If successful, how long can the enterprise continue to operate?

The influence of sustainable growth rate on enterprise financial management: the actual growth rate is greater than the sustainable growth rate, which means that the enterprise is short of cash. Start-up and mature enterprises are most prone to cash shortage. If managers think that the growth rate of enterprises exceeds the sustainable growth rate, it is only a short-term situation, and soon, as enterprises gradually enter maturity, the growth rate of enterprises will decline. From the financial point of view, the simplest way to solve this shortage problem is to increase debt. When the company's recent growth rate declines, it will automatically use excess cash to balance and pay off the loan. If managers believe that enterprises will maintain a high growth rate for a long time, then from the financial point of view, we can seek a balance by combining the following methods: (1) Increasing equity capital When enterprises are willing and able to issue additional shares in the capital market, the problem of their sustainable growth can be eliminated. The newly increased equity capital and the increased borrowing capacity by using financial leverage will provide sufficient development funds for enterprises. However, for many enterprises, there are sometimes some problems when adopting the method of increasing equity capital: 1) Where there is no capital market or the capital market is underdeveloped, the method of increasing equity capital is not feasible. Even if there is the possibility of selling shares, the certainty and timeliness of this work may be greatly reduced due to the complicated document preparation and application procedures. That's it. The procedure of applying for listing in China stock market is very complicated. As far as the financing of state-owned enterprises is concerned, it takes half a year to set up a company through asset restructuring, and one year for pre-listing counseling, including the transition time of application procedures during this period, so it is very likely that the equity funds raised within two years will not be in place. 2) Even if there is a developed capital market, for some small enterprises, it is often impossible to issue shares because of harsh conditions. Or because no good products are recognized by the market, many stocks cannot be sold. 3) Even though some enterprises can solve the cash shortage problem by increasing equity capital, they may be unwilling to use this method for various reasons. First of all, the cost of equity capital is quite high. Since 1996 China adopted the paperless online pricing method for stock issuance, the average winning rate of stock issuance is as high as 5%. For small sales, this ratio may be higher. This level of capital cost is often more than twice the cost of issuing the same amount of bonds. And because equity capital is permanent, its annual capital cost is even higher. Secondly, for many managers, constantly improving earnings per share is an important way to show their performance. Therefore, since the newly increased share capital will increase the number of shares issued to the outside world, it is difficult to immediately increase the net profit (at least in the initial stage), thus diluting the earnings per share. This is a phenomenon that many managers do not want to see. (2) Improving financial leverage means expanding the debt ratio and increasing the amount of debt. But we should remember that there is a limit to the increase of financial leverage. Every enterprise has a ceiling on its borrowing. After exceeding the upper limit, borrowing may be difficult to obtain, or it may become uneconomical because of increased risks and high costs. The funds obtained by the company in the form of debt financing constitute the company's debt, which can play a positive role in the company's production, operation and development under certain conditions. However, the more debts an enterprise has, the greater the pressure to pay off debts, and the greater the possibility of falling into debt crisis or bankruptcy. At the same time, in order to avoid or make up for possible losses, creditors will also make the loan conditions more stringent (such as raising the loan interest rate), thus increasing the cost of debt financing. Zheng company has long relied on loans provided by banks to maintain its development. The debt level has been very high, and the degree of financial leverage has been rising all the way. However, with the increase of the company's debt, the company's financial risk also increases. When the loan ceiling was exceeded, the bank stopped issuing acceptance bills to the company, and the company immediately fell into the crisis of capital chain rupture. Therefore, the company must optimize the debt/asset ratio according to the characteristics of the industry and its own production and operation. For companies with high debt ratio, obtaining equity financing may be a better financing method. However, if the financial leverage is forced to exceed the borrowing limit, the advantages outweigh the disadvantages. (3) Reducing the dividend payout ratio Reducing the dividend payout ratio is contrary to financial leverage, and there is a lower limit for reducing the dividend payout ratio, that is, zero. Shareholders' attitude towards dividends is closely related to their views on investment opportunities of enterprises. When shareholders think that the income can generate higher returns by staying in the enterprise, reducing the dividend rate will make shareholders feel acceptable. When shareholders think that the return on investment of enterprises is not satisfactory, the reduction of dividend payment rate will cause their dissatisfaction, and the most direct performance is the decline of stock price. But it should be said that reducing the dividend rate to improve the sustainable growth rate has little potential for most listed companies in China. Because the dividend rate of joint-stock companies in China has been very low, companies with zero dividend rate are very common. According to the statistics of Shanghai Securities Information Co., Ltd., since 1992, 220 listed companies have never made cash distribution after listing, and 