A Study Of Application Of New Indexes In Financial Warning

The clue of Financial Early-warning research is usually the development of warning model, so people always class Financial Early-warning on the differences of the warning models. In this paper we class Financial Early-warning by the resources of indexes in a new way. The FEWCI(Financial Early-warning Composite Index) could be divided timely into three parts: traditional financial index based upon Accrual Basis, index of operating cash flow based upon Cash Basis and three kinds of indexes, such as FCF,EVA,CVA which appeared just recently.Most of the research paper is using the traditional financial index based upon Accrual Basis. There are many disadvantages of the Accrual Basis accounting, so people need to find new indexes by which we can improve the function of warning models in theoretical and practical way. The applicability of operating cash flow indexes which are based upon Cash Basis has been proved to eliminate these disadvantages in a way. After that some research said FCF, EVA, CVA could also have good performance in financial warning, but they do not give the exact and further analysis and also have not given the demonstration.In this paper, we try to differ these three financial early-warning indexes in both principles and foundations. We investigate their advantages and disadvantages and use the data analysis to give the evidence of using the FCF in the financial warning model. At last we give our suggestions for the future research in financial early-warning composite index and hope this paper could give some help to other researcher.