Listed Companies Working Capital Management Problems and Countermeasures: Study on Gree Electric Appliances, Inc. of Zhuhai

Citation

Bai, Xueyan. (2021). Listed companies working capital management problems and countermeasures: Study on Gree Electric Appliances, Inc. of Zhuhai. (Master Independent Study). Bangkok: Siam University.

Abstract

Among the various assets of an enterprise, working capital matters most. Whether or not the management efficiency and turnover speed of working capital can ensure enterprises’ sustainable and stable development has become essential to enterprise management. Concerning, home appliance manufacturing enterprises’ financial management, especially the management of working capital, directly determines whether home appliance enterprises can survive and develop in the fierce market competition.

 By reviewing the research literature at home and abroad, this paper used the literature method, narrative research method, and comparative method to evaluate working capital management’s performance from the perspective of elements and channels. By selecting two large enterprises, Gree Electric and Qingdao Haier, this paper made a comparative analysis of their working capital and an in-depth analysis from the aspects of the management system and mechanism, business model, etc.. Based on the analysis of the reasons for the difference in working capital management performance between the two major home appliance manufacturing enterprises, the following conclusions were drawn: From the perspective of working capital management performance based on elements, the inventory turnover period of Gree from 2010 to 2014 was higher than that of Qingdao Haier. In terms of accounts receivable turnover period, Qingdao Haier’s accounts receivable turnover speed was faster than that of Gree Electric. The main reason was that in the accounts receivable of Gree Electric, notes receivable occupy many funds, and the time of money recovery was very long. This was why Qingdao Haier’s accounts receivable’s overall turnover performance was better than that of Gree Electric. The turnover period of accounts payable of Gree Electric in 2010-2014 was higher than that of Qingdao Haier, but this advantage was likely to become a disadvantage if it is overused. From the perspective of working capital management performance based on channels, the turnover period of working capital of purchasing channel of Qingdao Haier and Gree Electric was not ideal, which indicated that the capital occupation of accounts payable and bills were greater than that of raw material inventory and prepayment. This also meant that both Gree Electric and Qingdao Haier occupy the capital of upstream suppliers. From 2010 to 2015, the capital turnover performance of Gree Electric was obviously behind that of Qingdao Haier. For the turnover period of marketing channel working capital, except 2013, Gree Electric was longer than Qingdao Haier. From channel-based working capital management performance, the overall level of working capital management of Gree Electric was not as good as Qingdao Haier.

 We found that while Gree Electric was developing through in-depth analysis, there were still some problems, such as low working capital turnover period, serious occupation of upstream suppliers’ funds, and threats brought by marketing mode. Given the above problems, we put forward the following suggestions: strengthen the information sharing with suppliers, speed up the purchasing channel capital turnover, strengthen supplier management, and establish an excellent strategic cooperation relationship ,to implement scientific production mode, improve production efficiency, jointly manage inventory with suppliers, improve fund recovery efficiency, and develop e-commerce marketing mode. It is hoped that these suggestions to improve the working capital management for Gree Electric and becomes a specific reference.

Keywords: working capital management, performance evaluation, elements and channels.

Listed Companies Working Capital Management Problems and Countermeasures: Study on Gree Electric Appliances, Inc. of Zhuhai

Master of Business Administration (International Program), Siam University, Bangkok, Thailand

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