Debt management can not only bring huge profits to enterprises, but also make enterprises face great risks. The existence of liabilities has a dual role and influence on the business activities of enterprises, and enterprises must make an appropriate balance between income and risk. Because debt is a "double-edged sword", too much debt is not good for enterprises, and too little debt does not mean good. If the enterprise has too much debt, it will increase financial risks and may lead to bankruptcy of the enterprise; On the contrary, if the debt is too small, it will not be able to effectively obtain the benefits that the debt may bring to the enterprise. Debt investment is a magical tool, but it must be used well. At this time, we must adhere to two principles of lending: (1) the expected rate of return must be higher than the loan interest rate; (2) In the worst case, there must be enough cash to repay the principal and interest. A crucial aspect here is to understand the existence and influence of financial leverage.
The so-called lever, in short, is a tool for pulling a thousand pounds with a small stroke. Archimedes once said, "Give me a fulcrum and I can pry up the whole earth." Extending to financial leverage, it can be said: "Lend me enough money, and I can get great wealth." Specifically, financial leverage refers to the phenomenon that the change rate of earnings per share of common stock is greater than the change rate of earnings before interest and tax when enterprises adopt debt financing methods (such as bank loans, issuing bonds, preferred stocks, etc.). Because the financial expenses such as interest expense and preferred stock dividend are fixed, when the income before interest and tax increases, the fixed financial expenses per common stock will decrease relatively, thus bringing additional income to investors.
Suppose there is an investment that needs 654.38 million yuan, and it is estimated that there is a yield of 30%. If all of them are invested with their own funds, the rate of return on their own funds of 654.38+10,000 yuan is 30%. However, if only 60,000 yuan is withdrawn, and the other 40,000 yuan is obtained by borrowing, the annual interest rate of the loan is 654.38+05%, although the apparent return is. However, since we only really took out 60,000 yuan, the real rate of return of this 60,000 yuan self-owned fund is 30,000 yuan (100000×30%) to be earned, and after deducting the interest expenses, the burden is 6000 yuan (40,000×15%), so the rate of return of financial leverage operation is as high as 40% (24,000).
From this, we can draw the following conclusions and inspirations: (1) Debt is the basis of financial leverage, and the effectiveness of financial leverage comes from the debt management of enterprises; (2) Under certain conditions, the less self-owned funds, the greater the space for financial leverage. Using financial leverage seems to have high interest, but it must be operated properly. If the judgment is wrong, the return on investment is not as high as expected, or even negative, plus the loan interest that needs to be borne, it will become an anti-financial leverage operation, but it will suffer heavy losses.
Second, the rational use of financial leverage to improve corporate financing efficiency
To sum up, it can be seen that financial leverage can amplify the use of corporate funds. When enterprises use liabilities, the effect of financial leverage will appear. However, the more debt, the better. We must first analyze whether the rate of return after fund raising is greater than the interest rate. If this is the case, the use of debt will greatly improve the profit per share of the enterprise, and the debt reflects the positive leverage effect. On the contrary, the use of debt will greatly reduce the profit per share of enterprises, and debt reflects the negative leverage effect. Of course, this is only to illustrate the financial leverage effect of a single debt. For an enterprise, there are many financing channels, and the financial leverage effect is often reflected by the combined financing structure. The following is an explanation of this problem.
(A) from the perspective of capital structure
Capital structure refers to the composition and proportional relationship between long-term debt capital and equity capital. Traditional financial theory holds that from the perspective of net income, debt can reduce the cost of capital and improve the value of enterprises. However, when enterprises use financial leverage, they increase the risk of shareholders' equity and increase the cost of equity capital. To a certain extent, the increase in the cost of equity capital will not completely offset the gains from using debt with low capital cost ratio. Therefore, the weighted average cost of capital will decrease and the total value of the enterprise will increase. However, if financial leverage is overused, the increase in equity cost can no longer be offset by the low debt cost, and the weighted average cost of capital will rise. The cost of debt will also rise in the future, which will accelerate the rise of the weighted average cost of capital. The debt ratio when the weighted average cost of capital changes from falling to rising is the best capital structure of enterprises.
Enterprise financing includes debt financing and equity financing, which shows the proportional relationship between debt capital and equity capital, that is, capital structure. Enterprise financing must reach the lowest comprehensive capital cost, and at the same time keep the financial risk in an appropriate range to maximize the enterprise value, which is the best capital structure. How to reasonably determine the proportion of debt financing and equity financing in practical work and grasp the best point of capital structure?
1. From the perspective of the operating income of enterprises, it is determined that enterprises with stable operating income and an upward trend can increase the debt ratio. Because the business income of the enterprise is stable and reliable, the profit is guaranteed, and the cash flow can be well predicted and mastered. Even if the amount of corporate debt financing is large, it will be able to pay the due principal and interest because of smooth capital turnover and stable profits, and will not encounter higher financial risks. On the contrary, if the operating income of an enterprise rises and falls from time to time, the time and amount of cash withdrawal are also unstable, and its debt ratio should be lower. The scale of an enterprise's operating income determines the critical point of its debt. Critical point of liabilities = sales revenue × profit rate before interest and tax/annual interest rate of loans. If the scale of corporate debt financing exceeds this critical point, it will not only fall into debt repayment dilemma, but also lead to corporate losses or bankruptcy.
