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Business analysis of China Changcai Company

CONTENT

Page

I. General Introduction¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­.¡­.. 1-2

II. Business Environment & Strategy Analysis¡­¡­¡­¡­¡­. 3-6

III. Accounting Analysis¡­...¡­¡­¡­¡­¡­.¡­¡­¡­¡­¡­¡­¡­¡­ 7-13

IV. Financial Analysis ¡­¡­¡­¡­¡­...¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­

14-19

V. Prospective Analysis¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­ 20-21

VI. Conclusion & Suggestion.¡­¡­¡­...¡­¡­¡­¡­¡­¡­¡­¡­¡­ 22

Appendix

1. Balance Sheet 1999 ¨C 2002¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­..¡­¡­¡­.. 23

2. Income Statement 1999 ¨C 2002¡­...¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­... 24

3. Cash Flow Statement 1999 ¨C 2002¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­.... 25

4. Pro forma Income Statement for 2003¡­.....¡­¡­¡­¡­.¡­¡­¡­¡­¡­¡­. 26

GENERAL INTRODUCTION

Background Of The Target Company

Changchai CO., Ltd. (000570) once acknowledged as one of the leading small-diesel-engine manufactory in the China. The company issued and listed its A share in Shenzhen Stock Exchange (SSE) in 1994, and B share in 1996. The Company¡¯s sales and assets enlarged hundreds times since its going public, followed with the company¡¯s performance sharply went up, the Company¡¯s stock price also keep rising. From 1994 to 1998, the company ranked as the ¡°Best list company¡± in SSE consecutively.

Unfortunately, pressed under the industrial cut-throat competition, the company¡¯s performance comes down since 1999, followed the sales drop, the company¡¯s profit decreased significantly, even for year 2001 and 2002 the company suffered huge losses in its financial statements. At April 11, 2003, the company¡¯s stock was cataloged as ¡°ST¡± (special treatment) by Shenzhen Stock exchange, that means in the following half year if the company¡¯s operating performance can not significantly improvement, the company¡¯s stock will be ceased for transaction and picked off from the main board of SSE.

The Purpose Of Our Analysis

Our analysis purpose is to find out, what are the reasons of the Company¡¯s operation and performance up and down? Can financial statement effectively reflect these impact and factors properly? Are those operating fluctuations can be easily found from analysis of the financial statements? How about the company¡¯s [next page]