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Report the financial situation of SUNING Appliance

By Esther Payne,2014-02-07 06:11
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Report the financial situation of SUNING Appliance...

     Report the financial situation of SUNING

    Appliance

    黄冬暄 0920010095

    游媛斐 0920010310

    黄锦辉0920010099

    毕永健0920070001

    彭扬0920010206

    Report the Financial Situation of SUNING Appliance

    Report the financial situation of

    SUNING Appliance

1. Abstract

    Our group selected Shenzhen-listed Suning Appliance in the financial situation

    for research. By Suning Appliance to understand the financial data and to use the

    method of common financial ratios financial situation of the company.

    As the electrical industry in China, the economic oligarchy appears, GOME and

    SUNING virtual monopoly on the sales market share of the electrical industry. We

    mainly compare the two oligarchs Suning and Gome's financial situation. Analysis

    of the financial situation of Suning 2007-2010 used the first 3 quarters of the

    financial situation and used 2008-2009 data for Gome to peer group analysis,

    whose report obtained.

2. Company Profile

    Founded in 1990, Suning Nanjing. SUNING for the market demand, according to specialization, standardization principle that appliance chain store will be divided into flagship stores, community stores, professional Suning Appliance Shop. To open 200 new stores a year. At the same time increasing the development of self-built flagship store to achieve chain development .

    October 1, 2005 SUNING was the 3C home appliance retail chain enterprises in China's leader, was focused on cultivating the Ministry of Commerce of the 'National 15 large commercial enterprise groups'. As of 2009, Suning more than 300 cities in China, with 1,000 stores. With excellent performance, Suning Appliance has been highly recognized by the investment market. And Suning is the world's home appliance retail chain, one of the highest market value.

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    Report the Financial Situation of SUNING Appliance

    Introduction to the basic situation is as follows Suning:

    Stock Name SUNING Appliance

    Stock Code 002024

    Listing Exchange Shenzhen Securities Exchange

    Registered Address Shanxi Road, Nanjing City, Jiangsu Province,

    Jinshan Building, 1-5, 8 layer

    Registered Address of the Zip 210005

    Code

    Office Address Huaihai Road,Nanjing City,Jiangsu

    Province,No.68

    Office Address of the Zip Code 210005

    Company Internet Address http://www.cnsuning.com

3. Explanation on the financial ratios

    3.1 Short-term solvency

    Short-term solvency is the ability of companies to repay current liabilities,

    short-term liquidity depends on the strength of the liquidity of current assets, which assets into cash rate. Enterprise liquid assets liquid, the corresponding short-term liquidity is also strong.Current ratio is a measure of short-term solvency of enterprises is an important financial indicators, the higher the ratio, indicating the ability of companies to repay the stronger current liabilities, current liabilities greater protection to be repaid. Current ratio in the evaluation of short-term solvency of

    enterprises, there is some limitations, if the current ratio is higher, but less liquid current assets, the company's short-term solvency is still not strong . In this time , we

    can us the quick ratio to analyze . The quick ratio is usually considered normal is 1, the quick ratio below 1 is considered to be relatively low short-term liquidity Cash ratio is the class of corporate cash assets to current liabilities ratio. Cash asset classes including corporate-owned securities held by money funds.

     3.2 Long-term solvency

    Refers to long-term solvency is the affordability of debt and debt service support

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    Report the Financial Situation of SUNING Appliance

    capabilities. The strength of long-term solvency is reflecting the financial security and stability of an important symbol. We analyze total Debt ratio, Times Interest Earned and Cash Coverage.

    Total Debt ratio is total liabilities and total assets ratio, indicating that the funds provided by creditors of enterprises accounted for the proportion of total assets, corporate donors revealed the level of protection to creditors of debt, so the indicator is to analyze the company an important indicator of long-term solvency. Times Interest Earned is earnings before interest and corporate tax on the ratio of the amount of interest, reflecting the business activities of the ability to bear the expense.

     3.3 Asset management ratio

    Asset management ratio is used to measure the efficiency of asset management

    companies in the financial ratio Including inventory turnover, receivable turnover and total asset turnover.Inventory turnover rate is a measure of acquired inventory and appraisal of enterprises, production, marketing and other aspects of management of the situation to recover a comprehensive index. Receivables refer to accounts receivable into cash during the year, the average number of times that speed the flow of accounts receivable. Asset turnover ratio is to investigate the operational efficiency of enterprise assets is an important indicator, reflecting all the assets of business during the transfer from input to output speed, reflecting all the assets of the enterprise management quality and efficiency.

     3.4 Profitability ratios

     Profitability ratios tell us how many profit can get on this company . Profitability

    ratios include profit margin, return on assets and return on equity. The higher gross margin is better able to explain profitability. Return on assets is the return on assets, to measure their assets efficiency. Return on equity (ROE) is the investment rate of return to measure the efficiency of investment companies.

     Return on equity for investors is a special kind of financial ratios, because the risk ratio is the same relative rate of return than other investments to estimate the profitability of the investment.

