The Application Of Cash Flow Analysis In The Loan Risk Evaluation

For the time being, the main method employed by various Chinese commercial banks in assessing loan risks is the financial analysis system, which is generally based on the balance sheets of certain enterprises. As the development of market economy and the improvement of accountant principle, the limitation of this kind of loan risk evaluation system emerges. In this paper, in order to solve this problem, cash flow analysis is introduced and the cash flow analysis system is constructed.We can get to know the information of the enterprise such as the cash income and source, the cash payout and purpose and the detail about investment and fundraising through the cash flow analysis. Finance house can also know the following information about the borrower enterprise: the ability of the enterprise to own the net cash flow in the future, the ability of the enterprise to pay back the loan and the dividend, the cause of the difference between the net income of the enterprise and net cash flow in business, the infection to the financial status due to the cash and non-cash investment and fundraising. We get the conclusion that the new designed loan risk evaluation system can not only exhibit the financial status of the enterprise more accurately and authentically, but also evaluate the enterprise more comprehensively and extensionally by using both the traditional financial analysis system and the new designed loan risk evaluation system to do the research about the Hebei Baoshuo Stock Ltd. The loan risk evaluation system can help the decision-maker in the commercial bank to make the right decision by exposing the financial status, the management status, and the ability of fundraising and producing cash with the anisomerous information.