Financial Performance Evaluation Study Of The Transformation Of L Real Estate Into An Asset-Light Model

As a result of the accelerated decline in the fundamentals of the real estate industry and a series of regulatory policies introduced by the government for real estate enterprises,the business model of real estate enterprises in China is being transformed from the traditional Asset-heavy model to an Asset-light model,and L is one of the representative enterprises transforming into an Asset-light model.The purpose of this study is to investigate why L is transforming its Asset-light model,how it is transforming its Asset-light model,in what aspects its financial performance is improved after the transformation and its shortcomings,and to make corresponding suggestions based on the above analysis.Firstly,a case study approach combined with value chain theory,smile curve theory,and division of labor theory was used to analyze L’s Asset-light model,following the sequence of reasons,strategies,and financial characteristics of L’s transformation.The analysis found that the reasons for its transformation were mainly due to the large scale of liabilities,poor performance development and capital pressure faced by the enterprise.As well as being influenced by the overall poor development of the real estate industry.A comparison of L’s business model before and after its transformation in combination with theory reveals that its business strategies for transformation are to develop the construction agency business to achieve development refinement,to develop real estate financial services to achieve investment specialization and to build a high-quality brand to obtain high added value.It is also found that the financial characteristics of its post-transformation period are mainly a lower gearing ratio,a lower interest rate on borrowing,a low stocking rate and a significant increase in cash reserves.The second is to evaluate the financial performance of L company after the transformation of its Asset-light model.Since the impact of the Asset-light model on the financial performance of L enterprises is mainly reflected in asset quality,asset structure,solvency,profitability,etc.,thus the financial indicators with industry characteristics and characteristics of Asset-light operation are selected for comparative analysis,and the factor analysis method is used to conduct a comprehensive evaluation of the performance of L companies transforming the Asset-light model,and a comparative analysis with the real estate enterprises of the Asset-heavy model H.The analysis of the financial performance of the company is carried out by using factor analysis,which makes the impact of the transformation on the financial performance of the company more intuitive.Finally,after evaluating the financial performance of Company L,it is found that its overall financial performance has improved to a certain extent after the transformation.Specifically,the company’s debt risk control ability has improved significantly;its business growth ability has improved slightly;its asset management ability is slightly deficient;and its core profitability has improved slowly.By analyzing the reasons for the above deficiencies in financial performance,we suggest that L Company can further improve its business growth ability by using business diversification,further improve its core profitability by deepening its construction business,and further improve its asset management ability by improving inventory turnover.