Research On Loncin Holdings’ Failure Of Diversified Operation Based On The Combination Between Industry And Finance

Chinese economy is in the economic structure shift period between structural transformation and upgrading and the transformation of the old and new driving forces of economic development.The economic development effect of the real economy through obtaining credit funds from commercial banks has gradually declined.Private manufacturing enterprises represented by Loncin are facing greater financing constraints.In order to maintain the stability of their own operating profits and establish a more perfect industrial structure,they will inevitably demand more changeable and easier to use comprehensive financial services.In view of the debt crisis caused by the failure of diversification of Loncin holdings since 2018,this paper first combs its process and motivation from the successful development of the combination of industry and finance to the comprehensive development of industrial diversification strategy.Secondly,it evaluates the financial performance of Loncin’s diversification failure.Through Z-score Model and classified financial analysis based on four capabilities,it is found that it is in a state of increasing risk in the whole process of strategy implementation,which also directly leads to the final risk outbreak and bankruptcy reorganization.This paper analyzes the reasons for the failure of Loncin’s diversification: on the one hand,unreasonable financing methods seriously affect its capital structure and increase the pressure of short-term debt repayment;On the other hand,blindly expanding diversified industries and ignoring operational investment also makes a large number of long-term investment profits unable to make up for debt principal and interest in time;In addition,there is a lack of precipitation in the industrial operation after expansion,and the capital of diversified industries is combined but not integrated.The benefit of financial investment has become the dependence of enterprise performance.Based on the financial evaluation and cause analysis of the failure of Longxin’s diversification,according to the current situation of Longxin’s reorganization,the following suggestions are put forward: strengthen capital operation management;Optimize the capital structure;Reduce over investment;Focus on the main business;Strengthen industrial coordination to help them optimize the capital operation mode and get rid of difficulties,so as to realize the gradual recovery of benefits.