Relationship Among Investment Activities, Cash Restraints And Financial Performance In HL Company

Investment and financing are the two basic financial activities, which have closed relationship as the determinants of the enterprise value. One central issue in Finance is to explore the relationship among investment, financing, and corporate governance performance. Among them, the investment is an important way to expand enterprise scale, enter a new field quickly, enhance their dominant position in the value chain, and reduce main business costs. Business investment shall serve for improvement of the core competitiveness of enterprises, shall be under controllable risk with financial competence, shall aim at increasing enterprise profitability and growth finally. If investment exceeds this goal and constraints irrationally, over-investment will lead to financial risk, deterioration of financial performance, and suspension of sustainable development.Based on fundamental theory of finance, this paper takes Shandong Melon Co., Ltd.(hereinafter referred to as HL) as an example. This paper dissects the relationship between investment activities with cash flow management, and corporate financial performance changes in HL. Meanwhile this paper will study investment decisions of HL and its effect on the financial condition, operating results, and explore the relationship between financial activities and business development. The HL Company is the first public company of local market, which has strong support from local government. Through continually investment, HL had a15years history of rapid growth, whose assets increased from1.52billion in the end of1996to nearly80million by the end of2010. However, due to over-investment and direction problem, HL did not receive a good return on investment, worse still, it generated huge financing demand. Financing demand promoted the continue increase of liabilities and financial, finally, HL cash management came to mess, the company also suffered huge losses in the economic crisis.The revelations of this study are:the main target of business investment must be improvement of core competitiveness of enterprises; consider the constraints of corporate cash to avoid blind diversified investment; avoid investment growth exceed the cash security management capacity. In order to achieve the sustainable development of enterprises, the relationship, among the investment, financing constraints and corporate financial performance, must be scientifically maintained.