Internal cause analysis of financing risk

(1) Debt scale. The scale of liabilities refers to the size of the total liabilities of an enterprise or the proportion of liabilities in the total funds. The scale of enterprise debt is large, the interest expense increases, and the possibility of insolvency or bankruptcy due to the decrease of income also increases. At the same time, the higher the debt ratio, the greater the degree of financial leverage = [profit before tax and interest/(profit before tax and interest)] of the enterprise, and the change range of shareholders' income will also increase. Therefore, the larger the debt scale, the greater the financial risk.

(2) Interest rate of liabilities. Under the condition of the same debt scale, the higher the interest rate of the debt, the more interest expenses the enterprise bears, and the possibility that the enterprise faces the danger of bankruptcy increases. At the same time, the interest rate has a great influence on the change range of shareholders' income, because the higher the interest rate of liabilities, the greater the degree of financial leverage, and the greater the impact on shareholders' income.

(3) Term structure of liabilities. The term structure of liabilities refers to the relative proportion of long-term and short-term loans used by enterprises. If the term structure of liabilities is unreasonable, such as short-term borrowing when long-term funds should be raised, or vice versa, it will increase the financing risk of enterprises. The reasons are as follows: first, if an enterprise uses long-term loans to raise funds, its interest expense will be fixed for a long time, but if an enterprise uses short-term loans to raise funds, the interest expense may fluctuate greatly; Second, if an enterprise borrows a large number of short-term loans and uses them for long-term assets, there may be a risk that it will be difficult to raise enough cash to pay off the short-term loans when the short-term loans expire. At this time, if creditors are unwilling to extend the short-term loans due to the poor financial situation of the enterprise, the enterprise may be forced to declare bankruptcy; Third, the financing speed of long-term loans is slow, the acquisition cost is usually high, and there will be some restrictive clauses. Analysis of external causes of financing risk

(1) Operational risk. Business risk is the inherent risk of enterprise's production and operation activities, which is directly manifested in the uncertainty of enterprise's profit before tax and interest. Operating risk is different from financing risk, but it also affects financing risk. When an enterprise is fully financed by equity, the operating risk is the total risk of the enterprise, which is completely shared by shareholders. When an enterprise adopts equity and debt financing, due to the expansionary effect of financial leverage on shareholders' income, the volatility of shareholders' income will be greater, and the risk assumed will be greater than the operational risk, and the difference is the financing risk. If the enterprise is not well managed and the operating profit is not enough to pay the interest expenses, not only the shareholders' income will go up in smoke, but also the interest will be paid with equity. In serious cases, the enterprise will lose its solvency and be forced to declare bankruptcy.

(2) Expected cash inflow and liquidity of assets. The principal and interest of liabilities are generally required to be repaid in cash (monetary funds). Therefore, whether an enterprise can repay the principal and interest on schedule according to the provisions of the contract or not depends on whether the expected cash inflow of the enterprise is full and timely and the overall liquidity of the assets. The cash inflow reflects the actual solvency, while the liquidity of the assets reflects the potential solvency. If an enterprise makes a mistake in investment decision, or the credit policy is too wide, it will face financial crisis if it cannot realize the expected cash inflow in full or in time to pay the due loan principal and interest. At this time, enterprises can realize their assets in order to prevent bankruptcy, but the liquidity of various assets is different, among which cash on hand is the strongest, while the liquidity of fixed assets is the weakest. The overall liquidity of enterprise assets is different, that is, the proportion of various assets in the total assets is different, which has a great relationship with the financial risk of the enterprise. When the overall liquidity of enterprise assets is strong and there are more assets with strong liquidity, its financial risk is small; On the contrary, when the overall liquidity of enterprise assets is weak and there are more assets with weak liquidity, its financial risk is greater. Many enterprises go bankrupt not because they have no assets, but because their assets can't be realized in a short time, so they can't repay their debts on time and have to declare bankruptcy.

(3) financial markets. Financial market is a place for financing. The debt management of an enterprise is influenced by the financial market. For example, the interest rate of the debt depends on the supply and demand of funds in the financial market when the loan is obtained, and the fluctuation of the financial market, such as the change of interest rate and exchange rate, will lead to the financing risk of the enterprise. When enterprises mainly adopt short-term loans for financing, such as financial tightening, tight money supply and a sharp rise in short-term loan interest rates, it will cause a sharp increase in interest expenses and a decline in profits. What's more, some enterprises will go bankrupt and liquidate because they cannot pay the soaring interest expenses.

the internal and external causes of financing risk are interrelated and interact with each other, and * * * both induce financing risk. On the one hand, under the influence of operating risk, expected cash inflow, liquidity of assets and financial market, it is possible to lead to the financing risk of enterprises only under the condition of debt operation, and the greater the debt ratio, the higher the interest on liabilities, the more unreasonable the term structure of liabilities and the greater the financing risk of enterprises. On the other hand, although the debt ratio of the enterprise is high, the enterprise has entered a stage of steady development, the operational risk is low, and the fluctuation of the financial market is not big, so the financing risk of the enterprise is relatively small.