As the “blood health index” of enterprise operation, the increase and decrease of operating cash flow can capture the authenticity of the company’s “money” to a certain extent. From the data of listed companies that have published annual reports, there is a question mark for the “gold content” of the net profit of a small number of companies.
According to the statistics of the reporter of Securities Daily, as of the closing of April 15, of the 1787 annual reports that have been disclosed, more than 90% of the listed companies made profits in 2021. However, while the operating revenue and net profit of some listed companies increased, the operating cash flow decreased significantly or even negative.
Book profit and cash flow are negative. Does it mean that the profit of listed companies is “paper wealth” rather than “real gold and silver”? Many industry insiders said in the interview that the quality of operating cash flow is the core factor determining whether the enterprise’s profit is “paper wealth” or “real gold and silver”. However, the real “gold content” of net profit needs to be judged in combination with balance sheet, industry and other aspects.
180 companies’ operating cash flow and net profit do not match
The data show that among the 329 listed companies that have disclosed negative net cash flow from operating activities, 180 listed companies have achieved positive growth over the same period last year, that is, more than 50% of the operating cash flow of listed companies “do not match” the net profit.
In terms of industry, the above listed companies with “mismatch” phenomenon are mainly concentrated in the manufacturing industry, involving chemical, electronic, mechanical equipment and other industries, mostly heavy asset enterprises.
Is the above phenomenon related to the industry? A number of industry insiders told reporters in the interview that the “mismatch” between operating cash flow and net profit has a certain relationship with the industry. However, the root cause is a number of abnormal financial data and even financial data mismatch caused by enterprise expansion and development and business strategy.
In an interview with the Securities Daily, a certified public accountant who asked not to be named said that the difference between the net profit of the enterprise and the net cash flow generated by operating activities is large or even contrary, which is often related to the mismatch caused by the payment and financing of accounts receivable, inventory and even notes receivable. If the enterprise needs to invest more working capital to ensure income expansion, the net profit and operating cash flow will appear in the opposite direction. However, it still needs to be further analyzed in combination with the enterprise’s operating conditions.
Among the listed companies with “mismatched” operating cash flow and net profit, according to the increase of net profit, Wuxi Hodgen Technology Co.Ltd(300279) net profit, which ranked second, increased by 111987%, while the net cash flow from its operating activities was -4.5903 million yuan. The third place Shahe Industrial Co.Ltd(000014) net profit increased by 709.81%, while the net cash flow from operating activities was -72.482 million yuan, which turned from profit to loss over the same period of last year, which was “contrary to the sharp growth trend of operating revenue and net profit”.
For the difference between the net profit and the net cash flow generated from operating activities, Shahe Industrial Co.Ltd(000014) only indicates that it is caused by the increase of project fund expenditure during the reporting period. In this regard, the Shenzhen Stock Exchange issued an inquiry letter on April 13, asking the company to explain the reasons why the net cash flow generated from operating activities is negative and deviates from the change trend of operating income and net profit.
“white note profit” accounts for too much
Enterprises with mismatched operating cash flow and net profit often have “white note profit”, that is, most of the net profit is paper profits such as accounts receivable, rather than real “real gold and silver”.
Among the 156 non-financial listed companies whose operating cash flow does not match the net profit, 132 listed companies have accounts receivable accounting for more than 100% of the net profit, and some even reach 65 times of the net profit. Among them, according to the ranking of net profit growth, seven of the top ten listed companies with net profit growth have accounts receivable accounting for more than 100% of the net profit.
The financial personnel of a listed company said: “there has been no major change in the scale of income in the past two periods and there are no emergencies that affect the collection. Excessive accounts receivable is’ white note profit ‘for the enterprise. It is not ruled out that there will be bad debts in these accounts receivable in the future, resulting in the adjustment and write down of net profit.”
The reporter of Securities Daily noted that the above companies are still concentrated in the manufacturing industry, involving mechanical equipment, electronics, electrical equipment and other fields.
“This situation is mostly concentrated in the manufacturing industry, which shows that the manufacturing industry has weak negotiation ability in transactions due to fierce competition and low industry concentration, resulting in a large area of credit sales problems in the whole manufacturing industry.” Said Bai Wenxi, chief economist of IPG China.
Liu Shengyu, managing partner of Gaohe investment, told the Securities Daily that the settlement methods of each industry and company are different, which is determined by the settlement practices formed by the industry for a long time. What enterprises can decide is more the layout of the industry track and the improvement of their own R & D ability.
\u3000\u3000 “Some listed companies are absolute leaders in the industry, and they have absolute voice over downstream customers or dealers. The downstream will pay in advance to book their products, which can achieve a good balance between profit and cash. However, some industries are highly competitive and can only be the business model of goods first and payment later. In this way, we should pay attention to the gold content of net profit, especially the bad debt of accounts receivable. There may be profits on the statements, but But I can’t get the full amount. ” Liu Shengyu said.
The relevant personnel of the above listed companies also told reporters, “only by building a balanced relationship between cash and profit, can the enterprise always stand on the safety line. When analyzing the profit, we should pay attention to the analysis of financial indicators of the current credit sales proportion, strengthen the daily management of accounts receivable and speed up the return of enterprise funds.”
three tables of hidden risks to be vigilant
The operating cash flow of the enterprise does not match the net profit, and the proportion of white note profit is large. Are these listed companies rich on paper? How can we judge the “gold content” of enterprises?
“On the one hand, it depends on the book profit scale and profit margin, on the other hand, it depends on the proportion of cash assets in the asset composition of the enterprise and the operating cash flow in the cash flow statement.” Bo Wenxi said.
Liu Shengyu told reporters, “operating cash flow can show the gold content of the company’s net profit to a certain extent, and it can also be considered to investigate the cash situation of listed companies from the perspective of enterprise free cash flow or equity free cash flow. At the same time, the proportion of accounts receivable and notes receivable on the balance sheet and operating income in the income statement can be used to judge the gold content of the company’s net profit.”
In the view of insiders, combined with the three tables of the annual report, we can better understand the operation of listed companies and are more likely to find hidden risk tips of enterprises.
Bai Wenxi told reporters: “During the annual report period, when investors look at the cash flow statement, on the one hand, they should judge the status and sustainable development ability of the enterprise’s main business through the operating cash flow status, on the other hand, they should also judge the ability of the enterprise to support its own development and maintain its liquidity through financing and investment cash flow status, as well as the rationality of the enterprise’s past investment ability and capital expenditure, so as to judge the enterprise’s self-development ability Strength and liquidity control ability. Through the comprehensive judgment of the above three aspects, we can give whether the operation of the enterprise is healthy, whether the development is sustainable, and how the real profitability is. “
