A few days ago, some financial reports of listed car companies circulated on the Internet, and suddenly found that “BYD’s debt is as high as 500 billion yuan.
” and then magnified and hyped this figure, causing an uproar, and people who didn’t know the truth also began to talk about it.
In fact if you completely ignore the fact that BYD will hit record sales revenue and profits this year and hype BYD’s debt these speculations are either financial ignorance or ulterior motives.
Specifically, the assets and liabilities of an enterprise are very similar to a person’s height and weight, and a single figure does not tell the problem– a weight of 150jin is “round as a ball” on a teenager with a height of 160cm.
on Yao Ming, who is a 226cm of height, he is “skinny”.
They all weigh 150 jin, and if the proportion of muscle, bone and fat is different, a person’s exercise ability will be very different.
For a company, if you only look at BYD’s “500 billion debt” to arrange saliva, it is like an otaku mocking David Goggins, who can do 4, 000 pull-ups, “170jin is too heavy” and end up making fun of him.
The 77.
4% debt ratio is a reasonable range for giant manufacturing, “500 billion, does BYD have such an amazing debt?” Obviously, as one of the most concerned car companies in China, every corner of the 2024 semi-annual report released by BYD has been carefully searched by countless eyes.
According to the semi-annual results BYD had liabilities of 531.
634 billion yuan as of June 30.
However, unless there are ulterior motives, it should be able to turn to the previous page, BYD’s total asset value in the same period is as high as 686.
244 billion yuan.
Dividing total liabilities by total assets is called “debt ratio”, which is a reliable indicator of the relationship between assets and liabilities of an enterprise.
Like weight figures, it is necessary to compare the BMI index with height in order to have a certain degree of reliability.
Yao Ming weighed 141kg at his peak, but ordinary people were fat.
” This is what financial experts say.
So what is BYD’s debt ratio? The debt ratio of 77.
4% obviously belongs to the category of “health”.
For heavy industrial companies, more than 100% of “insolvency” is the real red warning line.
Didn’t you say that the general debt ratio is between 40 and 60%? Some curious people rummaged through the data.
However, automobiles belong to the heavy asset manufacturing industry, and usually the global auto companies have a relatively high asset-liability ratio.
Debt ratios between 60 and 80% are indicators of health.
In the first half of 2024, the debt ratio of Ford Motor was 84%, General Motors 75%, Volkswagen Group 70%, Toyota 61%.
Domestic mainstream car companies are basically the same class, Geely Holdings 68%, Great Wall Motor 63%, Changan Motor 61%.
New stars Cyrus and BAIC Blue Valley, which developed later, have debt ratios of more than 80%.
Overall, BYD’s debt ratio is at a reasonable level.
If you look at other leading high-end manufacturing companies they are even more indebted than car companies.
In the first half of this year, Boeing’s debt ratio was 117%, Dell 103%, compared with 85% for the healthier Airbus, 84% for Apple, and 83% for the former contemporary corporate benchmark General Electric.
“Don’t feel terrible as soon as you see debt,” the financial expert said, analyzing it from the bottom of the concept.
“reflecting the acquisition or formation of funds is called assets, and reflecting the use and existence of funds is called liabilities.
Some funds are used for current development and future repayment, which constitutes a debt, but it does not mean a heavy burden.
” For the fast-growing BYD, it needs to carry out a large number of investment layout, including plant construction, R & D investment, etc.
the income and expenditure time of each sector and project varies, and some development directions also need to advance investment.
Coupled with BYD’s huge scale and volume, debt is naturally not a small number.
At this time, we should look at the word “ratio” of “debt ratio” to contrast with global giants such as Apple and Ford, rather than be surprised by the “500 billion” figure.
In fact, it is the same BMI index, and different people have different situations.
They all have 180cm height and weight of 200kg.
They may be either a muscular champion like Mike Tyson or a fat man who is gluttonous and lazy.
In other words it is the same weight and the quality of “weight” varies from person to person.
Then they are all in debt, and the gold content of the “debt” of different enterprises is also very different.
Let’s take a look at the proportion of “muscle” as power and “fat” as an encumbrance in BYD’s “weight” if debt is heavy weight.
The total liabilities of enterprises can be divided into two categories: one is interest-bearing liabilities, which often borrow from financial institutions or issue debt in the capital market, which require a high amount of interest.
the other is outstanding supplier payments, upcoming employee salaries, outstanding taxes and fees, and so on.
Take a closer look at BYD’s financial report.
As a result, we found that the largest items were 207.
517 billion accounts payable, mainly outstanding supplier payments, and 157.
497 billion other payables, while loans from financial institutions were only 21.
353 billion yuan, accounting for only 4% of the total liabilities, down further from 5% at the end of 2023.
For comparison the interest-bearing liabilities of Geely and Great Wall are also at the level of 10 billion while the overall assets of these listed companies which also belong to their own brands are smaller than that of BYD.
So can BYD pay the outstanding supplier payment on time? This is a topic of concern to many suppliers.
According to Winds’s 2023 annual report on accounts payable and notes payable turnover days, the BYD partnership with suppliers is 128 days, in addition, SAIC is 140days, Great Wall Motor is 163days.
In addition to outstanding supplier payments there are 157.
497 billion other payables that are also the focus of questioning.
In the details of “other payables”, the most important is the “external transactions” of 145.
932 billion yuan.
Compared with the 2018-2020 financial report, there is no “external current” project, this location is “fixed assets equipment and maintenance accessories”.
it will not be renamed “external current” until after 2021.
If you look at the increase in the original value of fixed assets in 2019-2024, the original increase in fixed assets is about 250.
909 billion, including 164.
781 billion equipment.
At this point, it is clear that the second largest part of BYD’s debt is about 150 billion of the outstanding “equipment expenses.
” In addition there are 36.
755 billion yuan in contract liabilitiesThis is the company’s advance payment for car purchases from dealers, etc.
, which will be converted from debt to income after the product is delivered.
, , Another topic that interests investors and shareholders is: Does BYD have pressure to repay its debts? , we have found earlier that by the first half of this year, BYD’s borrowings from financial institutions were 21.
353 billion yuan, which is interest-bearing liabilities.
During the same period, the consolidated cash and equivalents balance was 54.
227 billion yuan, making its solvency easy.
, precisely because BYD has abundant cash, an interesting phenomenon occurred in 2023-cash interest income was higher than interest expenses on interest-bearing liabilities, so last year’s “financial expenses” were negative 1.
5 billion yuan.
“We can completely say that although BYD’s debt figure is not low now, it is like a player whose body is growing.
Weight gain is not a bad thing,” financial experts said.
“The debt ratio of 77% is equivalent to a good BMI index.
After all, it has more than 600 billion yuan in assets.
A careful analysis of the detailed indicators in debt is mainly the weight gain caused by investment.
Similar players gain weight mainly by increasing muscle, being in good health, and promising future development.
“, , , the debts of many companies will never reach BYD’s 500 billion, and at the same time their performance will always be far behind BYD’s.
Rather than belittle the strong, it is better to take action and catch up.
That is the right way to become stronger.
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