What Are The Twelve Mistaken Ideas Of Corporate Finance?

Financing is more important than capital.

In reality, the financial manager of a company always talks about "tight funds", and often runs out of funds. It believes that the goal of corporate finance is to raise funds.

But in fact, many enterprises do not lack capital and lack of working capital and the ability to maintain value and increase value.

This will inevitably lead to less quality assets, more poor assets, poor liquidity and weak liquidity.

How much capital an enterprise should have must be adapted to its own scale of operation and investment. Blindly pursuing incremental capital and revitalize stock assets is often the root cause of its failure in operation.

In addition, any money coming from the fundraising channel is not a free "Tang Seng meat", but probably a "hot potato", because the providers of funds always get the desired returns.

Enterprises do not have good investment projects, or when investment returns are much lower than financing costs, it is better to not raise money.

"Enterprises are working for banks", which vividly reflects some operators' state.

Issuing stocks is better than borrowing.

Large shareholders of many enterprises regard equity financing as "no need to repay the money" because the minority shareholders have no say in the operation and dividends of the company, but the peculiar phenomenon in this pitional period will not last.

In 1993, Yuchai, Guangxi, had sold less than 30% of its stake to Singapore for its financing, which has already exceeded dividends in the past year.

However, in order to maintain his rights and interests in Yuchai, he has resisted stubbornly in Yuchai's US refinancing and A shares.

Yuchai has struggled for more than ten years and still can not get rid of the "magic spell" of Feng long share.

In fact, the mature enterprises in Europe and the United States strictly abide by the so-called "pecking order" in financing: first, internal financing after external financing, and first equity financing after debt financing.

Because equity financing must pfer part of the control rights of the company, comprehensive comparison is the most expensive way of financing, and the more efficient companies should avoid this financing mode.

Debt management can make full use of resources.

When the net assets yield of a company is higher than the lending interest rate, debt management can play the role of financial leverage.

This can also occupy as much resources as possible.

Another advantage of debt management is called "tax stall".

Tax laws in various countries allow enterprises to deduct interest on debt before tax.

Suppose that a company has its own 100 million yuan as a floating capital, earning 20 million yuan pre tax profit, paying 6 million 600 thousand yuan of income tax, and a net profit after tax of 13 million 400 thousand yuan.

If the company uses 100 million of its debt as a floating capital, the profit before tax will reach 40 million yuan, and the annual interest rate will be 5 million yuan (generating 1 million 650 thousand yuan "tax stall"). The income tax is 11 million 550 thousand yuan and the net profit after tax is 23 million 450 thousand yuan.

However, debt management also increases the risk of enterprise operation. Once the profits created by the debt obtained by the enterprise can not bear the cost of debt, the enterprise will face considerable repayment pressure, or even be forced to go bankrupt.

Let's look at the above example. If the market changes, the company has no profit this year. If we borrow 100 million yuan at the beginning of the year, we will have to pay 5 million yuan profit.

Therefore, the general company will control the asset liability ratio to less than 50%.

Dark deficits are better than deficits.

Some enterprises do not want to announce their true business conditions, whitewash statements, manipulate profits, and create false prosperity.

Some enterprises believe that the loss without realisation is not a loss, resulting in a decline in asset quality and a weakening of profitability.

For example, in 2002, when Gu took over Kelon, the 2001 annual report revealed a loss of 1 billion 500 million yuan.

Among them, the provision for "sluggish inventories" was 282 million, accounting for 25% of the finished products (1999 and 2000 accounted for 6% and 11% of the finished products respectively). In the preparation of the 2002 report, the provision for the previous year was "back" 198 million yuan.

Around the increase and decrease of the provision, there was a poor performance of nearly 500 million yuan.

In 2002, Kelon's gross profit margin increased by 5.07% compared with 2000, and the ratio of operating expenses to turnover decreased by 7.5% compared with that in 2000. The ratio of management expenses to turnover decreased by 14.87% (to an incredible 1.57%) compared with 2000.

A series of reports whitewash Gu Chujun's creation of "taking over Kelong and losing a year".

Whitewash statements do have a considerable impact on the annual reports of enterprises, but there is no substantial change in the operation of enterprises. The way of adjusting profits through means of calculation, prepayment and amortization is like drinking poison to quench thirst.

Capital gains are focused on capital expansion.

The essential attribute of capital is the pursuit of value added, so many enterprises put capital expansion in the primary position of their operation, especially some new companies or new listed companies. Their expansion channels are mainly through acquisition, merger or large scale pfer of shares, and put large quantities of assets into listed companies in order to get higher valuations.

But when enterprises expand, performance growth should be synchronized with capital growth or should exceed the pace of capital expansion.

In recent years, after a large proportion of listed companies have pferred to the stock market, the performance of earnings per share has declined in the same proportion but opposite direction, thus reducing the share price from "nobility" to "junk".

