"In recent years the company introduced a large number of advanced equipment, the purchase of land, construction of a new workshop, capital expenditures increased year by year, and some short-term loans for capital expenditure." Recently, Shandong Li Peng Company Limited, said "Li Peng shares" (under Wang Guozhu, vice president and chief financial officer, introduced his strategy of using bank loans to support the expansion of the company.
Short-term financing as the main source of funding
Li Peng's main business is the production and sales of aluminum composite security printing and anti-counterfeiting bottle caps and related businesses. After more than 10 years of hard work, Li Peng started from the beginning of its creation by relying on simple stamping equipment processing aluminum anti-counterfeiting bottle caps, and gradually formed the only domestic aluminum plate composite security printing, cap manufacturing, capping machinery and mold manufacturing, Product technical research and development and after-sales technical services as one of the integrated service system, the main product is also extended from a single aluminum anti-counterfeiting bottle cap to a combination of security caps and outlets, multi-color, curved and multiple composite security printing aluminum, etc. Variety.
However, during the rapid development process, Li Peng also revealed that the source of funding for a single source of financing, liquidity, and fixed investment relied mainly on the issue of short-term bank borrowings. The unreasonable debt structure has become a heart disease for the Kingdom’s wishing.
It is understood that Li Peng's asset-liability ratio at the end of 2007, the end of 2008, and the end of 2009 were 46.09%, 49.13%, and 47.02%, respectively, and in its liability structure, all were current liabilities and the liability structure was not reasonable.
“By the restriction of financing channels, short-term bank borrowings have always been an important source of company funds,†Wang Guozhu said. According to statistics, the amount of short-term borrowings of Li Peng shares has increased year by year in the past three years. At the end of 2007, the end of 2008, and the end of 2009, the proportion of borrowings as a percentage of liabilities was 55.93%, 62.21%, and 52.43%, respectively.
In this regard, Wang Guozhu explained: “There are two main reasons. First, as the company’s production and sales scale has grown rapidly year by year, it has increased borrowing to meet its liquidity needs. Second, it has expanded production capacity to meet the growing market demand for products. In recent years, the company has invested a large amount of funds for the introduction of advanced equipment, land acquisition, and the construction of new workshops. Capital expenditures have increased year by year.â€
According to the Kingdom’s introduction, the total fixed assets of Li Peng at the end of 2007, the end of 2008, and the end of 2009 were RMB 87,095,500, RMB 10,919,890 and RMB 14,323.43, respectively, and the corresponding cash expenditures from investment activities were RMB 4,144.04 million. , 28,429,200 yuan and 40,580,600 yuan.
From the perspective of fundraising activities, the net cash flow generated by Li Peng’s fundraising activities was positive in 2007 and 2008, mainly because Li Peng shares increased bank borrowings, absorbed equity investment to meet the needs of business development and capital requirements. In 2009, the net cash flow generated by Li Peng’s fundraising activities was negative, mainly due to the return of more bank borrowings.
Resolve deadline mismatches
However, there are also hidden concerns about the use of short-term financing to support the long-term development of the company. This is the financial risk caused by improper matching of deadlines.
"In order to effectively avoid the use of short-term financing to support the long-term financial investment of financial risks, the company attaches great importance to fund management, reasonable control of long-term capital investment scale, and seek long-term dynamic capital balance." Wang Guozhu said.
It is understood that Li Peng's monetary fund balance at the end of 2007, the end of 2008, and the end of 2009 was 21.7421 million yuan, 6610.41 million yuan, 5310.46 million yuan, and remained at a relatively high level. "Since 2007, the company changed the year-end assessment of previous years to end-of-quarter assessment, and the assessment results are linked to the performance of business personnel. In 2008, the company further increased the management of sales receipts. These practices have effectively improved receivables. The payment rate makes the company more money," said Wang Guozhu.
In addition to fund management, Wang Guozhu also resolved the financial risks caused by improper matching of deadlines by strengthening the internal management of the company. "The company intends to continuously optimize the product mix, actively expand and expand the market for aluminum anti-counterfeiting bottle cap products with the highest level of gross profit margin, further increase the company's profitability, and seek to maintain a reasonable and stable interest guarantee multiple," said Wang Guozhu.
According to statistics, Li Peng's interest guarantee multiples at the end of 2007, at the end of 2008, and at the end of 2009 were 8.01, 5.31, and 7.21, respectively; the current ratios were 1.26, 1.19, and 1.19, and the quick ratios were 0.67, 0.77, and 0.74, respectively. relatively stable.
"Making full use of the company's good credit status in local financial institutions over the years, choosing low-interest loans as much as possible to gradually reduce financial costs and respond to the impact of rising financial costs on the company's earnings," said Wang Guozhu. It is understood that Li Peng has good credit standing and has maintained a good credit record for many years. The loan can pay principal and interest on time and there is no overdue loan. From 2002 to date, it has been rated as a AAA letter by the Shandong Branch of the Agricultural Bank of China.
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