Research On Financial Leverage Analysis And Risk Control Of AVIC REAL ESTATE

Liabilities operations can be widely used due to their financial leverage.Modest debts have a positive effect on financial leverage.That is,a slight increase in pre-tax profit can double the earnings per share.At this time,shareholders’ equity increases.However,excessive financial leverage will bring huge financial risks to the company.The real estate industry is intensively funded and needs huge funds to support development projects.Debt financing is one of the major sources of funds for real estate companies.However,the real estate project has a long construction period and the return of funds is slow,and it is unable to pay off debts in time.At this time,financial leverage can easily exert negative effects and increase corporate financial risks.At present,most of China’s real estate companies are highly indebted to operations.Excessive financial leverage can easily lead to financial crisis,leading companies to sell assets or bankruptcy.This article takes AVIC Real Estate as its research object,based on its capital structure and risk management theory,and analyzes AVIC Real Estate in light of its assets and liabilities,financial leverage,and financial leverage effect,and uses qualitative and quantitative analysis to identify and evaluate financial risks.Combining our country’s deleveraging background and problems found in the analysis process,we propose risk control recommendations.Firstly,this article analyzes the development and financing situation of AVIC Real Estate and finds that its loans to banks have risen to RMB 16.915 billion,an increase rate of 96.67%.At the same time,borrowing more than RMB 7 billion from brother companies has caused such a huge debt,resulting in AVIC Real Estate.In 2012-2016,the asset-liability ratio was abnormally high,exceeding the industry average,and the financial leverage remained high.Moreover,high leverage did not bring high yields.AVIC’s financial leverage effect has been declining for the first time in 2016.There was a negative effect.The analysis concluded that AVIC’s real estate liabilities are high and its financial leverage is high.The real estate development business has not brought excess returns to the company,which has led to a decline in the value of the company,impaired the interests of shareholders,and has enormous financial risks.Secondly,this paper uses financial ratio analysis to identify financial risks and finds that AVIC Real Estate has a very high debt repayment risk,the use of working capital efficiency,inventory backlog,slow recovery of receivables,high pressure on destocking,and diminished growth capacity;using the Z-value model Quantitative analysis of financial risks,according to the discriminant standards found that the Z value of AVIC Real Estate for five consecutive years were below 1.81,and the financial situation was worrying.Finally,according to the analysis,it was found that the high liabilities of AVIC Real Estate resulted in abnormally high financial leverage,poor management of working capital,and low awareness of risk.They proposed effective measures to reduce financial leverage from the perspective of deleveraging,and established an internal control mechanism for working capital.Maintaining supplier relationships,preventing operational risks,and strengthening risk awareness at the same time,building a financial risk management system,and combining financial risk early warning models to control risks in an all-round way.It will help provide reference for the company’s future operations,risk control and prevention,and protection of the interests of shareholders.It will help state-owned real estate companies rationally use financial leverage,avoid financial risks,and promote the sustainable development of enterprises.