Case Study On Financial Risk Control Of Real Estate Enterprises Under High Turnover Business Model

The "Golden Decade" of real estate development has passed.Today,China's real estate market is becoming saturated,competition between enterprises is becoming increasingly fierce,and national policies have continued to strengthen the regulation and control of the real estate industry.In the deteriorating market environment,many real estate companies are in financial crisis.Some wealthy real estate companies choose to "broken arms to survive".The industry benchmark Wanda has sold many projects in commercial real estate and cultural tourism to protect the capital chain,while companies with poor risk resilience have gone bankrupt.In this context,more and more real estate companies firmly believe that only by expanding their business can they quickly scale up and maintain their competitiveness.These real estate companies participating in the "scale war" have adopted high turnover business model.High turnover business model was first proposed and applied by Vanke.It refers to real estate companies accelerating the speed of their project development through a series of institutional arrangements to achieve rapid return of funds and minimize the occupation of project funds.High turnover business model is designed to help real estate companies speed up their investment frequency and scale to achieve the purpose of improving performance and avoiding risks.However,the research in this paper finds that high turnover also increases financial risk of the company while helping the company expand.The case company Country Garden in this paper fails to effectively control the financial risk.The reason is that the institutional arrangement of this business model will increase the difficulty of financial risk control.The high turnover model requires real estate companies to reduce the construction period as much as possible so that the project can reach the pre-sale status as soon as possible.To this end,enterprises usually set time standards for the project construction progress to ensure that the funds are recovered within the prescribed time.Similar institutional arrangements may lead to project rushing and house quality degradation,which is not conducive to inventory management and commodity sales.In addition,the rapid expansion of enterprises with the help of high turnover model has led to an increase in the blindness of investment,an increase in the capital gap of enterprises,and further increase of financial risks.Therefore,real estate companies which implement high turnover business model should raise their awareness of financial risk management and invest more resources in financial risk control.The research methods of this paper include literature research method and case study method.Based on references to financial risk control and other related literatures,a typical high turnover housing company Country Garden is taken as the research object to analyze the effects of its financial risk control.Then,countermeasures to the problems and causes of Country Garden's financial risk control are proposed to help real estate companies optimize financial risk control under high turnover model.This article is divided into six chapters.The first chapter is the introduction.First,the research background and significance of this article are introduced.Based on this,the related literature at home and abroad is reviewed.The related research on financial risk control and high turnover business model is summarized and the literature review is given.Finally,research ideas and research methods of this article are introduced.The second chapter is the theoretical overview of this article.Firstly,the concept and characteristics of the high turnover business model are introduced.Then,the main financial risks of the industry are classified into financing risks,investment risks,inventory management risks,and liquidity risks according to the characteristics of the real estate industry.The general methods of financial risk control in real estate companies are also introduced.Finally,the theoretical basis of the research in this article is described in conjunction with the thesis and case company.The third chapter is a case introduction of Country Garden's implementation of high turnover business model.Firstly,this article introduces Country Garden's corporate profile,then summarizes the characteristics of its high turnover business model based on Country Garden's internal documents and other relevant information.Finally,the internal and external environment of the company is used to analyze the motivation of Country Garden to implement high turnover.Chapter 4 firstly introduces Country Garden's main control measures for 4 types of financial risks,then selects risk evaluation indicators for each type of financial risk,analyzes the effects of financial risk control,and finds that its financial risk control measures are closely related to high turnover institutional arrangements,but they do not effectively control the financial risks of the enterprise.The fifth chapter analyzes the problems and causes of financial risk control,and finds that there are deficiencies in Country Garden's 4 types of financial risk control.Firstly,high turnover institutional arrangements will lead to project rushing,price reductions,and excessive expansion,making it more difficult for companies to conduct financial risk control.Secondly,Country Garden restricts equity financing,and there are also large amounts of related party receivables with excessively loose credit policy,which indicates that managers have not paid enough attention to the financial risks faced by the enterprise.This is also the reason for the ineffectiveness of financial risk control.Chapter 6 proposes optimization countermeasures for financial risk control.Country Garden should appropriately reduce the speed of project construction and corporate expansion,invest more resources to improve project investment quality,housing construction efficiency and product competitiveness.In terms of financing,it can take measures like introducing strategic investors to reduce the company's debt ratio,which help achieving high turnover and low leverage.In addition,Country Garden can raise the awareness of financial risk control through a risk-oriented corporate culture,establish a sound financial risk warning mechanism,and add financial risk control measures to high turnover institutional arrangements to standardize financial risk management and control.