Financial Analysis And Diagnosis For HDDC Corp.

This paper aims to make a financial analysis and diagnosis for HDDC Corp. However, with literature review, the current financial ratio system seems to be not so suitable for diagnosing a firm's financial condition. Thus this paper tends to establish a more specification and systematic financial diagnosis method, and then apply it to diagnose HDDC Corp.This paper assumes that if a person outside the enterprise, how he would do the analysis. He would not know much of the internal information, which can be known by the internal persons such as the managers. We study HDDC's financial statements of the last 5 years (year 2005-year 2009). With trend analysis and structural analysis to learn HDDC's financial situation and its development trend along these years. With ratio analysis to evaluate the three aspects (profitability, solvency, growth) of HDDC's financial situation. The Radar Chart is used to view the weaker aspect of HDDC to the best firm (ZKSH) among the Magnetic Material Industry. And then the DuPont Analysis is used to figure out that why HDDC is weaker than ZKSH, that's the reasons for its weakness. Then decompose the factors which affect HDDC's profitability, use the Method of Circulation Substitution to work out the specific degree of effect for each factors to Return on Equity (ROE). In addition, HDDC is a firm which is on the growth phase, cash holding is very important to its development, thus this paper tends to do another analysis to confirm HDDC's position in the financial strategy matrix, so as to make its development strategy plan. Based on the above methods to study the financial status of HDDC, we can understand HDDC in essence, thus put forward the attentions and actions of HDDC: HDDC would pay more attention the currency risk besides the Industry volatility risk and raw material risk like most of the firms. And HDDC should pay attention to the turnover rate of its current assets, especially its cash and cash equivalents; HDDC should pay attention to its dynamic liquidity; HDDC can improve its selling expenses management; HDDC should make use of its financial leverage to enhance profitability; if there is no financial crisis, HDDC would be in the first quadrant of the financial strategy matrix, thus HDDC should raise its Sustainable Growth Rate (SGR) and enhance its fund-raising capacity.