Diagnostic Study On The Decline In Profitability Of KL Company

KL company is a supplier of key components for electric vehicles.It is the leader in the development and sales of lithium battery management systems(BMS)in China.However,since 2014,KL company's profitability indicators have been falling.The return on net assets fell from 42.99% in 2014 to 4.26% in 2017,and the net profit also decreased year by year in2015.According to the disclosure data of the 2018 semi-annual report,KL company's net profit for the first half of 2018 was only 4.57 million yuan,and the return on net assets was only 0.95%.After 2018,the net profit after the annualization is-15.44 million yuan,and the return on net assets is-3.08%.KL company's profit declines and faces losses.Is the decline in KL company's profit due to internal management or the external environment? What are the factors that have contributed to the decline in KL company's earnings? What is the effect of various influencing factors on earnings?Based on KL's financial report,this article combines industry information,business operations and other information to diagnose its profitability.First of all,from the two aspects of the BMS industry and KL company's business status,KL company's internal and external environment is analyzed and the relationship between its profit decline and internal management and the external environment is initially diagnosed.Secondly,using a variety of financial analysis tools to diagnose the profitability and profit quality of KL company from both horizontal and vertical perspectives,and to identify the factors that affect the decline in earnings.Then,according to the influencing factors that lead to the decline of KL company's profit,the specific reasons behind it are analyzed from the management level and then the impact effect is analyzed.Finally,for the diagnosis process and results,the implications of the diagnosis and suggestions for improvement of KL are proposed.This paper diagnoses that KL company's profit decline is related to both internal management and the external environment.Among them,internal management reasons accounted for 74% of the reasons for the decline in corporate profits,which is the main reason for the decline in earnings.The specific reasons for the decline in profit are sorted according to the size of the impact,followed by the construction of the R&D center,the change of the company's sales policy,the rise of raw material prices and the fall of the industry subsidy policy.Although the investment in R&D center construction has the greatest impact on KL company's profit decline,it will benefit the company's competitiveness in the long run.Although the implementation of a stable sales policy has resulted in a shrinking business scale,it has improved the quality of earnings,so KL company's Potentiality has not declined.According to the analysis of the annualization and impact effects of the research data in the diagnosis process,two inspirations are drawn,and based on the results of the diagnosis,the proposed improvement suggestions are proposed from three aspects: R&D expense management,operation scale and quality,and procurement cost control.