2. From the aspect of enterprise financial management technology, it is decided that long-term liabilities are mostly secured by fixed assets of enterprises, so the ratio of fixed assets to long-term liabilities can reveal the security degree of enterprise debt management. Usually, the ratio of fixed assets to long-term liabilities is 2∶ 1. Only enterprises with all fixed assets operating normally can maintain the ratio of 1: 1 in a limited time.
3. From the attitude of the owners and operators to the capital structure, it is decided that if the owners and operators are unwilling to let the control of the enterprise fall into the hands of others, they should try to use debt financing instead of equity financing. On the contrary, if business owners and operators are unwilling to take financial risks, they should try their best to reduce the debt-to-capital ratio.
4. Determine from the degree of industry competition: If the industry where the enterprise is located has a low degree of competition or monopoly, the operating income and profit may grow steadily, and the proportion of liabilities in its capital structure may be high. On the contrary, if the competition in the industry where the enterprise is located is fierce and the profit of the enterprise tends to decrease, we should consider reducing the debt to avoid the debt risk.
5. Determine from the enterprise's credit rating: the attitude of lending institutions and credit evaluation institutions is often the decisive factor when enterprises borrow money. Generally speaking, the credit rating of an enterprise determines the attitude of creditors, and the debt ratio in the capital structure of an enterprise should be limited to a range that does not affect the credit rating of the enterprise.
From the qualitative analysis of the above financing, it can be summarized as follows: (1) If the enterprise is in a new or unstable and low-level development stage, in order to avoid the pressure of repaying the principal and interest, it should adopt a capital structure that emphasizes shareholders' rights and interests, including internal financing, issuing common shares and preferred shares, etc. ; (2) If the enterprise is in a stable development stage, it can make full use of the role of financial leverage by issuing corporate bonds or borrowing and other debt financing methods, focusing on the debt capital structure.
(B) From the perspective of financial structure.
Financial structure refers to the combination of various financing methods of enterprises, usually expressed by asset-liability ratio. There are three financial structures: (1) asset-liability ratio 100%, and shareholders' equity ratio is 0, all of which are borrowed funds; (2) The asset-liability ratio is 0 and the shareholder's equity ratio is 100%, both of which are self-owned funds; (3) The ratio of asset-liability ratio to shareholders' equity is less than 100%, and borrowed funds and self-owned funds each account for a certain proportion. Different proportions will lead to several specific financial structures. Enterprises operating in full debt, all risks are borne by creditors, which will not only affect the interests of creditors, but also seriously interfere with a country's economic order. The Company Law of People's Republic of China (PRC) clearly stipulates that the establishment of a company must have a minimum registered capital, which is contributed by shareholders, that is, the first financial structure mentioned above is not allowed in practice. Enterprises all rely on equity funds to operate, and there is no debt. Although it is not restricted by law, the cost of equity funds is high and cannot be adjusted flexibly according to needs. Moreover, in the market economy, the second financial structure does not actually exist because of the settlement relationship of transactions and the need for temporary funds. The third financial structure needs to be studied in real economic life, that is, how to arrange and adjust the ratio of liabilities to shareholders' equity funds to make it more reasonable. So, what is the ideal financial structure?
1. The comprehensive capital cost is low. Financial theory and practice tell us that the cost of borrowed funds is less than that of equity funds, and the cost of current liabilities is lower than that of long-term liabilities, so increasing the debt ratio and current liabilities ratio will reduce the actual capital cost of the company.
2. High financial leverage. Financial leverage refers to the extra income that enterprises can get from equity funds through debt management. When the profit rate before interest and tax of all funds is higher than the interest rate of liabilities, debt management will make the profit rate of equity funds exceed the profit rate before interest and tax of all funds. The higher the debt ratio, the greater the financial leverage benefit. However, if the profitability of the enterprise is poor, and the profit rate before interest and tax of all funds is less than the interest rate of liabilities, debt management or high debt ratio will make the profit rate of equity funds decline, even unprofitable or lose money. This negative benefit of financial leverage should be avoided as much as possible. The profit rate before interest and tax of all funds of an enterprise is equal to the debt interest rate, which is the critical point of debt management. The former is greater than the latter. Increasing the debt ratio will enable shareholders to gain more financial leverage benefits.
3. The financial risk is moderate. The high debt ratio and current debt ratio of enterprises can reduce the comprehensive capital cost and bring financial leverage benefits to shareholders, but increase financial risks. If the risk is so high that the probability that the debt cannot be repaid when it is due is high, the enterprise may fall into bankruptcy and its going concern will be affected. Therefore, enterprises should reasonably arrange the amount, type and term of debts according to the expected cash flow to reduce financial risks.
