Case Study On Financial Distress Of Shenwu Energy Saving Co.,Ltd.

With the rapid development of China's economy and the deepening of industrialization since the reform and opening-up,many environmental pollution problems have arisen.The state has paid more attention to environmental protection,energy conservation and emission reduction,and proposed to accelerate the improvement of the ecological environment.Under the background of environmental protection,China has built environmental protection infrastructure on a large scale,and the market of environmental protection industry has expanded.In order to solve the huge capital demand of environmental protection projects,the government introduced PPP mode,and many related enterprises took advantage of PPP mode to rise rapidly.In2017,China strengthened the supervision of PPP mode projects.The environmental protection industry,which relies on PPP mode to solve the project financing demand,is facing a huge business crisis,exposing the financing problem,and many environmental protection enterprises are deeply mired in financial difficulties step by step.Shenwu Energy Saving Company has a wholly-owned research institute and its own patented technology.Since the backdoor listing in 2016,Shenwu Energy Saving Company has been favored by the capital market because it has both environmental protection concepts and scientific and technological concepts.In 2017,the growth rate of net profit was as high as 106.34%,and the market value of the company exceeded 10 billion yuan.However,in 2018,Shenwu Energy Saving Company was affected by capital problems,guarantee problems and internal control problems,and its development declined all the way,and the project stagnated and fell into financial difficulties.After experiencing the internal control audit report that other risks were warned due to illegal guarantee in 2019 and negative net profit and negative opinions in2019,it became Shenwu Energy Saving Company,and if it still cannot turn losses into profits in 2020,it will have to withdraw from the market.After consulting the related research literature of domestic and foreign scholars on financial distress,this paper summarizes the definition,causes and corresponding solutions of financial distress of enterprises.In this paper,the annual report data of Shenwu Energy Saving Company from 2015 to 2019,which is deeply in financial difficulties,are selected for financial analysis,including vertical comparative analysis of its own financial indicators and horizontal comparative analysis with other enterprises in environmental protection industry.Through financial analysis,this paper finds that Shenwu Energy Saving Company has poor solvency,heavy debt pressure,poor asset management ability,insufficient operation ability,inability to create profits,lack of profitability,hindered development and lack of development ability,and also faces problems such as tight cash flow.Through financial analysis,we know the specific financial situation of Shenwu Energy Saving Company and summarize the specific performance of Shenwu Energy Saving Company's financial dilemma.Next,this paper further explores the causes of Shenwu Energy Saving Company's financial dilemma.The external causes of Shenwu Energy Saving Company's financial difficulties include the influence of macroeconomic environment and policies,as well as the incentive competition of main business industries.The internal causes of Shenwu Energy Saving Company's financial distress include unreasonable corporate governance structure,unreasonable capital structure,ineffective cost control and lack of financial distress early warning mechanism.The irrational corporate governance structure is discussed from three aspects: irrational equity structure,imperfect guarantee system and agency problems caused by pledge of major shareholders' equity.The unreasonable capital structure is analyzed from two angles of financing period and financing channel.In view of the above reasons,this paper puts forward some countermeasures to solve the financial difficulties of Shenwu Energy Saving Company from the aspects of optimizing corporate governance structure,optimizing capital structure,strengthening cost control and establishing early warning mechanism of financial difficulties.Nowadays,the external economic environment is constantly changing.On the one hand,companies should enhance their internal capabilities,including management capabilities,risk response capabilities,etc.On the other hand,they should improve their risk awareness,identify financial crises in time,and change their business strategies,so that enterprises can operate healthily and continuously.In this paper,the specific performance of Shenwu Energy Saving Company's financial distress is introduced in detail,the internal and external causes of financial distress are analyzed,and the corresponding countermeasures are put forward,hoping to help the company solve the financial crisis and get out of financial distress,and also hope that other enterprises facing similar financial crisis in environmental protection industry can learn from it,and hope that other domestic listed companies can pay attention to the experience and lessons of Shenwu Energy Saving Company,identify financial crisis in time,prevent financial distress or get out of financial distress.