Financial Early Warning Research For Small And Medium Enterprises Based On BP Neural Network

Because of uncertainty of exterior environment and limitation of small and medium enterprises, the small and medium enterprises face the huge financial risk. If the risk is not found in time, and enterprises do not take the effective measures, investors and creditors will face the massive loss. Additional, the healthy development of small and medium enterprises is pivotal to the national overall economy. So, building a set of effective and accurate finance early warning model for small and medium enterprise has a very important theoretical and practical significance.The purpose of this research is to establish an accurate and useful financial early-warning model for small and medium enterprises. In order to achieve this purpose, in the context of previous research, based on the characteristics of small and medium enterprises, this paper presents the three indicators of financial early warning model, which is suitable for small and medium enterprises. And then a three-year data of 46 small and medium companies in Shenzhen is selected for the empirical research. The detailed processes are:using a systematic method to determine financial crisis warning line of the samples; doing T test and principal component analysis for the data of 2006,2007 years, and screening the indicators; choosing the samples to train the neural network, then using the test samples to test the trained network. The empirical research results show that the financial early-warning model proposed in this paper is very effective for small and medium enterprises. And the empirical results show that, the T-1 year's profitability and solvency have the greatest impact on the T year's financial crisis, while the growth capacity, capital structure, operational capability and non-financial factors affect relatively small. T-2 year's three financial factors, which are profitability, operating capabilities and solvency, and one non-financial factor, which is technical factor, have the greatest impact on the T year's financial crisis, while the growth capacity, capital structure and corporate governance have relatively small impact on the T year's financial crisis. Compared with the T-1 year, the financial viability of small and medium enterprises has significantly increased the influence of early warning.Finally, according to empirical results derived from the financial crisis, in order to raising awareness of business financial crisis, corresponding suggestions are proposed on how to enhance profitability, how to protect cash flow and how to improve the technological innovation.