A Comparative Analysis Of Financial Performance, Policy And Strategies On JILIN CHEMICAL FIBER And BAODING SWAN

The textile industry is one basic industry in China. Chemical fiber, which is in the upstream of textile sectors and has the highest financial and technical requirements, is the best illustration of the comprehensive strength of a country’s textile industry. China ushers in a golden decade after joining the WTO in2001, and the capacity of chemical fiber, yarn, fabric and garment all rank first in the world. Annual growth rate of chemical fiber, yarn, and cloth is15%,16%and12%, respectively. Viscose industry as one important chemical fiber industry also experienced rapid development. However, the former market leaders, JILIN CHEMICAL FIBER and BAODING SWAN lost advantages in capacity, competitiveness and development gradually. What causes such state-owned enterprises to stand still in the face of the rapid development of the market? This article aims to analyze the main reasons from a financial point of view, combined with the industry and strategic analysis to make recommendations accordingly.This paper focuses on the financial reports of Jilin Chemical Fiber and Baoding Swan from2006to2011and the related business data, while the financial and operating data of domestic and foreign competitors is collected for comparison. In addition, industry data obtained from the professional industry website is also important for the analysis. Main analysis method includes financial ratio analysis, three-dimensional analysis of financial statements and financial indicators decomposition analysis.This paper is divided into eight parts. Chapter1outlines the background, problem, significance and analytical framework of this study. Chapter2is the analysis of viscose industry, which focuses on analyzing the major competitors. Chapter3is the three-dimensional analysis of two companies’three financial statements (i.e. trend, industry and structural analysis). Chapter4is the analysis of the key financial indicators of these two companies, and compares the profitability, asset operations, solvency, the pros and cons of cash generation ability. Chapter5is the decomposition analysis based on return, risk, growth and value creation. Chapters6evaluate the financial policies and provide relative recommendations for each company individually. Chapter7presents the general comment and suggestions combined with the conclusions of the financial analysis.Main conclusions include:Baoding Swan is better than Jilin Chemical Fiber in terms of profitability, liquidity, risk control and other financial issues. Both companies are in the area of value loss and money shortage. It is necessary to conduct a thorough business restructuring to change the status. Two companies made mistakes in the financial policy, and then missed the golden age for developing viscose. They shall study the trend of viscose industry, utilize their own advantages to make improvements in financial policy, adopt better strategies to eliminate disadvantage products, strengthen brand building and improve the supply chain system.