Three. Discussion on related issues
If enterprises want to develop and the economy wants to grow, there must be investment. In the case of private ownership of its own capital, debt investment is beyond reproach. So, how can we find the best way between enterprise development and debt risk control? Under normal circumstances, the cost of debt must be lower than the expected income of investment projects, otherwise the operation will be unprofitable, and any favorable financing conditions and attractive investment projects are not desirable.
(A) determine the appropriate debt structure
Once an enterprise decides to operate in debt, the first step is to determine the amount of debt and reasonably grasp the proportion of debt; The second is to consider the consumption structure of borrowed funds. When enterprises raise funds by borrowing, they must consider the appropriate borrowing methods and types of funds. With the deepening of economic system reform, the way of borrowing has changed from single borrowing from banks to multi-channel financing. Enterprises should choose different financing methods according to the loan amount, service life and affordable interest rate. (1) Bank loan. This is still the main channel for enterprises to borrow money. However, because banks are the main battlefield of China's macro-control, bank loans are limited by both capital positions and loan quotas, so it is difficult to lend. If the country tightens monetary policy, those who borrow heavily will be supervised first. (2) Resist capital market lending. It collects idle funds from some enterprises through financial institutions and capital markets, and then lends them to enterprises in urgent need of funds in the short term. The funds obtained through this channel will generally not be used for a long time, and the cost of funds is high. (3) Issuing corporate bonds. Issuing bonds to enterprises can closely unite employees and fight for the rise and fall of enterprises, but the funds that can be raised are very limited. Public offering can raise a lot of money, but the cost of capital is high, and a little carelessness will bring huge financial risks. (4) Use commercial credit cautiously. It is a widely used financing method in developed countries, which is not only low in cost, but also transferable by endorsement. When money is tight and cash is badly needed, you can withdraw money at a discount in the bank. It is the best choice to solve the triangular debt. But to use commercial credit, we must have sound economic regulations and good business ethics, that is, good business reputation, in order to use it safely. Otherwise, no matter how good the method is, it is also a dead letter to people with poor reputation. (5) Introducing foreign capital. That is, borrowing funds from abroad through various channels (government, banks, enterprises and individuals). The introduction of foreign capital needs to consider exchange risk. At present, although the macro-control of the national interest rate policy is strict, the cost of social capital removal is quite different, so we cannot blindly choose financing channels and strive to reduce the cost of capital. At the same time, the term structure of borrowed funds should be considered. The use cycle of borrowed funds is short, and the risk that the enterprise cannot repay the principal and interest is high; Long service life, low risk, but high capital cost. Therefore, enterprises should reasonably match the borrowed funds with different maturities, so as to maintain a relatively balanced annual repayment and avoid excessive concentration of repayment.
(B) Compound leverage and corporate financing benefits
The levers involved in financial management mainly include operating leverage, financial leverage and compound leverage, which correspond to business risk, financial risk, total risk of enterprises and related interests respectively. The goal of using leverage in financial management is to obtain higher income at lower cost on the basis of controlling the total risk of enterprises.
Operating leverage and operational risk. Operating leverage refers to the phenomenon that the change rate of earnings before interest and tax is greater than the change rate of production and sales due to the existence of fixed production and operation costs. That is to say, if the fixed production and operation cost is zero or the business volume is infinite, the change rate of earnings before interest and tax is equal to the change rate of production and sales, and there is no operating leverage effect at this time. From another point of view, as long as there is a fixed production and operation cost, there will be a phenomenon that the change rate of earnings before interest and tax is greater than the change rate of production and sales. Operating leverage coefficient = base period marginal contribution/base period EBIT = (base period operating income-base period variable cost)/base period EBIT. (1) When other factors remain unchanged (such as operating income), the higher the fixed cost, the greater the operating leverage coefficient and the greater the operating risk. (2) Under the condition of constant cost, the more operating income, the smaller the operating leverage coefficient and the smaller the operating risk.
2. Compound leverage and total risk of enterprises. Composite leverage is the result of linkage between operating leverage and financial leverage, which reflects the phenomenon that small changes in turnover lead to large changes in earnings per share of common stock. (1) comprehensive leverage coefficient = operating leverage coefficient × financial leverage degree. (2) The comprehensive leverage coefficient reflects the total risk degree of the enterprise, which is influenced by operational risk and financial risk (changing in the same direction). Therefore, in order to keep the total risk level unchanged and improve the total income of enterprises, enterprises can reduce the operating risk by reducing the operating leverage coefficient, and at the same time increase the debt ratio appropriately to improve the degree of financial leverage, thus increasing the income of enterprises. Although this will increase the financial risk, if the reduction of business risk can offset the impact of the increase in financial risk, it will still reduce the total risk of the enterprise. In this way, there will be a good phenomenon that the total risk of the enterprise remains unchanged (or even declines) and the total income of the enterprise increases.
To sum up, in order to improve the financing efficiency of enterprises, we must grasp the financial structure and capital structure of enterprises and reasonably match various financing methods according to the expectations of enterprises; At the same time, the scale, term and structure of corporate liabilities are reasonably arranged to optimize financial leverage, thus solving the problems of financial leverage and corporate financing efficiency.