Research On The Prediction Of Operating Working Capital Requirement In Real Estate

Real estate industry is the pillar industry of national economy, which has a strongindustrial promotion. For its enormous capital, long production period and policylimited, working capital management of real estate is extremely difficult andimportant. Rapid turnover brings to fluent cash flow; liquidity risk takes root in therelationship of capital financing and capital need. The prediction of operating workingcapital requirement could monitor the usage of capital among different projects of realestate, raising money through various channels timely to avoid the risk of capitalchain rupture, provide a new tool of risk management. Other stakeholders such asbanks can also assess the enterprise’s credit status to decide the line of credit.The prediction of operating working capital requirement in real estate should bebased on the scientific definition of working capital requirement. From theperspective of funding sources and uses, the economic behavior can be defined asfinancing activities and operating activities. Financing serves operating for the valuecreation. So operating working capital requirement can be defined as operatingcurrent assets minus operating current liabilities, which is the real financing neededexternally. Then analysis the influence factors of operating working capitalrequirement in real estate from the environmental dimension, organizationaldimension and managerial dimension, including inflation, macroeconomic regulationand control policy, size and growth of the enterprise, property right, fund managementmode, supply chain management, business processes and information technologylevel. Macroeconomic policies influence the enterprise operating by influencing theeconomic forecast, the cost of capital and the information environment. The strategicfactors influence the size of operating working capital requirement and the tacticalfactors influence the precision of operating working capital requirement. The strategicmanagement mode through information sharing, resource sharing, mutual trustmechanism, decision-making power to affect the need of operating working capital,and the executional precision of tactical management mode depends on theconformity of information technologies, human resource quality and administrativeprocess efficiency.Based on the analysis of influencing factors and mechanism of operatingworking capital requirement in real estate, the forecasting model of operating working capital requirement is established from the perspective of procurement channel,production channel and promotion channel. Prediction model should be adapt topersonality of each real estate company, considering the macro environment factorsand organizational management factors, select empirical regression coefficient ofempirical data to get the result. Finally take Vanke as an example to make a casestudy. Case shows that production channel and promotion channel has goodprediction effect, and the procurement channel verify a weak significance due to thepolicy of land reserve forecast contingency and the availability of perspectiveinformation. Prediction aims to reply for change, find the focus and strengthmanagement. Prediction research of operating working capital in real estate provide atrue perspective of working capital requirement, influence factors and influencemechanism of hierarchical analysis and reference of concept model, in order topromote the research among working capital management, budget management andrisk management.