Evergrande Group Financial Risk Identification And Control Under Diversified Operation

Diversification is one of the important strategic approaches that many enterprises choose after they reach a certain stage of development.The main goal of diversification strategy is to find a satisfactory balance between performance and risk.Since the reform and opening up,domestic real estate enterprises have passed the golden age and achieved rapid development in the past 20 years,and many real estate enterprises have also started diversified expansion after accumulating original capital.However,the road of diversified expansion of real estate enterprises is not plain sailing.Most of the real estate enterprises are not clear about the goal of diversification,and the expansion speed is too fast.The funds needed for diversified expansion are excessively dependent on external financing,making the originally highly leveraged real estate enterprises constantly suffer from financial risks.At this time,if the risk is not controlled,it will make the enterprise into a crisis.In this paper,Evergrande group,a representative enterprise in the real estate industry,is selected as a case enterprise.Firstly,literature research method is used to summarize the relevant theories of diversified operation and financial risk.Secondly,in this paper,the case of Evergrande group diversification,sorting and analyzing model based on the Z value,profit ability,debt paying ability,operating ability and cash flow indicators,identify Evergrande group under the diversification of financial risk,and then explore the enterprise diversification the deep cause of financial risk,finally aimed at these reasons,for Evergrande group of financial risk control Suggestions to diversified management.Through research,it is found that the financial risks of Evergrande group under diversified operation are mainly caused by the following reasons: first,diversified operation significantly increases the period expenses and reduces its profitability;Second,the rapid pace of diversification,a large proportion of debt financing;Third,the diversification of capital recovery period is long;Fourth,the target of diversification is not clear,resulting in investment losses and diversification expansion excessive reliance on financing to supplement funds,cash flow structure imbalance.In view of the above reasons,this paper puts forward corresponding risk control strategies: first,strengthen cost control,improve profitability;Second,the rational planning of diversification rhythm,grasp the scale of corporate financial leverage;Third,adjust the financing method,reduce the debt financing ratio;Fourth,strengthen the process control of investment activities;Fifth,optimize the cash flow structure of the group.It is hoped that through this paper,on the one hand,it can enrich the case study of the relationship between diversified operation and financial risk of real estate enterprises,and on the other hand,it can provide effective reference for information stakeholders.