It can be seen that although capital expansion is necessary, it must be limited. Enterprises must decide the pace of expansion according to their own conditions under the premise of ensuring the growth of performance.

As long as cash can be used to manage finances.

Some enterprises believe that as long as there is some cash in hand, whether it is the reserve fund or the loan to the bank, it can be used as an "idle fund" to manage money as long as it does not go out.

In fact, before deciding to invest abroad, enterprises need to analyze whether the rich funds at hand are free. Will the withdrawal of the money negatively affect the operation and future development of the company?

For example, a restaurant has a net profit of 500 thousand yuan at the end of the year, but next year it will cost 200 thousand for local decoration and purchase of kitchenware (additional investment). Considering the increase in agricultural and sideline products and labor costs, an additional 100 thousand liquidity will be required.

So the restaurant owner can only take home 200 thousand yuan at the end of the year.

"Free cash flow" refers to the undistributed profit after deducting additional investment and additional operating capital. In other words, free cash is idle funds which have nothing to do with the normal operation of enterprises.

In those days, Shi Yuzhu took the money away from the "brain gold" health care company and left the giant building, which was not free cash, which eventually led to the collapse of the whole company.

Later, he will buy part of the lucrative profit (about 300 million yuan) from the "brain platinum" to purchase the "original stock" of the people's livelihood and the two banks of China before the listing, that is, using idle funds to manage their finances, and get more than ten billion proceeds.

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Projects managed by themselves are more secure than investment and financial products.

The first generation of entrepreneurs, many of them rely on their own diligence, to achieve a certain scale of enterprises, once they succeed in a certain field, they believe that they will succeed in other fields, so they prefer to invest in their own projects, and they will not go to stocks, buy funds or make venture investments, because they are asking others to hold the market and not to feel relieved.

But in fact, the risk of doing so is greater than that of investment and financing.

For example, the company invested 10 million yuan this year and has nothing to do with the main business. Since the second year, it has annual output value of 20 million yuan, and 1 million 500 thousand net profit after tax. The renewal period of the project is 10 years.

The internal rate of return (IRR) of this project is 8%.

You can use the annual interest rate of 5.74% of the 5 - year treasury bonds as the opportunity cost of the project. --1000 million investment projects can not buy treasury bonds to eat interest.

Opportunity cost should not be neglected when making project decisions.

For example, in the above example, we can not only see the annual yield of 8%, and deduct the opportunity cost of 5.74%, the project can bring 2.23% extra income, that is, 223 thousand yuan per year.

How anxious and safe it is to buy treasury bonds.

How much time and energy will it cost to invest and manage a new project of 10 million yuan? How much risk should it take? Is it worth earning about 200000 yuan more?

Companies should actively entrust financial management to shareholders.

According to the 2007 China Daily, the non operating income of 1220 listed companies in the first half of the year amounted to 85 billion 900 million yuan, accounting for 21.54% of the total profit.

Excluding financial listed companies, net income from investment totaled 73 billion 100 million yuan, accounting for more than 80% of three non operating income.

Therefore, some shareholders believe that management should actively finance idle funds and improve performance.

But in mature market economy countries, dividends or repurchase shares are the first choice for the company's free cash destination.

This will not only enable shareholders to use their wealth autonomously, but also reduce the risk of corporate misinvestment and the responsibility of management.

In modern companies separated from ownership and management rights, management is only the agent of shareholders.

After passing through the fast growing period, Microsoft began to pay dividends or buy back shares. In the 2005 year, dividends were recorded to reach US $32 billion 400 million. Shareholders who get cash can invest according to their own preferences, but not the risks of the company.

Therefore, enterprises can only consider foreign investment only if they believe that the returns are much higher than that of the shareholders themselves and the risks are controllable.

The company's valuation will rise if the total revenue rises.

In 2007, a large number of investment income accounted for more than 30% of the company's total revenue. Some of them had surpassed the net profit of main business, so some companies thought that as long as the total income increased, the valuation of the company would definitely increase.

For listed companies, shareholders' interests are mainly reflected in the stock price.

Therefore, investment decisions should give full consideration to the positive and negative effects of the company's valuation in the capital market.

For example, the financial and financial business of GE is very developed. Only the subordinate financial leasing companies have 1300 Boeing aircraft, 2 million cars, hundreds of thousands of car wagons and more than a dozen satellites. But GE's efforts to keep its financial business in the past few decades accounted for no more than 40% of the total revenue of the group.

Because mature capital markets differ widely in valuing different types of companies, financial companies are far below the high-tech manufacturing industry.

A century old GE can be recognized by the capital market as the top two in every field.

Most mature investors are opposed to the fact that listed companies invest their hard money in stocks instead of doing business, which is a waste of resources themselves.

And even higher investment income is also a one-time, not sustainable, once the huge investment losses, the interests of investors will be damaged.

