Figure 3: Ratio of Sales of Available Housing to Short-Term Debt
Developers’ working capital isn’t sufficient to cover short-term cash outflow
The short-term debt includes debts to suppliers. It has been estimated that 40 percent of properties under development are completed every year (based on accounting information from the companies). Similarly, it has been estimated that 40 percent of liabilities to clients in the form of advances are advances to deliver housing in the short term. An adjustment of −15 percent of the properties’ potential sale price is made here (based on the drop in sales price per square meter experienced by Evergrande).
Source:Prepared by the author with data from the companies’ financial statements.