On Enterprise Financial Management on the Role of Corporate Sustainable Growth

Topics: Financial ratios, Balance sheet, Generally Accepted Accounting Principles Pages: 5 (1521 words) Published: February 14, 2011
On Enterprise Financial Management on the role of corporate sustainable growth Abstract: At present, under the impact of good macroEconomic environment, many enterprises in order to become bigger and stronger as soon as possible, often the pursuit of rapid growth that the faster sales growth, business occupies the greater market share, profits may be higher, corporate the existence of all the problems will be resolved by high growth. A business grows it is the sooner the better, high growth can promote long-term development? Is aimed at from the perspective of the Financial Management of enterprises for sustainable growth.  Keywords:: sustainable growth; concept; composition; impact; Application           A sustainable growth rate of the concepts and assumptions           U.S. Financial scientist Robert Higgins (Higgins) on the business growth and financial issues in-depth study in 1977 put forward the sustainable growth model, and under certain conditions, the growth rate of enterprises subject to the operating level, financial resources, policy constraints relationship has been described.  Robert Higgins sustainable growth of enterprises defined as "in need of financial resources exhausted, enterprises can increase the maximum rate of sales."           Sustainable growth model is based on the following assumptions:           (1) The companies want to market to allow the speed to develop;           (2) The manager can not or do not want to raise a new cost of equity;           (3) The enterprises should continue to maintain a target capital Structure and dividend policy objectives;           (4) Enterprise asset turnover levels remain unchanged.           Robert Higgins based on the method, sustainable growth model assumptions with corporate financial policies and operational efficiency in terms of both the establishment of the above assumptions, the sales growth rate of real growth and sustainable equal.           2 The composition of the sustainable growth rate of           Enterprises to survive development, sales growth of any business can not avoid the issue. Sales growth businesses often require additional funding, because the sales increases are usually caused by inventory and accounts receivable and other assets increased. Usually there are two channels for business access to finance:           (1) internally from retained earnings; 

         (2) external equity and debt fund raising. Under the conditions of sustainable growth, limiting asset growth is the growth rate of the interests of shareholders, such growth rates, generally will not consume enterprise's financial resources is a sustainable growth rate, on this basis Luobotexi Gold Sri Lanka reached the sustainable growth rate of equity growth rate is equal to the conclusions.           The calculation formula is as follows: 

         An increase in funding required for enterprise growth and increased debt equity two ways.           Assets, increase = increase in shareholder's equity + debt increase           Under the conditions of sustainable growth, the type can be derived as follows:           (Sales increase / current sales) × current period total assets = earnings retention rate × (net profit / current sales) × (base year sales increase in sales volume) Earnings retention rate × (net profit / Current Sales ) × (base year sales increase in sales volume) × (Debt / Equity)  Finishing after that: Sustainable growth rate = increase in sales volume / base period earnings retention rate of sales = net profit margin × Asset Turnover × × sold interests multiplier / (1 - retention rate of return net profit margin × Asset Turnover × × sales rights by number) = earnings retention rate of return × net asset / (1 - retention rate of return × net assets yield rate)  In addition, can be deduced:           Sustainable growth rate (sales growth) = shareholder's equity growth rate = growth rate of total assets = liabilities,...
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