difficulties Of Baobian Electric Power Company And Its Countermeasures

The global economy is in the post-financial crisis period,with the continuous progress of globalization and the increasing systemic risks undertaken by companies,many enterprises are in financial difficulties.As the focus of domestic and foreign scholars research,how to correctly deal with financial difficulties is a major problem that many domestic enterprises need to solve urgently.Restricted by the special capital market environment of our country,especially under the background of delisting system,many companies often adopt non-market-oriented means after they fall into financial difficulties,so as to improve the company's performance in the short term and achieve the goal of "taking off the stars and taking off the hat".As the leading enterprise in power transmission and transformation industry,Baobian Electric Company began to implement diversified development strategy in 2002,and has entered photovoltaic,rubber,medicine and other industries successively.In 2005,we began to implement the development strategy of "double main industries and double support",and began to invest in new energy industries,and obtained certain investment returns.However,since 2009,the performance of the new energy industry invested in Baobian Electric began to decline,resulting in a huge loss of Baobian Electric in 2012 and 2013 for two consecutive years,forced to "wear a star and hat".By taking a series of measures to cope with financial difficulties,Baobian Electric took off its hat in 2015.How effective are these measures? What is the impact on the long-term and sustained profitability of Baobian Electric? Is Baobina Electric really out of the quagmire of financial distress? These questions are worth exploring.Taking Baobian Electric Company as an example,this paper uses case analysis method to comprehensively and thoroughly study the causes of Baobian Electric Company's financial distress and the whole process of coping with it.Through the case analysis of Baobian Electric Company,the following conclusions are drawn:(1)After Baotou Electric Power Co.fell into financial distress,its financial situation continued to deteriorate,its profitability continued to decline,its assets shrank sharply,its short-term and long-term solvency ability continued to decline,its assets structure was unreasonable,its current liabilities ratio was too high,and its enterprises faced with huge financial risks and fell into financial distress.(2)The financial distress of Baobian Electric Company is the result of the combined effect of internal and external factors.Influenced by the financial crisis and cyclical economic fluctuations,the external economic environment is depressed,and the income of transmission and transformation business and new energy industry of Baotou Electric Power Station has continued to decrease.The enterprise's investment decision-making mechanism is imperfect and an unsuitable development strategy has been formulated.In addition,the management of enterprises blindly expand capacity,risk control awareness is weak,and ultimately,Baobian Electric fell into financial difficulties.(3)Baobian Electric Company copes with financial difficulties from four aspects: corporate governance restructuring,strategic operation restructuring,asset restructuring and financial restructuring.Corporate governance restructuring is carried out through the change of senior managers;from the development strategy of "dual main business and dual support" to the specialized operation strategy to realize the strategic and operational restructuring;through asset replacement and application for bankruptcy liquidation of holding new energy subsidiaries to achieve asset restructuring;through targeted issuance and government subsidies to achieve financial restructuring.(4)Generally speaking,the response of the market to a series of dilemma measures taken by the Baotou Electric Power Company is insipid.Although Baobian Electric turned a profit in 2015,it took off its cap smoothly.However,the measures taken by the enterprise to cope with the dilemma have no substantial effect on the long-term and sustained profitability of Baotou Electric Company.Therefore,Baobian Electric has not really got rid of the quagmire of financial difficulties.Finally,this paper provides some enlightenments for other enterprises in our country to deal with financial distress.The main problems are that enterprises should take systematic measures to deal with financial distress,improve investment decision-making mechanism,formulate appropriate development strategies,strengthen risk control awareness,strive to improve their real profitability and "eradicate" financial distress.