Financial Analysis Of Liyuan Precision Company Limited Based On Harvard Analytical Framework

China is a big country in aluminium processing industry,and aluminium processing industry is one of the pillar industries in China.The development of aluminium processing industry plays an important supporting role in the development of our national economy.During the past 40 years after reform and opening,China’s aluminium processing industry has marched into the period of high-quality development from the period of high-speed development,and has been faced with a series of new situations and problems.In recent years,due to overcapacity and other reasons,the development speed of China’s aluminum processing industry has been slowing down gradually,and it is urgent to find solutions.Jilin Liyuan Precision Co.,Ltd.was established in 2000.Its main products include industrial aluminum profiles,building aluminum profiles,special profiles and various parts and products of deep-processing aluminum profiles.It is the second largest supplier of aluminum profiles in Northeast and North China.Its operating performance has been in the leading position in the industry.However,the company’s operating performance has been gliding since 2018,and recently it has immersed into a huge debt crisis.The sudden change of the its performance has aroused widespread concern in the society.This paper takes Liyuan Precision as the research sample,and uses Harvard Analysis Framework to conduct financial analysis,hoping to find out the reasons for the company’s financial distress,as well as provide some suggestions for the company’s future development.Other enterprises in the same industry can also take the procedures of this analysis method for reference,when they analyze their own financial statements.Small and medium-sized investors can also take this analysis results for reference when they make investment decisions of this company.This paper uses literature analysis,case analysis and comparative analysis to study the case.Firstly,this paper combs the existing research findings on financial analysis methods and strategic analysis tools by using literature analysis,and then summarizes and evaluates them.Secondly,this paper uses case analysis to make a detailed investigation about Liyuan Precision Company Limited.In strategic analysis,Porter’s Five Forces Model and SWOT Analysis are used to analyze the industry environment of aluminum processing industry and the internal environment of the company,in order to provide the company with appropriate strategy.In accounting analysis,the quality of accounting information of the company and the degree of compliance on current strategy are evaluated by investigating key accounting policies and accounting estimates.In financial analysis,the method of comparative analysis is used.By comparing the financial indicators of Liyuan with those of other three companies in the same industry,we find the shortcomings of Liyuan’s operation.In prospective analysis,we forecast the risks that the company will face in the future,and provide the methods to avoid them.In the process of investigating the industrial environment of rail transit equipment manufacturing industry,we find that the industry has high technical barriers and it is completely monopolized by state-owned enterprises,which are the reasons why it isn’t suitable for Liyuan Precision to march into.After analyzing the vocational environment and the internal environment of Liyuan,we find that the existing strategy of Liyuan is highly consistent with the strategy given by the analysis model.Next,we begin to investigate whether Liyuan has followed the strategy or not in the process of operation.When evaluating the quality of accounting information of the company,we find some nonstandard phenomena,such as distorted accounting information and the failure to follow the existing strategy.After financial analysis,it is found that although Liyuan has high profit ability and strong development ability,it has following shortcomings compared with other companies in the same industry: borrowing new debts to repay old debts,unreasonable asset structure and capital allocation,poor cost control,poor sales ability,inadequate investment in R&D and lack of feasible plans and budget control for the project.And corresponding improvements are put forward.In prospective analysis,we find that Liyuan is likely to meet some systematic risks as well as nonsystematic risks,and the precautions against them are put forward.It has been foreseen that Liyuan will choose to reorganize its asset or take other measures to get through the debt crisis.Deep processing aluminium profile products will become a new profit growth point.Under this situation,Liyuan should return to its traditional business and seize the opportunity to seek better development.