The Causes And Countermeasures Of Lifan Group’s Capital Chain Breaking Crisis

The capital chain is the blood transfusion organ of an enterprise,and the good operation of the capital chain is a necessary guarantee for the survival and development of a company.Lifan was listed on the A-share market in 2010,and Lifan was in good condition in the first few years.Since 2014,product sales have declined.In order to expand the market,Lifan started to develop into the new energy vehicle and shared car industries.Originally,sales of new energy vehicles were good,but the 2016 fraud incident caused Lifan’s reputation to be greatly reduced,new energy vehicle sales fell sharply,and sales of passenger cars and motorcycles were also unsatisfactory.Lifan,which has a shortage of funds,can only obtain funds to maintain business operations by borrowing heavily and selling corporate assets.In the first half of 2019,the rights protection activities of dealers and overdue financing guarantees for subsidiaries pushed Lifan to the forefront,product sales continued to decline,and Lifan was burst out of the capital chain crisis.Aiming at the situation of Lifan’s capital chain,this study first used the literature research method to read relevant literature and theoretical research,based on the capital cycle theory,capital structure theory and currency demand theory,and took Lifan as the research object to break the capital chain.The process of the crisis was sorted out,and then the operation of Lifan’s capital chain was analyzed,and the safety level of its capital chain was measured using a reasonable capital chain early warning system.Subsequently,it further analyzed the performance of the capital chain breakage crisis from a financial perspective,and used this to analyze the causes of the Lifan capital chain crisis and the relevant measures that can be taken.According to the results of the model calculations,the Lifan capital chain is on the verge of breaking,but considering the financial support of the BOC and related measures of Lifan,this study believes that the Lifan capital chain is not completely broken,but it has greater risks.From a financial perspective,it is found that Lifan’s financial situation is relatively severe,and most of its debt service,operation,and profitability indicators deviate far from the industry average.The reason is considered to be due to both internal and external factors.Internal factors:(1)The low level of corporate R & D has resulted in uncompetitive products and a sharp decline in sales;(2)Lifan’s diversified strategy blindly expanded,and corporate profits cannot pay Operating expenses;(3)Difficulties in corporate financing,a large amount of debt,and increased financial burden;external factors are the overall decline of the automotive industry.Based on the foregoing analysis,this article believes that Lifan can take the following measures: First,the company’s focus shifts to the motorcycle industry with better operating conditions to strengthen the profitability of the company;Second,improve the financing capacity and adjust the financing structure by improving the credit rating and brand image;3.Strengthen the enterprise’s ability to assess and prevent the risks of investment projects to avoid blind investment.