An ad for Wanda Plaza, one of Dalian Wanda Group's property investments. (Internet photo)

A fresh round of mergers and acquisitions at Dalian Wanda Group, the largest entertainment firm in China, has triggered speculation about the company's cash flow and motivations given its liability-to-asset ratio of 90%, reports Guangzhou-based newspaper Xin Kuai Bao.

Amid the stir caused by the announcement of its US$2.6-billion purchase of American cinema operator AMC Entertainment, Wanda signed an agreement to invest up to US$3 billion in Russian resorts during a visit to by Beijing by Vladimir Putin, the Russian president. These two agreements, both signed during visits by high-ranking officials from abroad, have triggered rumors that they were politically motivated.

The acquisition of AMC brought controversy as the potential value of the deal to Wanda is not immediately obvious. Annual reports from AMC, the second-largest movie theater operator in the US, showed that in the fiscal year to March 29, the company's revenues had come to roughly US$2.6 billion, translating to losses of US$82 million. Its total assets were US$3.64 billion and total debts US$3.48 billion, bringing its liability-to-asset ratio to 95.7%. Last year, AMC posted revenues of US$2.5 billion and losses of US$82.7 million.

Several investors find it difficult to see the benefits of the deal to Wanda.

Another question being asked surrounds how and from where Wanda obtained the funding for the deal and other investments, said the newspaper. The Chinese entertainment conglomerate reportedly has close ties with several banks, suggesting that the capital for acquisitions and mergers came mostly from bank loans.

The Bank of China and the Agricultural Bank of China are Wanda's biggest lenders — in 2010, the Agricultural Bank of China lent the company more than 20 billion yuan (US$3.14 billion).