Such as Yun Yun power in the first quarter of 2007 to achieve investment returns, the two quarter of the profits and the same period in 2006 is actually flat, down 48% compared with the first quarter, therefore, although the 2007 first half net profit grew 104%, but in fact, the main growth rate is not large, after the announcement of the stock price fell 8.34%.

RMB appreciation, dollar income can not be maintained.

Since the reform in July 2005, the appreciation rate of RMB against the US dollar has reached 10%, and the risk of exchange rate faced by SMEs with foreign trade is increasing.

In fact, there are six ways to avoid exchange rate risk at present: first, financial derivatives, including forward settlement, exchange, options trading, etc., two is trade finance, including import and export bills, Fu Feiting, export packing loans, etc. three is to change trade settlement methods, including advance payment, deferred payment, long-term letter of credit, etc. four is to use non US dollar currency settlement, including euro, Japanese yen and others; five is to use foreign exchange financial products; six is high export and low import.

Taking the forward selling and selling business of banks as an example, banks can agree on RMB exchange rate with foreign currencies at some time in the future, so that enterprises can lock in the exchange rate cost.

The so-called swap refers to the two paction, the first paction, domestic institutions use foreign exchange in accordance with the agreed rate of exchange from the bank to buy the renminbi, second pactions, the agency reused the Renminbi according to the agreed rate of exchange to buy foreign exchange from the bank.

Such pactions are very popular among enterprises, especially those with import and export business.

Publicly raised funds are their own money, and they can be managed at any time.

At present, some companies have entrusted the sources of financial resources "not right", and some companies have raised hundreds of millions of dollars in listing. In fact, the funding gap is not as large as that in the prospectus, so a part of the "idle" money began to burn some "where" where to make money easily.

It is not only a market risk, but also a violation of the law, to protect the interests of investors and standardize the operation of the securities market.

Although the "entrusted financial management" makes the annual reports of the listed companies "touches" quite a lot, but the risk and the income weigh each other, but the gain is not worth the candle.

In the Daniel market in 2006, the average earnings of listed companies entrusted to finance were only around 10%, much lower than that of the same period.

In 2007, the fund was hot, but not all investment companies of the listed companies were all smooth sailing.

Zhang Ze electric power (love shares, quotes, information) three quarterly report shows that the amount of investment in the Celestica fund has shrunk by 1/3. Wuhan Steel shares (love shares, quotes, information) hold 16.67% of the Changxin fund company, but at the end of the three quarter of this year, the book also saw a about 2000000 loss.

The risk of entrusting financial management lies in the legal aspect.

From the practice of "entrusting financial management" of listed companies, most companies fail to make timely announcement or notice.

At present, most of the entrustment agreements signed by the listed companies and the securities dealers are short term investments by "entrust financial management", and there is no legal guarantee, and the rate of return on investment is not guaranteed.

For example, the investment company entrusted by CITIC Hai (AI share, market, information) is CITIC investment, the rate of return agreed to be as low as 1%, while the return of more than 1% is attributed to CITIC investment. 90%.

If you are working with a small investment consulting firm with weak risk appetite, you will face huge risks.

And illegal joint efforts to create disputes and litigation more.

Distribution of shares is more advantageous than cash dividends.

From year to year, A share listed companies began to sell shares.

Send ten less, send two, send eight more, send ten.

The announcement of the stock exchange is regarded as a super good without exception. It is taken for granted that the right to fill the shares is granted.

In addition, when many listed companies distribute dividends to investors, they always prefer to use stock dividends. On the one hand, they are based on the requirement of capital expansion to gain better market reputation, raise stock prices and manipulate market services for the "banker"; on the other hand, they are to save cash outflows.

Some companies have allocated more than 30% of stock dividends for many years. Due to the dilution effect on earnings per share, the net asset yield of companies has been declining, and the share price has fallen. This has affected the company to raise new capital through the issue of shares, and investors often do not get the actual cash reward, and lose confidence in the company's investment.

In addition, our so-called ten delivery ten, in the overseas capital market, is called dismantling, the aim is to adjust the trading price of the company's stock to facilitate the investors and have no effect on the financial situation of the company.

For example, Ctrip made 1 dismantling 2 when the stock price reached $88 in April 2006; in July 2007, the share price reached $89.84 again, another 1 dismantling 2; in November 2007, Ctrip price went to $62.87, and the paction price would be 251.48 dollars without the two split.

If the overseas capital market is controlled by 1, 2, 10, 10, 1, 3, 10, and 20, it is a laughing stock to use these "sending" stocks as dividends.

For example, someone borrowed 10 hundred dollar bills and 20 50 yuan bills, and also managed to borrow 10, 10, and 10! The listed companies could not get out of their papers, and the way to share dividends as dividends would be seen by Chinese investors sooner or later, when investors would vote with their feet.