Linqu Qin Chi slogan

From the perspective of modern enterprise financial management, the following aspects of Qin Chi's enterprise financial management deserve careful study:

1) The huge advertising expenditure has increased the role of operating leverage and brought greater business risks to enterprises.

Profit = sales volume × (unit price-unit variable cost)-total fixed cost

From the basic formula of profit, we can see that the unit price of products is determined by market competition, and the total unit variable cost and fixed cost are fixed within a certain production capacity. Therefore, these three elements are basically constant, and the only variable in the formula is actually product sales. It can be seen that the profit of an enterprise depends largely on the sales volume of products. The sales volume of products depends on the market share of products to some extent. When there are many similar products, it is a good way, even the only effective shortcut, to establish the brand of enterprise products. Under certain circumstances, the relationship among brand, market share and profit can be expressed as: brand = market share = profit. Therefore, in the fierce competition environment of "good wine is afraid of deep alley", it is a better scheme to establish product brands and increase the market share of enterprise products through competition with China's leading media CCTV. The problem is that advertising and brand building must meet two conditions: first-class brands must be guaranteed by first-class quality; Advertising is a road of no return, and you must be able to bear huge advertising expenses for a long time. Otherwise, the market share of enterprises will easily drift with the wind. As we know, huge advertising expenditure, as a fixed-term expense, is not affected by product sales changes, but it will change the original cost structure of enterprises, increase the proportion of fixed costs in product costs, and then increase the operating leverage function of enterprises. Operating leverage's role in enterprises is also two-sided: when the sales volume increases, due to the positive role of operating leverage, the profits of enterprises are greatly improved; When the sales volume decreases, due to the negative influence of operating leverage, the profits of enterprises will also be greatly reduced. It can be seen that "Wang Biao" not only increases the huge advertising burden of enterprises, but more importantly, it increases the role of enterprise operating leverage, thus increasing the business risks of enterprises. As long as the enterprise product market is slightly disturbed, the operation of the enterprise will be in trouble.

That's exactly what happened. After Qin Chi won the first advertisement at a price of 66.66 million yuan, the sensational effect of the advertisement made Qin Chi Winery famous overnight, and the brand position of "Qin Chi" was basically established, and its market share increased accordingly. From 65438 to 0996, the substantial increase in the sales volume of Qin Chi Winery has produced a positive (positive) effect on operating leverage, and the profits of enterprises have also increased greatly. However, this situation did not last long, and the sustainable development of Qin Chi in 1997 has become a very prominent issue. The reasons are as follows: (1) More than 40,000 liquor production enterprises make the output of liquor far greater than the sales volume (about 50% of the output is surplus); At the same time, the entry of foreign wine makes the proportion of liquor consumption decline. By 1997, the "decline" of liquor sales was more serious. Qin Chi's market share is facing a severe test. (2) First-class brands are not guaranteed by first-class product quality. 199612 "xx reference daily" reported four articles about Qin Chi blended with loose wine purchased by Qin emperor along the Sichuan-Tibet highway, which not only plunged Qin emperor into a huge media crisis, but also damaged the newly established image of "Qin Chi", thus affecting its market share to some extent. (3) The huge advertising fee of 65,438+0,997,320,000 yuan is a huge burden for Qin Chi. On the one hand, it makes Qin Chi's cash flow difficult; on the other hand, it greatly enlarges the dependence of corporate profits on sales. Only a stable market share can guarantee the sustainable development of enterprises. The market competition of 1997 and 1998 and Qinchi's own problems make its market share fluctuate. It is the fluctuation of market share that makes Qin Chi fall into serious and difficult business risks. 1997, Qin Chi's advertisement in conversion of time on CCTV was about10.50 billion yuan, while Qin Chi actually paid only 48 million yuan.

(B) the imbalance of asset structure, leading to the deterioration of the contradiction between profitability and liquidity.

The principle of enterprise financial management tells people that there is a contradiction between the profitability and liquidity of enterprise assets. The current assets of enterprises have the characteristics of strong ability to change views, high liquidity but low profitability; Long-term assets such as fixed assets of enterprises are profitable assets, which can bring profits to enterprises, but their liquidity is low. Poor liquidity. Therefore, enterprises are required to balance profitability and liquidity, and make corresponding choices according to their own characteristics to ensure a moderate balance between profitability and liquidity, thus ensuring the healthy and stable development of enterprises.