     3.5 Market value ratio

    Market value ratio of stock market price of an enterprise with corporate

    earnings and book value ratio. Used to investigate the effectiveness of business operations and future development of the past, and reflect the evaluation of corporate investors, including price-earnings ratio, dividend yield, price book value ratio. Corporate earnings to reflect the ratio of stock price and earnings.

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    Report the Financial Situation of SUNING Appliance

     4. Suning, Gome and financial capability of

    the basic analysis of financial data

    4.1 Suning and Gome’s Balance Sheets and Income

     Statement

    This section mainly through balance sheets and income statement to calculated the Common financial ratios.

    Table 4.1

    SUNING Appliance

    Balance Sheets as of December 31, 2007 to 2009 and first 3 quarters of 2010

    ($ in millions)

     2007 2008 2009 2010 Assets

    Current assets

     Cash $ 7,465.29 $ 10,574.23 $ 21,960.98 $ 22,347.27

     Accounts receivable 107.84 110.13 347.02 893.89

     Notes receivable 1,472.52 1,595.66 1,561.26 3,756.55

    Inventory 4,552.54 4,908.21 6,327 10,653.06

    Total $ 13,598.19 $ 17,188.23 $ 30,196.26 $ 37,650.77 Fixed assets

     Net plant and equipment $ 1,869.27 $ 4,430.3 $ 5,643.57 $ 7,066.91 Total assets $ 16,229.65 $ 21,618.53 $ 35,839.83 $ 44,717.68

Liabilities and Owners Equity

    Current liabilities

     Accounts payable $ 3,146.32 $ 3,633.33 $ 5,003.12 $ 8,693.91

     Notes payable 8,244.33 8,872.88 15,715.72 18,046.92

     Total $ 11,390.65 $ 12,478.57 $ 20,718.84 $ 26,740.83 Long-term debt $ 215.44 $ 364 $ 196.01 $ 391.33 Owners equity

     Common stock and paid-in surplus $ 1,041.59 $ 4,441.47 $ 8,541.66 $ 8,607.81

     Retanied earnings 3,608.95 4,334.49 6,383.32 8,977.71

     Total $ 4,623.56 $ 8,775.96 $ 14,924.98 $ 17,585.52 Total liabilities and owners equity $ 16,229.65 $ 21,618.53 $ 35,839.83 $ 44,717.68

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    Report the Financial Situation of SUNING Appliance Table 4.2

    Gome Appliance

    Balance Sheets as of December 31,2008 and 2009

    ($in millions)

     2008 2009

    Assets

    Current assets

     Cash $ 3,051.07 $ 6,029.06

     Accounts receivable 45.1 54.2 Notes receivable 9913.04 10,657.01

     Inventory 5,473.50 6,532.45

    Total $ 18,482.71 $ 23,272.72 Fixed assets

     Net plant and equipment $ 9,012.39 $ 12,490.46 Total assets $ 27,495.10 $ 35,763.18

Liabilities and Owners Equity

    Current liabilities

     Accounts payable $ 12,917.96 $ 15,815.26

     Notes payable 2.229.29 4,4867.12

     Total $ 15,147.25 $ 20,682.38 Long-term debt $ 3,647.82 $ 3,278.33 Owners equity

     Common stock and paid-in surplus $ 331.79 $ 382.41

     Retanied earnings 8,368.24 11,420.06

     Total $ 8,700.03 $ 11,802.47 Total liabilities and owners equity $ 27,495.10 $ 35,763.18

P.S: Earnings per share for SUNING 2007: $ 1.02

     2008: $ 0.74

     2009: $ 0.64

     2010: $ 0.41

    Earnings per share for GOME 2008: $ 0.09

     2009: $ 0.13

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    Report the Financial Situation of SUNING Appliance

    Table 4.3

    SUNING Appliance

    2007 to 2009 and first 3 quarters of 2010 Income Statement

    ($ in millions)

     2007 2008 2009 2010 Sales $ 40,152.37 $ 49,896.71 $ 58,300.15 $54,301.52 Cost of goods sold 34,346.74 41,334.76 48,185.79 44,915.91 Depreciation 3,555.57 5,597.58 6,239.33 5,631.81 Earnings before interest and taxes $ 2,250.06 $ 2,964.37 $ 3,875.03 $ 3,753.8 Interest paid 9.7 13.5 51.34

    Taxable income $ 2,241.36 $ 2,950.87 $ 3,823.69 $ Taxes 718.19 690.95 937.87 890.27

    Net income $ 1,523.17 $ 2,259.93 $ 2,988.50 $ 2,827.79

     Dividends $ 1,465.43 $ 2,170.19 $ 2,889.96

     Addition to retained earnings 57.74 89.74 98.54 Table 4.4

    Gome Appliance

    2008 to 2009 Income Statement

    ($ in millions)

     2008 2009 Sales $ 45,889.26 $42,667.57 Cost of goods sold 41,381.22 38,408.04 Depreciation 2,974.19 2,427.02

    Earnings before interest and taxes $ 1,533.85 $ 1,832.41 Interest paid 0.06 0.1

    Taxable income $ 1,533.79 $ 1,832.51 Taxes 435.16 406.31

Net income $ 1,098.63 $ 1,426.20

     Dividends $ 1,048.16 $ 1,409.29

     Addition to retained earnings 50.53 26.91

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    Report the Financial Situation of SUNING Appliance

     SUNING ratio analysis 4.2

    This section mainly through calculated Sunings financial ratio to analysis

    and compare with Gome.

