What is the capital chain? How important is the company's capital chain?

What is the capital chain?

Investor: Pai Paijun, you keep repeating the importance of the capital chain. What exactly is the capital chain?

Paipaijun:As the name suggests, the capital chain refers to the basic circular capital chain required to maintain the normal production, operation, and operation of an enterprise. It is a process in which an enterprise achievesCash - Assets - Cash(increment)The foundation of a virtuous cycle.

To put it more plainly, enterprises usually lack money in the early stages of establishment, but they need funds to purchase production equipment, raw materials, labor, and so on. At this point, he will go to other people to borrow money, such as seeking a bank loan or issuing bonds himself. After receiving the money, the company can happily produce its own products, and finally sell the products to customers to obtain a certain amount of funds.

Of course, the final capital obtained after the sale is not all the enterprise's own, because it needs to repay the principal and interest of the borrowed money. If the enterprise is a high-quality enterprise, there is usually a balance after the repayment of the principal and interest. The enterprise can use this money to expand the scale of reproduction, save to expand the enterprise's own capital, and even pay employee benefits. This business operation has come to an end, and the chain of enterprise capital circulation is what we call the capital chain.

How important is the funding chain?

investor:Oh, I see. I understand. Paipaijun, if the capital chain is so important, how does it affect a company?

Paipaijun:The management of the capital chain is a very important part of enterprise financial management. Sometimes, the bankruptcy and bankruptcy of many enterprises is not due to problems in profitability, but because of problems in the capital chain. If a company experiences a capital chain rupture, it will not have sufficient cash flow to cope with some external risks. Even if it encounters a good project, it will have to give up, and some companies may not be able to repay their principal and interest in a timely manner, which will cause investors to panic and run on the company's bonds or sell off its stocks. Investors' cash out behavior will ultimately worsen the company's capital chain.

Give me a small chestnut. If a company is compared to a person, then their ability to run fast, jump high, and lift heavily is the company's profitability, and their respiratory and circulatory systems are the company's capital chain. Even if this person can lift the mountain's aura to the world, let him10If he doesn't breathe for minutes, he will also fall in shock, which is the importance of the capital chain. In order to avoid irrational investment behavior, it is also possible to entrust the investment to a professional person. For example, there are many private equity funds on the private placement platform that do not charge subscription fees, which can help investors.

How to identify companies with good or bad investment chains?

investor:wow!So, how important is the funding chain!So how should we eliminate companies with poor funding chains when making investments?JustofoI am quite afraid of such a company.

Paipaijun:A gentleman does not stand under a dangerous wall, and your concerns are also very reasonable. There are some painful lessons in the market, as in the past"Brain platinum"The failure of the giant group Shi Yuzhu and the subsequent bankruptcy of Delong Group and Sanjiu Group were all due to a broken capital chain, leading to the failure of the enterprise's operations. Especially at present, in order to prevent and control financial risks, the country is tightening its monetary policy, which is more prone to the problem of company fund chain breakage than in the past.

In fact, we can analyze the problem of a company's capital chain from its fundamental perspective. Generally speaking, a company with a good capital chain generally has the following characteristics.

1. Stable profitability

Whether a company's products can be sold and whether they can sell at an advantageous price is the fundamental basis for the company's foothold. Companies with a stable profit model and a complete fund return system generally have a good fund chain. Imagine ifofoIf we advance daily and strive for cash, we won't end up in the current situation of queuing up to refund the deposit.

2. Having core competitiveness

If a company has mastered the "core technology" in the industry, congratulations to the company. It will become a "hot potato" in the entire industry production chain. His suppliers are willing to credit him for the purchase of raw materials, and his buyers are afraid that they will not be able to buy his products in the first place and are willing to pay a certain amount of advance payment. In this way, this enterprise can be very capricious in taking everything from top to bottom, making it difficult to have capital chain problems.

3. Having a large amount of cash assets

Cash assets, due to their easy monetization characteristics, can effectively solve the liquidity problem of a company's funds. So we can focus on the cash assets in the company's accounts to understand the company's "bottom line", known asAKweichow Moutai, known as the "king of shares"(600519.SH)This is the representative of the 'cash cow'.

4. Having high-quality financing channels

Every family has its own difficult to remember, let alone a company. In the process of enterprise development, it is inevitable that there will be some "bad money" days. At this point, the ability of a company to borrow money based on its "ability" is very important. Generally speaking, companies with high-quality financing channels are more resistant to external risks compared to ordinary companies. Of course, all the borrowed money needs to be repaid. If a company only has the ability to borrow money but cannot repay it, then we should classify such companies as "minefields".

The structure of the capital chain varies among different industries, and we can interpret the specific situation from the financial statements of enterprises, with the cash flow statement being our general focus. So after reading this article, have you understood the capital chain? Investors who are interested in financial statements can also leave a message.