Research On Financial Leverage Effect Of H Iron And Steel Company

In the rapid development of the global economy,the environment is complicated and changeable today,depending on debt financing and financial leverage has become an important means of business development.The effective of financial leverage is double-side,Enterprises should bear the risks while using financial leverage to obtain revenue.Steel is the most important engineering and building materials in the world,meanwhile the steel industry is the pillar industry of our country.Debt is an important way of financing the majority of iron and steel enterprises.But with the global economic downturn in recent years,China's economic growth slowed and the demond of iron and steel s significantly reduced which resulted a serious excess capacity and lower price.In iron company,the revenue declined and operating costs increased,a large number of steel enterprises facing bankruptcy crisis.It has important practical significance to increase the company's valuation by debt management and avoiding the negative effect of financial leverage.H Iron and Steel company has the biggest capacity in the whole country.On the research of financial leverage effect in H Iron and Steel company,first we summarize the relevant theory and analysis the financial leverage effects of H company through case analysis.On the basis of explaining the capital structure and financial leverage of H Steel Corp,we analysis the impacts of financial leverage effect and calculate the related date of financial leverage effect.In order to analysis the financial leverage effect of H steel company,we compare the degree of financial leverage,the ebit and debt and interest rate,the ebit and net profit's growth rate and the risk under financial leverage effect.Through the analysis,though the ebit of H company is raising in recent years,but the financial leverage hasn't exert positive effect,only a few years shoe the positive effect.The DFL and assets liabilities ratio are all Above the industry average.Under the instable effect of financial leverage,we analysis the liquidity,solvency,and profitability and compare it with the related data.We find that the liquidity of the company is poor and the structure of asset and liability is not reasonable.Based on the above problems,we propose the company should strictly control the scale of debt,Reduce short-term liabilities,upgrade product structure and strengthen cost management in order to enhance the profitability of enterprises and help H steel company develop positive effect of financial leverage,avoid the risk of financial leverage,promote the healthy development of enterprises and provide some reference to other iron and steel company.