The Analysis Of Financial Statements Of ChangChun Department JiTuan Store Company Limited And The Methods Of Solving The Problems

ChangChun Department JiTuan Store Company Limited(CCD),a well-known state-owned enterprise of Jilin Province, listed in 1994. This company brought the advantage of brand into play in the 1990s and was run well. But in recent years, the trend of its mainly financial indexes were towards decline, most indexes were below the average of the same trade, and were to the bad in some quarters of 2002 to 2004, which resulted in the long-term fall of the share price. In order to improve the adverse situation of CCD, I will analyze the situation of its finance by mean of ratio analysis, comparative analysis, trend percentage analysis and Du Pont analysis in this thesis, finding that the following problems are in CCD: 1.Ability to pay current liabilities: The net working capital is negative. Current ratio is lower than value 1 and the standard value 2.The quick ratio is lower than the standard value 1 all the time. All in all, the ability to pay current liabilities of CCD is on the low side, still shows itself the trend towards weakness and faces a short-term paying pressure and financial risk. 2.Ability to pay long-term debt: The debt ratio keeps about 50% basically, the financial lever of CCD was put to a good use. Although we can reduce the costs of using funds by getting into debt, which has the function of financial lever, the financial lever is a double-edged sword, the company can get more profit by increasing the financial lever, only on a certain condition, otherwise this will increase the risk of finance. This is the reflex of the increase of the ability to pay long-term debt of CCD in these two years, which is still weak and need to be strengthened. 3.Operational ability: Assets turnover, accounts receivable turnover and inventory turnover all declined in recent years. From 2003 to 2004, on account of the decline in the net sales and the cost of products sold, the assets turnover, accounts receivable turnover and inventory turnover declined seriously in the same year and continued declining. As a whole, the operation ability of CCD declined continuously, the assets turnover is slow, the management ability is bad, the sale efficiency is bad, the demand of the products is not strong. CCD must find way to solve the problems and reform the situation of the decline of the operation ability. 4.Profitability: The rate of returns on net sales and the rate of returns on common stockholders'equity dropped from 2000 to 2002. Though they were strengthened gradually in 2003 and 2004, due to the increase of the proportion of operating expenses to net sales, the rate of returns on net sales and the rate of returns on common stockholders'equity are still low. From this we can find that the profitability of CCD is not strong, we should find methods to solve the problems. We can find the following reasons of the above problems of the financial situation of CCD by Du Pont analysis to CCD from 2000 to 2004: 1.The drastic marking competition makes the mark share drop. In order to race to control the market, the CCD adopted strategy of low price, which led to the net sales declined year after year, and this affected the profitability seriously. 2.In order to deal with the adverse situation, the company has organized a lot of sales promotion, which caused the increase of the proportion of operating expenses to net sales. This is another factor that influenced the profitability of CCD. 3.The disadvantageous factors of sales caused the overabundance of stock , the assets turnover and inventory turnover declined.This affected the operational ability of CCD seriously. 4.Credit policy is excessively unbending, this led to the nimiety of the accounts receivable and the low accounts receivable turnover. The return of cash is slow. All of these affected not only the operational ability, but also the ability to pay liabilities. 5.A lot of funds were put into the project of shopping center of the FilmCity of the CCD, which led to the highness of financial expenses, caused the increase of cost and the pressure of the ability to pay current liabilities, of course, this would affect the ability of refinancing. 6.The accounts payable reduced quickly. This affected the cash flow. According to the problems, the reasons leading to these problems and the condition of CCD, I suggest: 1.In order to change the traditional marketing mode, introduce the Hi-Tech means actively. 2.According to the specified conditions of the company, regulate its market orientation, follow the road of market subdivision, expand new market space. 3.Race to control the market by choosing the advanced trade state. 4.Strengthen the internal management, reduce the operating cost, carry out the scale merit. 5.Carry on the regulation of the industrial structure and rearrangement of assets actively, utilize the capital market to launch the operation of the capital. 6.Accelerate the paces of the information construction. 7.Give full play to the function of the guild. 8 . Adjust the operating structure, continue supporting the branch companies which have the advantage of market competition, in order to obtain the greatest benefits; recall the accounts receivable, clean up the inventory. Because CCD has the characteristic of most of the commercial listed company in China, the methods of solving the problems will make sense, for they can improve the competitive ability and the operating conditions of the commercial enterprises in our country.