Cash flow

Cash flow is an important concept in modern financial management. It refers to the movement of money into and out of a business plan, a financial project and a product within a certain period of time（a quarter or a full year）. Generally, through a series of economic activities such as internal business, investment and financing, a company works out its sum of cash flow. Here, cash is not what call in our daily life as ready money in hand. It’s mentioned as cash stock , cash reserved in banks, equivalents of cash, etc. If an investment is defined as a cash equivalent, it must fulfill simultaneously fours conditions: short limit time, quick circulation and easy transformation into expected money, small risk of value changing.

On the basis of origins and functions of cash flow, we count three kinds as seen below:

1)  Operationalcash flow. Operational activities refer to direct production, product and service sales . Money generated in these business make up the majority of companies’ net income. Besides , output cash flow in operational activities includes buying goods, paying labor, paying taxes, etc. Considering that business varies from the nature of industries, we have other definitions and evaluated areas, especially for finance and assurance industry.

2)   Investment refers to a long-term construction od assets, not including investment or activities within cash equivalents. Long-term assets indicates fixed assets, intangible assets and other properties that have at least one year’s or a business cycle’s time limit. Here, the investment activities contain both material investment and financial investment. Usually, cash received from investment activities are mostly : cash regained from investment, investment profits, etc. Cash spent on investment activities are：the purchase and construction of fixed assets, intangible assets and other expenditures on long-term assets.

3)   Financing activities refers to operations that result in changes of market research companies’ capital and debt’s dimension and composition. Generally speaking, cash is received from the issue of debt and equity, and cash is put out as dividends and share repurchases, etc.

 The following chart is cash flow statement of Bejing North company:

北方公司现金流量表分析案例

北方公司2009年现金流量统计如下表（单位：万元）：

year	2009	备注
Operational cash inflow	22690
Operational cash outflow	19816
Operational cash flow net inflow	2874
Investment cash inflow	16
Investment cash outflow	810
Investment cash net inflow	-794
Financing cash inflow	568	All is debt repayments without any dividends or shares.
Financing cash outflow	812
Financing cash net inflow	-244
Sum fo cash flow	23275
Sum of cash outflow	21437
Sum of cash inflow	1838

When we analyze the statement, it includes analysis of inflow structure and outflow structure, as well as the proportion between them.

a.Analysis of inflow structure

Among the total inflow, cash received from operational activities represent 97.48％, investiment activities0.08％, financing activities 2.44％. From here we see that operational activities contribute a lot to cash inflow, however the other two do a little.

b.Analysis of outflow structure

Among the whole outflow, cash spent on operational activities represent 92.43％, investment activities 3.78％, financing activities 3.79％. Thus it can be seen that the companies’ expenditure is concentrated on operational activities.

c.Analysis of proportion between inflow and outflow

According to the statement, operational inflow is 226900000,outflow 198160000, so the proportion between them is 1.15. It means that 1 RMB outflow returns 1.15 RMB. For investment activities, the inflow is 160000, outflow is 8100000. So the proportion is 0.02, which shows that the company is in a developing phase. In financing activities, the proportion of 0.70(568/812) means repayment is superior to debts. Relating the inflow with the outflow, we come to know that the company’s essential cash inflow and outflow are generated by operational activities. Besides, the operational net inflow is used to make up for expenditures of investment and financing. Apart from these analysis, we can also work out company’s cash profit rate with the help of the statement.

Through information implicated in the statement, Cash flow guides management’s financial decision-making. It provides suggestions on investment strategies. It serves also as a proof of company’s financial credibility. As cash is flowing all the time, so it manifest to some extent the force of repayment and reaction of a company. Cash flow is also applied to define a bankrupt point. For some time, it is a criterion to assess the value of a company.

