Three Basic Financial Strategies Of A Company

How to choose different financial strategies to ensure that enterprise funds meet the needs of creating financial competitive advantages and ensure the realization of strategic objectives is an important issue that needs to be explored in financial strategy decision and selection.

The type of financial strategy can be divided into three types: rapid expansion financial strategy, steady development financial strategy and defensive shrinkage financial strategy.

First, the rapid expansion of financial strategy.

The rapid expansion of financial strategy refers to a financial strategy aimed at the rapid expansion of the scale of enterprise assets.

In order to implement this financial strategy, enterprises often need to make large amounts of external financing while making most of the profits retained, and make greater use of liabilities to make up for the lack of internal accumulation relative to the expansion needs of enterprises.

Because debt financing can not only bring financial leverage to enterprises, but also prevent the dilution of net assets yield and earnings per share.

The rapid expansion of enterprise asset scale often results in a relatively low level of return on assets over a long period of time. Therefore, the rapid expansion of financial strategy usually shows "

,

The characteristics of "less distribution".

Second, a steady development financial strategy.

A steady development financial strategy is a financial strategy aimed at achieving stable growth of financial performance and smooth expansion of asset scale.

The implementation of a prudent developing financial strategy enterprise will generally optimize the allocation of existing resources as much as possible and improve the efficiency and efficiency of the existing resources as the primary task, and take profit accumulation as the basic source of funds to realize the expansion of enterprise asset scale.

In order to prevent excessive interest burden, these enterprises often take a very cautious attitude towards using debt to realize the scale of enterprise assets and expand the scale of operation.

Therefore, the general financial characteristics of a company implementing a prudent development financial strategy are "low liabilities, high returns and moderate distribution".

Defensive contraction financial strategy refers to a financial strategy aimed at preventing financial crisis and survival and development.

In order to reduce the outflow of cash and increase cash inflow as far as possible, enterprises implementing defensive and contractile financial strategy will take the priority of increasing cash inflow as much as possible. By taking measures such as cutting down branches and streamlining institutions, we will revitalize the stock assets, save costs and expenditures, and concentrate all the human, material and financial resources that can be concentrated on the leading businesses of enterprises so as to enhance the market competitiveness of the leading businesses of enterprises.

Because these enterprises have suffered setbacks in the past development process, they are likely to have implemented a rapidly expanding financial strategy. Therefore, the debt burden and the difficulties faced by them in the past have become the two important reasons for forcing them to adopt a defensive and contractible financial strategy.

"Low liability, low income and less distribution" are the basic financial characteristics of enterprises implementing this financial strategy.