Study On The Financial Distress Of The Manufacturing Listed Companies In China

The manufacturing industry is the foundation of the national economy and the main part of the industry. It also can make our country richer and our people more healthy. With the increasing competition, many manufacturing listed companies can not work as usual, even fail to the financial distress because of the mismanagement. So to establish the models for predicting financial distress of the manufacturing industry is a very important thing that the management of the listed companies, investors, creditors and others concern.Firstly, we pick out 40 crisis companies and 40 healthy companies in 2006, 41 crisis companies and 41 healthy companies in 2007 from the manufacturing industry. We analysis the current situation of the crisis companies and the reason why they fail into crisis. Based on the reason, we put forward our indicator system. Then, through the normal distribution test, the nonparametric test and the correlation test,we choose 12 indicators from the indicator system. With the 12 indicators, we set up the logistic multiple models of t-1 year, t-2 year and t-3 year. The predicting ratios of the three models are good and are better as the time goes by. At last, we put forward our suggestions according to the results of the models.The results indicate that the financial distress in manufacturing industry is a dynamic developing process, from the worse of the debt ability, to the profit ability, at last to the cash flow ability. During the three abilities, the profit ability is the most important, because it can be founded in the whole process. So in order to avoid falling into financial distress, we should pay much more attention to the three abilities, especially the profit ability of the manufacturing industry. Once we find anything wrong, we should take action immediately.