     4.2.1 Short-term solvency, or liquidity, ratios

     2007 2008 2009 2010 2008 2009

    Current 1.19 1.38 1.46 1.41 Company Gome Suning Gome Suning

    ratio Current 1.22 1.38 1.13 1.46

    Quick ratio 0.79 0.95 1.15 0.89 ratio

    Cash ratio 0.66 0.85 1.06 0.84 Quick ratio 0.86 0.95 0.81 1.15

     Cash ratio 0.2 0.85 0.29 1.06

1.61.461.411.41.381.221.21.191.131SUNING0.8GOME0.6

    0.40.2

    0

    2007200820092010

    Graph 1- Current ratio

    We can be seen from Graph 1, in the comparison period, Suning Appliance and Gome not

    all fluctuations in the current rate. Suning Appliance's current ratio has been rising and the

    overall point of view than from Gome. Gome's current ratio is a declining trend, indicating the

    pressure of debt service Suning Appliance and Gome is less than the solvency has been

    enhanced.

    1.4

    1.21.1510.950.890.860.80.81SUNING0.79

    0.6GOME0.4

    0.2

    0

    2007200820092010

     Graph 2-Quick ratio

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    Report the Financial Situation of SUNING Appliance

     Graph 2 can tell us, Suning Appliance's quick ratio tended to increase, while the quick ratio is slightly lower Gome. Suning the same period of the quick ratio is higher than Gome. Current ratio and quick ratio we can see that Suning's liquidity and solvency stronger than Gome. 1.2

    1.061

    0.850.840.8

    SUNING0.660.6GOME0.40.290.20.2

    0

    2007200820092010

     Graph 3-Cash ratio

     As graph 3 show, Suning and Gome cash rates are on the rise. But in 2009 the cash rate is not the money Suning than 1 , while Gomes cash rate between 0.2-0.3. This shows that the business activities of Suing and Gome to repay debt does not have a role in safeguarding. This means that companies need investment and financing to repay debt. In 2009, Suning Appliance has the ability to guarantee repayment of debt, and solvency of Gome is not high, there is unable to pay current liabilities, the risk due.

     4.2.2 Long-term solvency, or financial leverage,ratio

     2007 2008 2009 2010

    Total debt ratio 0.667 0.49 0.43 0.53

    Debt-equity ratio 2.46 1.42 1.39 1.52

    Equity multiplier 2.94 1.96 1.46 2.14

    Times interest earned ratio 231.96 219.58 75.48 -------

    Cash coverage ratio 598.52 634.22 197.01 -------

     2008 2009

    Company Gome Suning Gome Suning

    Total debt ratio 0.53 0.49 0.49 0.43

    Debt-equity ratio 1.74 1.42 1.75 1.39

    Equity multiplier 2.12 1.96 1.97 1.46

    Times interest earned ratio 25564 219.58 18324 75.48

    Cash coverage ratio 75134 634.22 42594 197.01

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    Report the Financial Situation of SUNING Appliance 0.8

    0.70.6670.60.530.530.50.490.49SUNING0.430.4GOME0.3

    0.2

    0.1

    0

    2007200820092010

     Graph 4- Total debt ratio

     As Graph 4 show, Suning Appliance and Gome are declining total debt ratio is higher than

    43%. Operating in the full use of financial leverage to the interests of shareholders to the

    company. After 2007, Gomes total debt ratio was higher than Suning.

    3

    2.52.46

    21.741.75SUNING1.521.51.421.39GOME1

    0.5

    0

    2007200820092010

    Graph 5-Debt-equity ratio

     As Graph 5 show that Suning's debt-equity ratio has been declining sharply in 2007. Gomes

    debt-equity ratio was fiat in 2008 and higher than Suning. So we know the stability of the

    financial position of Suning getting better and better and stronger than Gome.

     From the table we can see, Suning and Gome guaranteed repayment of principal and interest

    on the ability to pay. Through the above indicators, we can see Sunings long-term solvency was stonger than Gome.

     4.2.3 Asset utilization,or turnover,ratios

     2007 2008 2009 2010

    Inventory turnover 8.62 8.73 8.56 4.22

    Days sales in inventory 42 day 41 day 42 day 85 day

    Receivables turnover 372.33 453.07 168 60.74

    Days sales in receivables 0.98 day 0.8 day 2.17 day 4.53 day

    Total asset turnover 1.46 2.31 1.63 1.21

    Capital intensity 0.68 0.43 0.61 0.83

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