Before Qin Chi became famous, as a county-level enterprise, its total assets and production capacity were limited. In the face of the rolling orders from Wang Biao, it is impossible to give it up, but it is difficult to cope with it only by its existing production capacity. There are only two ways out:

1. Increase capital investment, upgrade existing factory equipment or expand new factory equipment, so as to improve the production capacity of enterprises. However, this practice is restricted by two factors: (1) funding constraints. Huge advertising investment has greatly affected the cash flow ability of enterprises, and the source of a large amount of funds needed for enterprises to expand production capacity is even more problematic. Enterprises only rely on bank loans to solve this problem, and loans will increase the proportion of assets and liabilities of enterprises and increase repayment pressure. At the same time, the expansion of production scale will also increase the proportion of fixed assets in the total assets of enterprises, while the proportion of current assets will decrease, which will affect the liquidity and liquidity of enterprises and the asset structure of enterprises will be out of balance. (2) the limitation of production cycle. Even if the enterprise is fully capable of expanding production scale and increasing production capacity, it takes a certain period for both the purchase and construction of plant equipment and the brewing of liquor, so it is difficult to meet immediate customer orders in a short time.

2. Faced with the constraints of the above two factors, Qin Chi needs to meet the customer's order demand in a short time, and another possible way out is to horizontally unite with liquor enterprises in surrounding areas or purchase liquor from other enterprises for blending. However, it is difficult to ensure the quality of products whether it is horizontal combination or blending. If there is a problem with product quality, it will not only affect its brand and market share, but also affect the withdrawal of funds for selling products. Therefore, the maintenance of its brand and market share needs first-class quality as a guarantee.

The above two outlets put Qin Chi Winery in a dilemma of improving corporate profitability and maintaining a certain cash flow ability, but faced with customer orders, it had to make a choice. No matter which way Qin Chi finally chooses, the result will increase the business risk of the enterprise.

(C) Limited financial resources restrict the sustainable development of enterprises.

According to the basic principle of enterprise financial management, the sustainable development of enterprises needs the support of continuous financial resources. Its basic premise is: (1) the organic coordination of asset structure and capital structure; (2) Cash flow forms a benign "hematopoietic" functional mechanism. That is to say, the cash inflow and cash outflow generated by production and business activities are organically coordinated in time, quantity and speed. On the one hand, Qin Chi has expanded its production scale and improved its production capacity, thus increasing the proportion of long-term assets such as fixed assets, while reducing the proportion of current assets in total assets, thus reducing the liquidity of enterprises and their ability to change their prospects. On the other hand, the huge advertising expenditure and fixed assets investment require enterprises to solve the problem through bank loans. According to the banking policy at that time, such loans were often short-term loans, which caused the short-term loans of banks to be used for long-term assets with slow capital recovery speed and long cycle, which greatly incongruously coordinated the asset structure and capital structure of enterprises in time and quantity, thus forming the pressure of "short-term loans and long-term investment". In this case, if the enterprise has a relatively sound hematopoietic function mechanism-a good cash flow mechanism for business activities, this funding gap can be partially relieved by sound cash budget arrangements and reasonable capital scheduling. However, as long as it is a little careless, it may make the capital turnover of enterprises difficult, thus making enterprises fall into financial difficulties that are difficult to extricate themselves. At this time, the real problem Qin Chi is facing is that while the relative shortage of current assets makes the cash flow ability of enterprises difficult, huge short-term bank loans due during the year need to be repaid, thus falling into the financial dilemma of "due debts have to be repaid, and enterprises are unable to repay them free of charge".

Third, the enlightenment and lessons of this case

From the perspective of corporate finance, the rise and fall of "Qin Chi" has three experiences and lessons worth summarizing and learning:

First of all, the existence of fixed costs not only brings operating leverage effect to enterprises, but also brings corresponding operational risks. Operating leverage's role is not always positive. As long as the sales volume of enterprises can't keep growing, the role of operating leverage will be negative. Advertising and brand building are effective ways to ensure the sustained growth of sales. However, advertising investment should keep a moderate balance with the sales performance of enterprises, otherwise it will bring huge business risks to enterprises. At the same time, the first-class brand needs to be guaranteed by the first-class product quality, otherwise, the brand effect can only be a flash in the pan.

Second, the focus of financial management is on the left side of the balance sheet. Of course, enterprise financing is an important part of enterprise financial management, but foreign capital is only a "blood transfusion" function for enterprise development, which can solve the temporary capital problem of enterprises. However, the long-term stable development of enterprises must rely on the formation of a benign "hematopoietic" functional mechanism from the business activities of enterprises. Only in this way can the sustainable development of enterprises be supported by sustained financial resources. The formation of "hematopoiesis" functional mechanism can only rely on the rational and effective utilization of enterprise assets to ensure the coordination of cash inflow and outflow in time, quantity and speed.

Third, rational capital allocation needs to be based on the balance of assets structure, capital structure and the balance of the left and right sides of the balance sheet. The imbalance of any of these three aspects will lead to difficulties in the capital flow of enterprises, thus causing enterprises to fall into certain financial difficulties.

It can be seen that only with the sustainable support of financial resources can enterprises develop sustainably.