| Competition among steel trading industry is very intense in China where most steel trading companies are small, private-owned, target on similar customers, and serve to provide identical service. To highlight the financial condition of steel trading companies in China, especially of those of smaller size, this paper analyzes the financial statements of a representative small steel trading company in China, which is the Company JF(or the Company henceforth).The main methods used in the analysis include vertical analysis, horizontal analysis and trend analysis of financial statements. Comparative Studies are applied to explore the relative financial conditions of the Company, as with respect to its competitors. Key questions are factorizing the profitability of the Company and reasons for the Company's low free cash flows.Following IASB and FASB(2008)[7], the paper also reconstruct the financial statements of the company by distincting results of corporate operatingactivities from financing activities. The purpose is to provide a new set of financial statements of which the format ensures comparability and allows users to understand better how the different pieces within the financialstatements of a company fit together.Compared with traditional set of financial statements, the new format make it more easier to evaluate the solvency, the profitability and the growth ability of the target company.Based on the results, the paper suggests the Company to strengthen its policy on receivables management by reducing the ratio of credit proposal. This should be helpful to enrich the source of funds, thereby reducing the cost of funds and enhancing its operational efficiency. |
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