A Case Study On The Financial Crisis Of Erzhong Heavy Company

At present,with the increasingly fierce competition in the market,the external business environment faced by enterprises is complex and changeable.The prevention and control of the financial crisis has become a major issue that the enterprise must face.In particular,after the rapid expansion of recent years in equipment manufacturing industry of China,with the emergence of new situations such as the upgrading of the country's industrial structure and supply-side structural reform,the industry's long-term accumulation of overcapacity and other issues have been intensively erupted.As a result,the equipment manufacturing industry is facing enormous pressure for industrial upgrading and transformation.The equipment manufacturing companies,represented by Erzhong Heavy Company,continue to experience deteriorating business operations and have experienced severe performance declines.This article selects the China National Erzhong Group(Deyang)Heavy Equipment Co.,Ltd.(here in-after referred to as the “Erzhong Heavy Company”),which has considerable influence in the equipment manufacturing industry as a case study object.In the performance and analysis of the financial crisis,some relevant theories of domestic and foreign experts have been sufficiently absorbed.The data are mainly obtained through the financial report of the enterprise and the Chinese Industrial Statistics Yearbook.Through the in-depth analysis of the two aspects of the development environment and the internal management of enterprises,this paper explores the fundamental reasons for the financial crisis of the company,and then appraises the measures and effects of its active response to the financial crisis.Based on the quarterly financial performance of the company from the first quarter of 2016 to the third quarter of 2017 after the delisting restructuring,through vertical comparison of operational capacity,profitability,and solvency indicators,together with DuPont analysis system,the financial situation has been quantitatively described and analyzed in the hope of providing reference for other manufacturing companies under transformation pressure.The research content of this paper is mainly divided into the following sections:Firstly,this paper systematize the relevant theories such as the causes and countermeasures of financial crisis and crisis life cycle and leads to the main problems of this research on the basis of the relevant literature.The second part is the case analysis section.In terms of financial crisis performance,we use the Z scoring model and DuPont analysis system.Then based on the comparison of financial data among the Erzhong Heavy Company and other companies in the same industry,the specific reasons for the financial crisis were obtained based on the enterprise's business decision information.In order to find a strategic basis for the decision of Erzhong Heavy Company to deal with the financial crisis.Furthermore,it is an analysis of the measures taken by the Erzhong Heavy Company inresponse to the financial crisis.Through analysis of various initiatives such as active delisting,debt liquidation,innovation drive,and equity transfer,the company will sort out its strategies for responding to financial crisis.The rational composition of the decision-making,and based on the financial performance of the company before and after the company's active delisting,based on DuPont analysis system to evaluate the overall response to its financial crisis.The final part is the conclusion and the outlook.Through the above-mentioned case study,it is concluded that the key to successfully responding to the financial crisis of the Erzhong Heavy Company is the “active delisting + reorganization” strategy,the ingenious use of all parthenogenesis,and the enhancement of the company's operational capacity.Many other enterprises should establish a financial crisis early warning model and always pay attention to case study such as cash flow,in the hope that this study can provide a certain reference for equipment manufacturing enterprises in China to actively respond to the financial crisis,and provide a stable financial environment for the the sustained and healthy development of equipment manufacturing enterprises in China.The provision will eventually help equipment manufacturing companies to actively adapt to the supply-side structural reforms and the new situation of Industry 4.0.