67 of them have never even made profit distribution. In order to regulate the rights issue of listed companies, China Securities Regulatory Commission proposed that cash dividends should be a necessary condition for listed companies to raise funds again. In the face of new policies and regulations, in order to cross the threshold of repeated financing, many companies have changed their previous stingy practices and started to distribute cash to investors. This is also the main reason for the decrease of non-issuing companies after the publication of the annual report in 2000. In contrast, listed companies in western developed countries mainly use cash dividends and rarely use stock dividends in order to maintain corporate control and maintain the steady growth of earnings per share. The amount of cash dividend paid by a company and the stability of this payment have become an important symbol to measure the management level and growth of the company. According to the data, in the past 50 years, about 50% of the profits of all American companies have been distributed to shareholders as dividends. It seems that the listed companies in China do not regard dividend payment as a financial policy related to the company's stability, but more closely link the dividend payment ratio with fund-raising. (4) Non-core business divestiture Anyone who pays a little attention to economic events will be familiar with the name Giant Group. Giant Group has only experienced a short period of six years from its establishment to its decline. The key reason for the failure of Giant Group is the lack of enterprise resources caused by diversified management. Since 1993, the whole computer industry in China has entered a trough, and the banks on which the giant group made its fortune have been hit hard. In order to find new industrial pillars, Giant Group began to diversify and March into real estate and bioengineering. However, the diversification strategy of the group company is not successful. In terms of real estate development, the construction of the giant mansion just happened to meet the situation that the state strengthened macro-control, tightened monetary policy and the real estate cooled down. The development of health care products met with the rectification of the health care products market by the state, and the health care products market also cooled down. The company developed into two unfamiliar fields and invested a lot of money and resources, resulting in insufficient funds for the company's main core business. At the same time of rapid development, the capital of the group company has flowed out a lot, but at the same time, the capital inflow has not been matched accordingly, which has led to the sharp deterioration of the financial situation of the group company. At the end of 1996, because the first phase of the Giant Building was not completed as scheduled, the deposit had to be refunded and the liquidated damages of 40 million yuan had to be paid according to the contract, and the Giant Group fell into bankruptcy crisis because it could not pay as scheduled. Giant Group hopes to spread risks, but the inefficient use of resources leads to greater bankruptcy risks. An enterprise has limited resources, so it is impossible to form strong competitiveness in multiple fields at the same time. It can only act as a follower, so that the resources of the enterprise do not play the best role. When resources are scattered in many different fields, there will be no strong competition, and the business risk of playing a second-rate role is greater. Therefore, we can solve the growth problem by withdrawing funds and investing them in the reserved business of enterprises and "stripping non-core business". The divestiture of non-core business can solve the problem of sustainable growth from two aspects: first, the sold non-core business can directly generate cash to support the growth of retained business; The second is to eliminate the growth pressure brought by non-core business by divesting non-core business, thus reducing the growth rate of enterprises. Non-core business divestiture is not only applicable to diversified enterprises, but also to enterprises in a single industry. Enterprises operating in a single industry can achieve the purpose of divestiture by dealing with some inventory items with slow turnover and canceling transactions with customers who often delay payment. This can solve the growth problem from at least three aspects: 1) generating excess cash to support growth; 2) reduce some low-quality sales revenue to control growth; 3) Improve the asset turnover rate. (5) Enterprises seeking outsourcing can increase their sustainable growth by entrusting some activities to other units. If some parts are changed from self-made to outsourcing, the sales work will be entrusted to an external professional sales company. When enterprises adopt outsourcing business, the assets originally occupied by these activities are released and the asset turnover rate can be improved. These measures help to solve the problem of sustainable growth. The most typical example of this situation is franchising. In this way, the licensor handed over all the capital-intensive activities to the licensee, and as a result, he invested little capital, but he was able to achieve a relatively fast growth rate. The production license of Nike sports shoes in the United States is such an example. Whether an enterprise can effectively outsource mainly depends on its core competitiveness. If the outsourcing of an activity will not damage the core competitiveness of the enterprise, then this part of the activity is suitable for outsourcing. (6) M&A is also an effective way to solve the problem of sustainable growth by seeking some enterprises with excess cash flow or enterprises that can improve the efficiency of activities and business volume. This kind of merger often refers to absorption merger. There are two kinds of enterprises that can provide cash support for the acquirer: one is mature enterprises, which are called "cash cow" enterprises in management. These enterprises are also looking for suitable investment opportunities for their extra cash. The other is enterprises with very conservative financial