The 19th Grab with integrated thinking of science and art!The key to sustainable branding Etsuhiro Hosoda ...
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By fusing "sustainability" and "branding", which can be said to be the dual core of corporate competitiveness required by the times, at a higher level, we can create a leverage effect and create a competitive advantage unique to our company.
SB-J Columnist Etsuhiro Hosoda With integrated thinking of science and art, Huang is a brand strategy suitable for the times. → Continue reading
Sustainable brand Japan
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The original meaning is "LeverThe action of (lever) ".Leverage,LeverageThere are several katakana notations.Leverage effect,Leverage rateAnd so on.Gearing(gearing,gear(Torque increase due to) is sometimes called, but the purpose is the same.It is likened to a lever or gear whose force is unconditionally amplified, but in commercial terms, loss is also amplified as described below.
If you want to increase the profit margin (more precisely, volatility: increase volatility) when conducting economic activities with your own capital, you can do so by using the capital of others.
Total assets = equity capital + other people's capital
- Example 1) If the operating company has equity capital of 100 yen, the total assets are 100 yen.If it is expected that the total assets will be 100 yen to 100 yen in sales and 10 yen in profit, the profit margin will be 100% for 10 yen in equity capital.Assuming that the market is very promising (expandable), it is assumed that 400 yen of other people's capital (borrowing) is introduced and the total assets are 500 yen.In that case, from total assets of 500 yen, sales of 500 yen and profit of 50 yen (Operating income) Is brought. If the interest payment for a loan of 400 yen is 5 yen, which is 20%, the profit (Ordinary profit) Is 30 yen.This brings the rate of return on equity to 30%.
- Example 2) Buy 100 yen land with 100 yen equity capital, borrow 80 yen land with it as collateral, buy 80 yen borrowed land with it as collateral, buy 60 yen land with it as collateral, 60 yen When buying land of 40 yen borrowed and using it as collateral to buy land of 40 yen borrowed 20 yen.You can own a real estate of 20 yen with 100 yen of equity capital (300 times the leverage).In this case, if interest rates are not taken into consideration, if the real estate price rises by an average of 3%, the equity capital will be 10 yen.
On the other hand, since the leverage effect increases volatility, the ratio of loss to equity capital also increases.In other words, when the rate of return of a business that uses total capital is lower than the cost of procuring other people's capital, the leverage effect causes a decrease in the rate of return or an increase in loss.
In this way, by introducing other people's capital, even with the same amount of equity capital, a higher rate of return can be raised.Leverage effectCalled.Similarly, companies that are already using other people's capital will also increase the percentage of other people's capital used.Capital adequacy ratioThe leverage effect can be utilized by reducing.
Reverse leverage effect
On the contrary, by lowering the ratio of investment in equity capital, it is possible to reduce the volatility of profits with respect to equity capital and improve safety.
Example of leverage effect
- Borrowing in the equipment industry
- Real estate investment with real estate as collateral
- Margin trading in finance
If the market is expected to grow steadily over the long term, the operating company will borrow with its own assets (equity capital) as collateral, strengthening the sales department and strengthening manufacturing facilities.At this time, if the long-term expected rate of return is sufficiently higher than the market interest rate, a positive leverage effect can be expected from the introduction of other people's capital.On the other hand, if market growth is very uncertain and short-term fluctuations can be expected to be large, highly leveraged management can result in unforeseen losses on equity capital.
In financial transactions, the leverage effect has been consciously exerted since the beginning of the 20th century.In a transaction called a broker's loan, it was possible to invest more than equity capital because it was possible to purchase stock by borrowing funds with the stock to be purchased as collateral.Even today, leveraged typeInvestment trust・ Leverage typeListed investment trust-Margin trading-Forex margin trading-Cash settlement transaction-Futures trading-Option tradingIt is possible to make an investment that exerts a leverage effect by introducing other people's capital.
Leverage effect of Japanese companies
Japanese companiesHigh economic growthIt has traditionally been considered to be more leveraged than other developed countries due to the significant increase in borrowing during the period.However, in the case of Japan, especially in the case of corporate loans to traditional (family business) small and medium-sized enterprises, solidarity guarantees by individual owners have been developed, and in terms of corporate loans secured by individual owners' land and houses, The leverage effect in the sense of is limited.
In addition, since the latter half of the 1970s, the excellent manufacturing industry turned to debt repayment, and by the end of the 1990sInterest-bearing debtIt was a big boom in repayment.For this reason, some companies have a large amount of cash, and rather the opposite leverage effect is working.
In general, Western companies have a high capital adequacy ratio, and Japanese companies have a low capital adequacy ratio.Generally, American companies have a high capital adequacy ratio, but listed companies and unlisted companies have different tendencies, and SMEs have a slightly higher ratio of borrowing from financial institutions.Due to the traditionally developed corporate bond market in Europe, the capital adequacy ratio is lower than that of US companies.Even when a US company establishes a subsidiary in Europe, it tends to raise capital by issuing corporate bonds locally rather than investing capital directly from the US headquarters.
1990 for Japanese companiesBubble burstSince then, there has been a tendency to increase equity capital, but this is also a situation that varies depending on the type of business and individual companies.For example, it was once whispered as debt-free managementToyotaIn addition, although the head office alone does not borrow money from financial institutions, there is a large amount of interest-bearing debt in consolidated accounting, and the consolidated capital adequacy ratio is in the 30% range.This is because it has a financial business company such as auto loans for customers as a subsidiary (Toyota Finance), and interest-bearing debt exists in a new subsidiary that was consolidated through acquisitions.In the auto loan business, when customer receivables are securitized and underwritten by other financial institutions (guarantee contract: default swap), bad debt risk can be treated as a guarantee fee, and in this case, how far is the net other person? It is suddenly difficult to judge whether it can be evaluated as capital (leverage) from accounting materials alone.
- "Deterioration of Corporate Capital Structure and Countermeasures: Proposal for Issuance of Tax Reduction Bonds" Kaichiro Nishino (Commercial Studies 1965-12-20)Otaru University of CommerceAcademic achievement collection)
- "Determinants of capital structure-focusing on comparison of capital structure of Japanese and German companies-" Akio Mori (Faculty of Business Administration, Kobe University National Economy 156 (1) pp.1-19 1987-07)
- "Problems related to strengthening competitiveness" Masato Amano (Financial Services AgencyFinancial Research and Training Center (July 2009, 7)P.8
- "Policy financing for SMEs in major Western countries"SME Finance CorporationResearch Institute (Small and Medium-sized Public Corporation Report No. 2004-10 March 2005, 3)* There is a case in Europe on P.11.
- "International Comparative Statistics Focusing on the Japanese Economy"Bank of Japan