Research on the Valuation to Tencent: A Case Study

Abstract

In the 21st century, people's life has been inseparable from the network, the network penetration rate of our life is unprecedented. Large Internet companies provide many job opportunities for the society, and more and more people flock to this industry for investment or entrepreneurship. Moreover, unicorns are more likely to emerge in Internet companies than in other industries. At the same time, financial leverage is more commonly used to obtain financial returns. It is necessary to study the financial situation of Internet companies. Tencent is a strong Internet company. However, according to its financial statements, it could be found that some hidden dangers, such as the rapid growth of liabilities, the decrease of asset turnover rate and asset turnover rate, led to the high financial leverage of Tencent. Although this strategy could produce high income effect and improved the efficiency of the enterprise's use of funds, it is a double-edged sword and increases the business risk of the enterprise. Based on the analysis of Tencent's debt paying ability, operation ability and profitability, this paper drew the conclusion that Tencent has operational risks due to its high financial leverage. Research data mainly came from Tencents annual report.