What types of risks are reflected in the financial statements of the enterprise?

Answer 1

The financial statements of a company can reflect the following types of risks:

** 1. Raising funds risk **
1. ** Rate risk **
- Changes in funding costs due to fluctuations in financial assets in the financial market. For example, when the market interest rate rises, the cost of borrowing for a company increases. If the company has a large amount of floating-rate debt before, its interest expenses will increase significantly, affecting its financial results.
2. ** Refinance risk **
- The changes in the types of financial instruments and the methods of financing in the financial market will cause uncertainty in the re-financing of enterprises. For example, the financial market tightened the scale of credit, and the original plan of companies to refinance through bank loans could be blocked. If the company's own funding structure is unreasonable, such as over-reliance on short-term debt financing, it may also face refinancing difficulties when the debt matures.
3. ** Financial leverage risk **
- The use of leverage would bring uncertainty to the interests of the shareholders. When a company used debt leverage to expand its business scale, if it was not well managed and the profits were not enough to pay the debt interest, it would affect the shareholders 'rights and interests and even lead to bankruptcy.
4. ** Exchange rate risk **
- For enterprises with foreign exchange business, changes in exchange rates would cause uncertainty in the results of the foreign exchange business. For example, a company had a large amount of foreign debt. When the local currency appreciated, the company needed to use more local currency to repay foreign currency debt, increasing the cost of debt repayment.
5. ** Purchasing power risk **
- The impact of currency movements on funding. For example, during the period of inflation, the purchasing power of the currency declined, and the actual value of the funds raised by the enterprise decreased, which may not be able to meet the original capital needs of the enterprise.

** 2. Investment risk **
1. ** Rate risk **
- Similar to the interest rate risk in funding risk, interest rate fluctuations would affect the investment returns of enterprises. For example, when a company invested in bonds, when the market interest rate rose, the price of the bonds would fall, and the value of the bonds held by the company would shrink, resulting in a decrease in investment income.
2. ** Reinvestment risk **
- After the enterprise receives the investment income, if the market interest rate falls, it may not be able to find a suitable high-yield investment project when it is re-invested, resulting in the re-investment income being lower than expected.
3. ** Exchange rate risk **
- When enterprises invest abroad, exchange rate fluctuations will affect investment returns. For example, if a company invested in an overseas project, if the local currency appreciated, the overseas investment income calculated in local currency would decrease.
4. ** Inflationary risk **
- As a result, the cost of investment for enterprises would increase. At the same time, the rise in the price of products or services might affect market demand, which in turn would affect investment returns. For example, if a company invested in the production of a certain commodity, the price of raw materials and labor costs would increase due to the increase in the price of the product. After the price of the product increased, the market demand would decrease, and the return on investment would decrease.
5. ** Derivative risk **
- If companies participate in financial derivative investments, such as futures and options, they may face huge losses due to the complexity of their transactions and high risks. For example, when the price of a derivative instrument was misjudged, or when the market experienced extreme fluctuations, the company could suffer huge losses.
6. ** Moral hazard **
- During the investment process, the investee may have unethical behavior, such as concealing the true financial situation, operating results, etc., thus bringing risks to the investor's enterprise.
7. ** Breach of Contract **
- When a company invested in bonds or made a debt investment in other companies, the invested company might not be able to repay the debt, resulting in losses for the investing company.

** 3. Business risks **
1. ** Purchasing risk **
- Changes in the raw material market may result in insufficient supply. For example, if a company relied on a single supplier to provide key raw materials, if the supplier had production accidents or operational difficulties and could not supply raw materials on time and in full, the company's production would be affected, increasing costs or delaying delivery.
2. ** Production risk **
- In the production process, enterprises may face uncertain factors such as equipment failure, technical process problems, workers 'strikes, etc., resulting in production interruption or unqualified product quality, affecting the capital movement and value of enterprises.
3. ** Liquidation risk of inventory **
- If the inventory could not be sold in time and converted into cash, it would occupy the company's funds and increase the cost of funds. For example, the products produced by the enterprise did not meet the market demand, or the fierce market competition caused the inventory to be overstocked, and the value of the inventory might be reduced or even unable to be realized.
4. ** Liquidation risk of accounts Receivable **
- If the customer's credit was not good or the enterprise's accounts were not well managed, it might cause the accounts to be uncollectible or the collection period to be too long, which would affect the enterprise's cash flow.

** IV. tax-related risks **
1. ** Balance sheet project-related tax-related risks **
- ** In terms of currency and funds **
- If a large balance is kept in the account for a long time and the amount of operating income is small, there may be a situation where the sales collection is kept in the account for a long time and the income is not recognized; if a low balance is kept in the account for a long time and the amount of operating income is large but the gross profit rate is low, there may be a situation where the sales receipt is falsely issued.
- ** Receivable and advance payment **
- If a large amount of debits were kept in the account for a long time, there might be a situation where the receipt was falsely issued; if a large amount of credits were kept in the account for a long time, there might be a situation where the recognition of income was delayed.
- ** In terms of inventory **
- Long-term accounts with a large balance may conceal income and costs; the ending balance may be significantly lower than the opening balance, which may lead to abnormal losses of inventory. If tax treatment is not carried out according to regulations, there will be tax-related risks.
- ** Other accounts Receivable and Other Payable **
- Long-term accounts with large amounts of debits may include false issuing of bills (capital outflows), withdrawal of funds after shareholders 'capital contributions, long-term occupation of funds by shareholders or related parties, disguised dividends to individual shareholders to avoid personal tax, etc. Long-term accounts with large amounts of credit balance may include concealment of income, purchase of false issuing of bills (capital reversal), commercial returns failing to transfer tax according to regulations (commercial enterprises), etc.
- ** Fixed assets and construction in progress **
- The scale of fixed assets for production does not match the scale of output (manufacturing enterprises). There may be cases of undercalculation of income, off-the-book operations, or false ticketing; there may be cases of long-term borrowing balance of large amounts of projects under construction, which may not be transferred to capital and avoid property tax.
- ** In terms of short-term and long-term loans **
- If the cash flow is sufficient but the loan balance is large for a long time, there may be situations where the loan is occupied by shareholders or related parties for free; if the loan balance is large and there are projects under construction, there may be situations where the borrowing costs are not capitalized according to regulations; if the growth of the loan is inconsistent with the growth of the interest expense, there may be situations where the income is included in the loan category to avoid taxation.
- ** Owner's rights **
- When there is a change in the balance of paid-in capital and capital reserve, if there is a situation where the retained earnings are converted into capital, whether the individual shareholder has paid the individual tax according to the regulations; if the shareholder is exempted from debt, whether the enterprise income tax has been paid according to the regulations; if the net profit of the year is greater than the increase of the retained earnings (if there is a bonus), whether the individual shareholder has paid the individual income tax and other tax-related risks according to the regulations.
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