Reserch On The Enterprise Financial Early Warning System And Its Application

In 2003, the unexpected SARS made many enterprises in our country suffer a crisis. No longer than one year later, birds' flu is indulging in wilful persecution in some countries and regions in Asia, which include china. Thus, crisis management has become a hot topic again wildly paid attention by the circles of enterprise management in china. How to keep away business crisis and make countermeasures effectively has been a difficult problem concerned by people in industry. Financial early warning management is an important component part of business management. Based on the theories of financial management and early warning management, this article applies the theoretical knowledge about economics, management, statistics, investment and etc. to conduct an analysis of the main aspects on financial risk, especially the risk existing in operation flows, and then provides some corresponding measures. The main contents include as follows: firstly, we summarize the research findings about financial early warning for enterprises at home and abroad, systematically analyze the principles, procedures and methodologies to enterprises' financial early warning, based on which a whole framework of financial early warning system is present. Secondly, we focus on investigating some kinds of risk enterprises often facing, such as environment risk, marketing risk, financing risk, investing risk and so on. Finally, we use a statistical model of principal components approach and the database on annual reports for some public companies from 1998 to 2003 to establish a financial early warning model. Empirical tests indicate that financial crisis is a gradual process from quantitative change converted into qualitative change, which can be monitored by financial indexes. The empirical results also show that the financial early warning model established here with principal components approach has a strong power to warn ex ante. The research conducted in this article can raise managers' risk consciousness, and provide a theoretical and practical instruction for enterprises' financial early warning management. At the same time, it can also increase the scientificaalness and effectiveness of the decisions made on financial risk.