The Financial Analysis Of Northeast Electric Development Company Limited

With its coming into Chinese theoretical and practical fields, modern financial analysis has developed rapidly, and there are plenty research results on it. These research achievements focus on the following two aspects: one is theoretical research, such as the indices, evaluation systems, and analyzing methods for financial consition analysis; the other one aims to positive researches for listed companies using financial indices. But most of these only do research on classical or some special phenomenon, and research few on firm cases. Recently, as more frequently financial scandals came out, such as Lantian company, as more important case analyzing in financial analysis is. This paper analyzes financial conditions of Northeast Electric Development Company Limited (abbreviated as NEDC) in good many areas from 1995 to 2004, which use a serial financial analysis techniques and methods. Furthermore, there offer some advices for the problems of NEDC. 1.Analyze the financial reports of NEDC all over. With analyzing balance sheets, this paper finds out that the structure changing tendency of NEDC's balance sheets. Firstly, the proportion of fixed assets is high and the proportion of other assets is low, which get from the NEDC's asset situations. Before 2001, the total assets increased and after 2001 decreased. And in current assets, accounts receivable appeared abnormally increasing, which maybe is the main cause of NEDC's financial deterioration. In the other side, short-term liabilities took the principle place of NEDC's financing. After 2001, long-term liabilities downsized as well as the industrial average. Then before 2001, the equity kept lowing and after 2001, turned to rise. The strategic adjustment and asset restructure generally and analytically made it. With analyzing income statements, this paper make it out that after 1998 the operating revenue decreased. Compared to the industry, revenues of other companies kept rising excluding 2002 and 2003. It describes that the NEDC's operating condition got bad, or that the industry had changed. With analyzing cash flow statements, inflow and outflow of cash came mainly from operating activities. From 2001 to 2002, net cash flow of operating activities were positive and NEDC had cash capacity to sustain the operating activities. From 1999 to 2000 and from 2003 and 2004, the cash flow deteriorated and lost balance. The usual operating activities need additional current capital. And new investments and their scales are simple. 2.Analyze the financial indices of NEDC all over. With solvency ability analysis, this paper find it out that before 2001, cash to current liabilities ratio and current ratio were both decreasing., which meant the short-term solvency ability of NEDC kept declining. And with analyzing the debt to asset ratio and other indices, this paper find it out that the long-term solvency ability of NEDC kept declining too, excluding 2001. With operating ability analysis, accounts receivable turnover ratios and current assets turnover ratios of NEDC were lower than the industrial average, which meant NEDC need improve the use efficiency of capital. But inventory turnover ratios were higher than the industrial average. Meanwhile, fixed asset turnover ratios and total assets turnover ratios were decreasing, which demonstrated the total operating ability of NEDC decreased. With profit ability analysis, NEDC's relevant indices declined quickly and thus NEDC's profit ability decreased. Finally, according to NEDC's financial condition analyses, there are four advices about ROE, ROA, net income and cash flow. All above, the author analyze the NEDC's financial conditions using the relevant knowledge from 2-year studying and offer the effective advices for the problems facing to NEDC.