The limitations and financial risk of EDF Group

      杜 瑞

   The EDF Group has a large fleet of low-carbon facilities - hydroelectric power plants, nuclear power generation, energy and renewable energy, including wind farms. This Group, and will continue on a global scale, the lowest carbon emissions in the major European utilities suppliers. All company EDF group has a strong sense of responsibility to local communities. In this report, through the published annual reports of the EDF Group will both analysis the limitations and financial risk of the EDF Group.

   Introduction

   Electricite De France (EDF), founded in 1946, is responsible for the whole of France sent, transmission and distribution business of state-owned enterprises. In order to complete the mission of public service, the EDF Group is responsible for the design of the power facilities, construction and operation. The company strategy includes social corporate responsibility and sustainable development. The social corporate responsibility can be split into three sectors. One is to help customers manage their accounting resources of energy consumption, taking into account the local environment, and public relations policies. Then, their activities in the location of their business and create new employment opportunities and improve the quality of life of local residents. Lastly, their goal is to promote the understanding of sustainable development and climate change, to promote the efficient use of energy in a wide range of the population of the countries they operate at the same time.

In the sustainable development, they think that they must make every effort to protect the earth, through thoughtful growth and the impact on our environment. Group as a utility, they must contribute to tackling climate change. This means not only to ensure that the energy supply of the future, but also to ensure their safe installation and provide access to affordable energy. They believe, is closely related to energy and the environment, low-carbon electricity will help solve the climate crisis.

   Limitations and Financial risk

   The first limitation of financial ratios is trade payable payment period. A high accounts payable payment period is good from a financial standpoint, but it overlooks non-financial aspects of their business. In this company, trade payable payment period is 140 days that means the company should pay their loans in 140 days. It just thinks about the time long or short. It cannot reflect the company’s relationship with their suppliers. A supplier may extend the small business of the company credit based on trust and their good payment history.

   The second limitation of financial ratios is current ratio. The problem of current ratio is that it does not focus on the quality of the current assets. That means the current ratio cannot reflect current assets directly. For example, the EDF Group current ratio is 1.17:1. It is bad figure, but we do not know the parts of Cash and cash equivalents. It is real current assets.

   The last limitations of ratios are that in this company, there are past information to compare. We cannot compare the ratios with industry average. Meanwhile, we cannot know specific information from other companies to compare. Therefore, if use financial ratios to analysis the company’s financial performance, it will be subjective. Managements want to get and know the benefits from future, whereas the ratios always use past information or figures, so it is difficult to find correct information to arrive their expected.

    Financial risk in the EDF Group is current liability. In 2012, the current liabilities increased so fast. It is higher than current assets increased. This problem will impact the ability of repay of the company. If a company has not enough money to pay their liabilities, it will be difficult to operate their company and go on their business. However, the biggest financial risk in the EDF Group is natural disasters or other emergencies because there is a business to use of nuclear energy to generate electricity. The natural disasters have led to nuclear contamination. For example, Japan. It cannot estimate the losses brought about by nuclear contamination.  It will lose a lot of economic benefits, while it damage to the environmental pollution is far greater than the loss of money. The EDF Group should carry out protective measures for environmental safety.

   Conclusion

   Through all information it is clear that the EDF Group is good company for their social corporate responsibility to create new employment opportunities and improve the quality of life of local residents and insist the sustainable development to protect the environment. This is a good way to develop their company and business. It should improve their strategy and solve some specific financial problems to promote their profitability, efficiency and solvency. It is important to keep on their operation. Although the financial ratios are important in financial analyse, whereas they are not absolute correct. It could impact development of economic of the company and bring some danger factors, which could block the operation of the company. Therefore, it is clear that solve above problems, the EDF Group will operate better in the future.  

（作者单位：陕西国际商贸学院）