An Empirical Study On Financial Failure Pre-Warning System Based On Assets Liquidity

According to the statistical surveys from developed countries, nearly 80% of bankruptcy enterprises are profitable. The main reason of their failure is usually the deficiency of cash instead of operational loss. Therefore, the lack of assets liquidity can be regarded as a important reason for financial failure of enterprises. While scholars abroad and domestic often research on the financial failure through financial conditions of enterprises in terms of debt-repaying capabilities, profit-gaining capabilities, operational capabilities and growing capabilities.Based on the former two years of liquidity indexes acquired from financial statements of listed corporations, this paper will try to make research into the financial failure pre-warning model, by the use of Factor analysis method together with Logistic method. Through both normative and empirical analysis, the paper discusses the impacts on the corporate financial structure by assets liquidity.At first, this paper reviews existing literatures of financial failure pre-warning and expatiate the inherent relations of assets liquidity and financial failure. It introduces the characters of failure corporation, at the same time, and points out the research points. Through descriptive statistic,this paper account for the different liquidity lever of different industry.Thus,it make a Cluster analysis in listed companies which picked from 10 manufacturing industry. So the research sample of empirical analysis can base on almost the same liquidity.The primary variables comes from former literature and the result of normative analysis,and be screened out by diversity analysis of failure and un-failure corporations.Picking up main factors by Factor analysis,as well as banish collinearity problem within variables,and importing main factors into Logistic model.The model shows up a preferable pre-warning veracity.Based on the research,this paper defines solvency,cash flow structure and turnover ability as main factors of corporation financial failure,and time goes by the veracity goes better.A financial failure pre-warning system is founded, based on assets liquidity condition and prevention and remediation is involved. Finally, all the contents are summarized, with the deficiency of the existing research and also expanding directions of this research.