policies, which can improve the liquidity and lending ability of enterprises after mergers and acquisitions. The merger of excellent parts supporting enterprises can often improve the operating efficiency and business volume of enterprises. The fact that the actual growth rate is less than the sustainable growth rate means that the enterprise has extra cash. Enterprises in maturity and recession are prone to generate excess cash. When the actual growth rate of an enterprise can't reach the sustainable growth rate, if there are no appropriate investment opportunities, the cash of the enterprise will be surplus. This situation of enterprises often makes cash-strapped enterprises envy, but it is actually a thorny issue. When the cash surplus appears, managers should first judge whether the low growth rate will last, that is, whether it is a short-term phenomenon or a long-term phenomenon. If managers think this phenomenon is temporary, then enterprises will still have great growth in the near future. At this time, when this phenomenon exists for a long time, managers must fundamentally solve it. The expected low growth, one situation is the influence of the industry, that is, the industry has entered a mature stage, and the market capacity is difficult to expand rapidly; The other situation is the problem of the enterprise itself, which often shows that the growth rate lags behind the overall growth rate of the industry, and the market share is gradually shrinking. At this time, enterprise managers should review their own business policies and methods, find out the internal factors that hinder the rapid growth of enterprises, and try their best to eliminate them. This often includes a series of processes, such as strategic change, organizational structure change and business structure change. This process should produce results in a short time, otherwise this disadvantage will be difficult to change. When an enterprise can't tap its growth potential from the inside, there are usually three options for extra cash: (1) There are two ways to ignore the problem: one is to continue the core business with low return on investment. The second is to enjoy idle cash resources. This irresponsible behavior of ignoring the existence of problems is not a long-term solution for managers. Today, with the emphasis on efficiency, the inefficient use of this resource will soon attract the attention of all parties. First of all, low returns and low growth rate will make the stock price of enterprises fall. Next, cheap stocks and abundant cash can easily make enterprises the target of acquisition. Once acquired, the acquirer will reorganize the resources of the enterprise and play a higher efficiency. However, the managers of these merged enterprises are likely to be the first targets of restructuring. Even if the enterprise is not acquired, the owner of the enterprise will often put pressure on the manager because of the poor performance of the enterprise until he is fired. (2) The most direct way to solve the cash surplus is to return it to shareholders by increasing the dividend rate or stock repurchase. When the company's share capital expands too fast, resulting in a serious decline in performance, it can reduce the share capital and improve performance through share repurchase. Although this method is the most common, it is not often used by managers. Because returning the funds to the shareholders' meeting narrows the control scope of the managers. From the personal point of view of managers, even if they can't create high value for shareholders, they still hope to "grow"-that is, the scale of enterprises continues to expand. For them, shareholders give money to them for management out of trust, and they have the responsibility to increase the value of shareholders' money. Returning the money to shareholders means that they are unable to manage more funds, which is a failure. (3) Purchasing growth The most active way to eliminate the problem of slow growth is purchasing growth. In order to prove their management ability, retain excellent employees and avoid being acquired, managers often try to adopt diversified business strategies and invest excess cash in other industries, especially those in the growth stage. The computer industry is one of the most closely related industries in the household appliances industry, especially the TV manufacturing industry and the computer industry, which belong to the electronic information industry and the industry management of the Ministry of Electronic Industry. Therefore, home appliance enterprises that have entered the mature stage of the industry give priority to the civil computer industry when seeking new growth points. Hisense Group has taken the lead in this respect. Hisense Computer Company, a subsidiary of Hisense Group, owns more than 20 kinds of computer products, and its monthly sales increase by 90%, reaching the production capacity of 500,000 units in 1998, ranking among the top 8 in the national computer industry. At the same time, the development of computer technology in turn promoted the promotion of Hisense TV production technology, and launched a series of digital, networked and high-definition TV products for 2 1 century. This is a successful case of purchase growth. As mentioned above, the choice of diversification strategy must be cautious, and enterprises should choose industries that complement their core production capabilities, otherwise diversification will lead to scattered resources and weakened competitiveness, leading to bad results. The idea of sustainable growth does not mean that the growth of enterprises cannot be higher or lower than the sustainable growth rate. The problem is that when the company exceeds or falls below the sustainable growth rate, managers must foresee and solve the financial problems caused by it. Any enterprise should control the growth of sales so as to balance it with the financial ability of the enterprise, and should not blindly follow the market. The management of enterprises can't just rely on formulas. Formulas can provide us with simple methods to help us quickly find potential problems in enterprises. The sustainable growth rate model provides us with such a means to control the growth of enterprises.