Cash Flow Index Predicting Financial Risk

In a word, financial risk prediction is to use financial indexes to forecast corporate risk. The research of financial risk prediction is always main problem in business and academic circles. How to recognize, assess, forecast financial risk is always one of the world researchers'focus. Through the study of financial risk indexes, we could exactly forecast corporate risk. And so, we could decrease the probability of bankruptcy to protect investors'interest. According to the analysis of Ying Guangxia case, it is be found that there are many limitations in the practice of traditional financial risk indexes. Through the comparison of traditional financial risk indexes and cash flow indexes, we could find cash flow indexes have six advantages in theory. At the same time, depending on ST companies of real estate industry, we analysis the difference of traditional financial risk indexes and cash flow indexes in predicting ST corporate risk. And then, making use of grey system theory, which is the newest analysis method, we set up a grey prediction model of cash flow indexes. Selecting the free cash flow of ST Zhu Jiang as an interpretive variable, we ran a positive research of cash flow index predicting financial risk. The research result testified that the gray prediction model could well forecast the financial situation of ST Zhu Jiang. At the end of the paper, we analysis all kinds of factors to set up an integrated system of cash flow predicting indexes. In the practicing of the cash flow indexes, we should consider all factors which could effect the prediction of corporate financial risk.