Financal Analysis of Lianhua Supermarket Holdings Company

Junyan Guo

Bachelor's thesis

Abstract:

The main objective of the thesis is to formulate the assessment of Lianhua Supermarket’s present and future financial position. Knowing a company’s operations, expenses management and credit policies is a very important skill to investors and company’s managers. Understanding the knowledge of financial tools is the first step to do. And most of the theories were found in Analysis of Financial Statements, written by Pamela Peterson-Drake and Frank Fabozzi and Financial Analysis Techniques, written by Thomas R. Robinson, CFA. Normally different financial tools are used in different condition. Common-size analysis and financial ratios are introduced in this part. Common-size analysis includes horizontal analysis and vertical analysis. And financial ratios contain activity ratios, solvency ratios, liquidity ratios, profitability ratios and market ratios. More details about these methodologies will be explained in the second chapter. Why choose Lianhua Supermarket as this study object? Firstly, it’s a Chinese company, and I worked there during my last summer holiday. So this company is easier to be analyzed. Secondly, Lianhua is the fourth supermarket in China, just behind Carrefour. There are three main segments of retail outlets in Lianhua’s operation, namely hypermarkets, supermarkets and convenience stores, catering for the diverse needs of consumers. In a sense, Lianhua Supermarket is more representative among Chinese supermarkets. More information like Lianhua’s history, main competitors, operation structures and stock prices will be showed clearly and deeply in the third part of this text. When the balance sheet, the statement of cash flow, the income statement, the statement of shareholder’s equity and the financial environment have been known, it is time to use financial tools, including common-size analysis, financial ratio analysis and DuPont analysis. These boring data from annual report will be transferred by financial tools to a certainly conclusion, and the reason of policies deciding or financial statement changing will also be explained. It’s the fourth part of this thesis, and is also the main part. Based on the analysis above, we can know whether Lianhua is valuable to be concerned and invested. The last chapter is conclusion. It’s focused on the results and summaries of the study.

Abstract:

The main objective of the thesis is to formulate the assessment of Lianhua Supermarket’s present and future financial position. Knowing a company’s operations, expenses management and credit policies is a very important skill to investors and company’s managers. Understanding the knowledge of financial tools is the first step to do. And most of the theories were found in Analysis of Financial Statements, written by Pamela Peterson-Drake and Frank Fabozzi and Financial Analysis Techniques, written by Thomas R. Robinson, CFA. Normally different financial tools are used in different condition. Common-size analysis and financial ratios are introduced in this part. Common-size analysis includes horizontal analysis and vertical analysis. And financial ratios contain activity ratios, solvency ratios, liquidity ratios, profitability ratios and market ratios. More details about these methodologies will be explained in the second chapter. Why choose Lianhua Supermarket as this study object? Firstly, it’s a Chinese company, and I worked there during my last summer holiday. So this company is easier to be analyzed. Secondly, Lianhua is the fourth supermarket in China, just behind Carrefour. There are three main segments of retail outlets in Lianhua’s operation, namely hypermarkets, supermarkets and convenience stores, catering for the diverse needs of consumers. In a sense, Lianhua Supermarket is more representative among Chinese supermarkets. More information like Lianhua’s history, main competitors, operation structures and stock prices will be showed clearly and deeply in the third part of this text. When the balance sheet, the statement of cash flow, the income statement, the statement of shareholder’s equity and the financial environment have been known, it is time to use financial tools, including common-size analysis, financial ratio analysis and DuPont analysis. These boring data from annual report will be transferred by financial tools to a certainly conclusion, and the reason of policies deciding or financial statement changing will also be explained. It’s the fourth part of this thesis, and is also the main part. Based on the analysis above, we can know whether Lianhua is valuable to be concerned and invested. The last chapter is conclusion. It’s focused on the results and summaries of the study.

Keywords

financial analysis, financial ratios, balance sheet, income statement, cash flow statement

Keywords

financial analysis, financial ratios, balance sheet, income statement, cash flow statement

Language used: English

Date on which the thesis was submitted / produced: 10. 5. 2013

Thesis defence

• Date of defence: 12. 6. 2013
• Supervisor: Martina Novotná
• Reader: Jiří Valecký

VŠB - Technical University of Ostrava

Ekonomická fakulta

Bachelor programme / field:
Hospodářská politika a správa / Finance