Evaluation Of Foton’s Financial Performance Based On Improved Du Pont Analysis

As China’s economic development enters a new normal,the development status of the automobile industry,one of the national industries,has a pivotal impact on China’s economic development.As a country with the world’s largest auto production and sales volume,China is setting new records for auto production and sales volume every year.However,along with the emergence of the new coronavirus epidemic,rising oil prices and the rise of new energy vehicles,China’s auto industry is experiencing a lack of development momentum.As the backbone of China’s auto industry,the financial performance evaluation of Foton,using the improved Du Pont analysis,can provide a glimpse of the problems that exist in the overall development of the auto industry,which is very beneficial to the long-term development of China’s auto enterprises.Based on this,this paper selects Foton Motor to evaluate its financial performance under the improved Du Pont analysis system.Firstly,the literature research method is used to sort out the domestic and foreign researches,and the related literature of Du Pont analysis system is compiled in more details,and on this basis,the research idea of this paper is proposed.Moreover,the concept of the improved Du Pont analysis system is defined and the theory used in this paper is briefly introduced.Secondly,the basic financial situation of Fountain Set is introduced and the traditional Du Pont analysis system is applied to analyze the company’s financial situation,and the limitations of the traditional Du Pont system are pointed out.Again,based on the case study method,the financial performance of Fountain Set is evaluated using the improved Du Pont analysis system,the financial performance of the enterprise is evaluated from the aspects of sustainable development ability,dividend payment ability,cash flow ratio,profitability and solvency,and problems and countermeasures are proposed based on the analysis process.Finally,we summarize the content of the whole paper and present the research outlook for reference by the industry.This paper evaluates Foton’s financial performance by applying the improved Du Pont analysis and mainly draws the following conclusions: Firstly,there are hidden problems in Foton’s sustainable growth capacity.The main factor affecting the sustainable growth rate of Foton is the fluctuation of net profit.The decision-making of enterprises in the acquisition and development direction also affects the sustainable development ability of enterprises to a certain extent.Secondly,Foton’s dividend distribution policy is discontinuous.Since 2018,Foton has not distributed dividends because of negative undistributed profits.The discontinuous dividend distribution policy has released signals to the market that the company is in poor operating conditions,which will reduce investors’ confidence in the company and thus have a negative impact on the company’s performance.Thirdly,Foton’s operating net cash flow is in poor condition.In the comparative analysis of the enterprise’s sales cash ratio and total assets cash recovery rate,it is found that the enterprise’s profitability and operating capacity are at a good level in the same industry,but in the analysis of the net operating cash ratio,which reflects the enterprise’s solvency,it is found that the enterprise’s net operating cash flow is in poor condition and the growth rate of net operating cash flow fluctuates greatly,indicating that the enterprise’s operating cash flow is not stable.The innovation of this paper is mainly in two aspects: First,the research object is more unique.As a representative enterprise in China’s auto industry,Foton’s business development will reflect the overall business situation of the current domestic auto market,which has certain significance for other enterprises in the auto industry.Second,the research perspective is relatively new.The analysis of Foton’s financial performance according to the improved Du Pont analysis is a novel perspective and demonstrates the important role of the improved Du Pont analysis in evaluating the financial performance of enterprises through the study.