　

Market Research: market shares of pharmaceutical companies in China

In March 2009, China's government revealed plans for a sweeping healthcare overhaul, and committed RMB850 billion to develop the country's healthcare system between 2009 and 2011. Among its provisions were to increase the Basic Medical Insurance (BMI) coverage from approximately 65 percent of the population to 90 percent by 2011 to revise the national Essential Drugs List (the "EDL", medicines reimbursable under BMI); and to allow the National Development and Reform Commission (NDRC) to more strictly regulate pricing. A second phase of the healthcare reform plan, expected between 2011 and 2020, is to involve the establishment of a universal health care system by which all citizens will be able to access affordable drug and medical services.

Chinese pharmaceutical companies in Chinese market

Pharmaceutical distribution in China is highly fragmented, and often criticised for its inefficiency and lack of transparency. To illustrate the fragmentation by way of comparison, China's top three distributors—Sinopharm Group, Shanghai Pharmaceutical, and Guangdong Jiuzhoutong Pharmaceutical—had in combination less than 20 percent of overall market share in 2009; while in the U.S., the top three pharmaceutical commerce companies together held a 96 percent market share.

Concentration has been slightly improved. Large companies are gaining more market share through acquisition, with a view to improving operational capabilities and cost effectiveness. For example, Sinopharm completed 24 acquisition-related transactions in 2010, including three stake-raising investments, which together brought the company a nearly RMB4.7 billion increase in sales. In January 2011 alone, Sinopharm completed another 12 acquisitions.

Foreign pharmaceutical companies in Chinese market

The involvement of many foreign pharmacy enterprises operating in China can be dated back to a century ago. Bayer of Germany, the inventor of aspirin, began trade with China in as early as 1882.Hoechst AG, known as Aventis, sold its products through 128 distribution agents across China in 1887, becoming China’s No.1 Western medicine and dyeing provider. The US Eli Lilly & Co. opened its first overseas representative office in China’s Shanghai in 1918. ICI, the predecessor of the world’s No 3 pharmacy enterprise AstraZeneca, began trade with China in 1898, and still maintained its old-time office by the Huangpu River in Shanghai.

In recent years, more and more western pharmaceutical corporations, such as GSK, Roche, Novo Nordisk, and others, have come to China and set up R&D centers. Many world leading pharmaceutical companies have established joint venture manufactories in China. Some have even set up sole propriety manufactories. As of 2004, amongst the largest 500 overseas enterprises, 14 of them are pharmaceutical companies.

As of 2004 (three years after China's WTO entry), nearly all global pharmaceutical companies have already completed their accession into the Chinese market and will gradually shift their focus to research development. The main reasons for overseas companies coming to China have been to save costs by using the extensive science and technology research bases currently in place in China, the abundant human resources, and less expensive medical and clinical trials.

Source:

Fierce Biotech

China's Pharmaceutical Market

Research China

Deloitte

Market Research Company China

Chinese auto market

China is since 2009 the first world market of the automobile. The low rate of equipment of the households lets hope in a strong growth for years to come. «The long-term trend remains unchanged: the Chinese automobile market is dynamic ". Meïssa Tall, analyst associated in charge of the automobile at Kurt Salmon. In the first quarter 2013, the sales of cars increased by 10 % in China and the tendency do not seem ready to stop.

Less than 5 vehicles for 100 

“The economic growth is supported, infrastructures develop almost everywhere in the country and the purchasing power increases” specify Meïssa Tall, who sees two other growth factors of the market. The desire of the Chinese for the luxury should strengthen first of all even the sales of the German manufacturers, who detain 24 % of the market today. Then, the first four Chinese builders (SAIC, FAW, DongFeng and Changan) continue too to gain ground. They represent 62 % of the market today and the increase of the domestic demand supports their expansion. On average, the equipment rate of the Chinese households is 50 for 1 000 against 800 for 1000 in the United States.

The observers remain however sceptical on the emergence of national champions, capable of exceeding the international Westerners. “To survive, the offer is going to have to strengthen. Of big four or five manufacturers, will be no more than three in the next ten years” said Meïssa Tall.

The Chinese manufacturers try at present to offer themselves credibility via the purchase of European brands in trouble, as Geely with Volvo. At certain level of income, the consumers of the BRIC always prefer the western models, considered more qualitative, attached to a brand, an automobile story.