The Study Of Real Estate Development Enterprise Risk Prevention Based On Free Cash Flow

The article strives to take free cash flow as the core indicator to establish a comprehensive real estate development enterprise risk identification and prevention mechanism, which means identifying the critical operational risk and financial risk by analyzing critical financial statement items affecting free cash flow and developing specific measures to prevent major risks by combining free cash flow employment in enterprises.The objective of real estate development enterprise risk management is to maximize shareholder wealth. Shareholders are most concerned about the risk of direct impact on business decision-making and financial decision-making leading to decline enterprise value. Based on the above idea, the article expounds the superiority and adaptability of the free cash flow indicator identifying and preventing real estate development enterprise risk. Free cash flow overcomes the shortcomings of traditional financial indicators, pays more attention to long-term interests of enterprises, gives more consideration to the interests of enterprise stakeholders.Real estate development enterprises are facing the uncertainty and complexity of the external environment leading to the risk of internal management decision-making and financial decision-making. External risk will inevitably be shown up by translating into internal risks, such as the financial position, operating results and cash flow deterioration that is reflected by financial statements. Based on the above ideas, the article identifies and prevents risks from the inside out. Financial statements of the enterprise as a starting point, the article analyzes free cash flow indicator and risk indicator fluctuation based on free cash flow indicator. In addition, it screens significant report items that affect operational risk and financial risk and analyzes the external factors of these report items in order to achieve the goal of identifying real estate development enterprise risk.The principles of real estate development enterprise risk prevention can be a bridge between risk prevention theory and practice of risk prevention. The article raises six real estate development enterprise risk prevention principles, six principles may be not absolutely correct in any case, but the principles of real estate development enterprises provide guidance for developing risk prevention measures. Based on the principles, combined with application of free cash flow, an overall strategy and specific measures for risk prevention is developed.