First, financial leverage and its measurement
From a physical point of view, lever is a device to increase force. In the economic field, generally speaking, companies always need to borrow money in their operations. No matter how much profit the company makes, the interest on the debt is constant. When the profit increases, the interest per 65,438+0 yuan profit will be relatively reduced, which will greatly increase the income of the company's shareholders. The influence of this kind of debt on shareholders' income is called financial leverage. Of course, if the profit is below a certain value, then leverage will reduce rather than increase the income of shareholders. If the variation of shareholders' income caused by the introduction of leverage is regarded as the increase of shareholders' income risk, then financial leverage is a double-edged sword: it not only increases the expected income of shareholders, but also increases the risk of their income. Therefore, in financial management, a very important issue is to distinguish when leverage is favorable and when it is unfavorable.
Financial leverage can be measured by many methods, usually expressed by the degree of financial leverage, that is, the change rate of earnings per share of common stock divided by the change rate of earnings before interest and tax, and the formula can be further simplified as earnings before interest and tax divided by earnings before tax. In the simple case that the capital of an enterprise only contains pure debt and pure equity, financial leverage can also be expressed by the following ratio:
1. The ratio of debt to equity expressed by market value;
2. The ratio of debt to total capital expressed by market value;
3. The ratio of debt interest to net operating income;
4. Ratio of total assets to equity.
Second, the theoretical point of view of the impact of financial leverage on enterprise value
Different theories put forward different views on the influence of financial leverage on enterprise value:
1. net income theory. The theory holds that debt can reduce the capital of an enterprise, and the higher the degree of debt, the greater the value of the enterprise. That is, as long as the debt cost is less than the equity cost and the equity cost remains unchanged, the increase of debt financing will not affect the cost of equity finance, so the total capital cost will change directly with the use of financial leverage, so that the total market value of enterprises will change directly with the use of financial leverage in the same period.
2. Operating income theory. The theory holds that the increase of debt financing will increase the cost of equity financing. In this way, the effect of reducing cost by increasing debt financing and the effect of increasing equity cost just cancel each other out, while keeping the total cost of capital unchanged.
3. Traditional theory. The theory is between the above two conclusions, and holds that although the use of financial leverage will increase the cost of equity to a certain extent, the increase is very small and will not offset the full effect of debt use. Therefore, within a certain range, the use of financial leverage is beneficial.
4. um theory. Modigliani and Miller (MM for short) are engaged in analysis and some empirical studies in the study of 1958, and think that when the company has no income tax, the capital cost and market value of the company have nothing to do with the financial leverage adopted.
Obviously, various theories provide valuable reference for enterprise financing decision-making and can guide enterprise decision-making behavior. However, due to the complexity of fund-raising activities and external environment, the influence of financial leverage on enterprise value needs further attention and research by relevant managers in combination with the actual situation.
Thirdly, the influence of financial leverage of listed companies in China on enterprise value.
1. The company has unlimited motivation to raise the debt level. Because China's interest rate system is not market-oriented, the marginal cost of debt will not rise with the amount of financing. Even if the financial leverage exceeds a certain value, the cost of corporate debt capital will not go up, but will remain in a horizontal state, and most of the corporate debt constraints come from the outside, that is, administrative instructions, personal relationships and national policies, so enterprises have unlimited motivation to improve the debt level.
2. Companies usually divest their debts at the beginning of listing. Although the cost of liabilities does not rise with the amount of liabilities, the cost of equity will change with the amount of liabilities. The debts of individual companies exceed a certain level, which increases their operating risks and the cost of equity capital. Because of this, companies usually divest their debts at the beginning of listing.
3. Listed companies with equity can use financial leverage to enhance enterprise value. For listed companies that meet the requirements of rights issue, their financial leverage is favorable. The optimal financial decision is not simply to raise funds through rights issue and expand the capital scale, but to increase their liabilities at the same time of rights issue to maintain or expand leverage, so as to maximize the use of financial leverage to increase shareholders' interests, that is, to increase debt financing can make enterprises get more benefits. On the contrary, for those listed companies that are not qualified for rights issue, their profitability is less than the average interest rate of their liabilities, and their financial leverage is unfavorable. At this time, increasing leverage will further worsen their return on net assets, so it is not appropriate to take further debt financing, but to reduce the role of unfavorable leverage and obtain external funds by equity financing.
To sum up, only by actively paying attention to and studying financial leverage and its influence on enterprise value, correctly distinguishing and judging favorable or unfavorable financial leverage, and making scientific use of it, can listed companies achieve the financial management goal of maximizing enterprise value.