Cash Flow-based Study Of The Financial Early-warning

Modern financial learned an important conclusion is:the intrinsic value of the assets is its present value of future cash flows. There is a growing concern about corporate cash flow and its inherent in the information. Cash flow of enterprise financial risk research has a direct significance, because in normal circumstances, the enterprises must be paid in cash due debts, otherwise, even if companies have a lot of book profits at this time, but also have to face the financial risk or even the threat of bankruptcy. Therefore, the entire process of business, cash flow and financial risks are interrelated, and both are aimed at achieving the ultimate goal of corporate strategic goals-to maximize enterprise value, so that enterprises in the fierce market competition, demand may survive and continue to develop.In the course of business operations, cash flow, as the dynamic performance of enterprise capital movements may be a combination of production and operation of the main processes (supply, production, marketing), and the main aspects (financing, investment, costs, expenses, profit distribution, etc.) picture. The start of operations in advance of monetary funds, the ultimate is to get the value of the increase in the recovery of monetary funds, the financial regain currency in the future advances of money activities in the principal amount of advances have been naturally when planted the seeds of the financial risks:First there is the risk can not be recovered, more importantly, that there is no access to the principal value-added risk. Capital investment and revenue of the financial nature of the financial decisions through financing, regulation, distribution, monitoring functions to achieve the value of the principal amount of value-added, have also decided to pass the financial and utilization of these features to guard against financial risks.In the entire process of business and financial risk monitoring and control of cash flow is the mutual penetration and mutually reinforcing, both with the ultimate goal is the future of the strategic objectives of enterprises so that enterprises in the fierce market competition for survival, continue to develop. On the one hand, real-time monitoring, prevention and control of financial risks, and maintain good operating conditions, to facilitate access to business survival and development required for adequate, effective cash flow. On the other hand, through cash flow control is more conducive to strengthening financial controls, to prevent and control financial risks. Business process, in essence, from cash to the material, but also from the material-to-cash process and better reflect the cash flow position from continuing operations capabilities. Thus, through-cash flow control, will help eliminate such drawbacks CPB funding will help strengthen financial control.This paper is divided into five chapters, the main contents are:The first chapter is the Introduction to analyze the background of this research to explain the purpose and significance of the study to introduce the structure and characteristics of this article, as well as research methods. In this paper, China's capital market research background, the purpose is to study the listed company's cash flow on the financial risks, developing management plans for the company and investors to make investment decisions have, a real reference value to study the use of evidence-based analysis method and the corresponding theoretical analysis.Chapter II Analysis and foreign researchers. First warning of the financial results of foreign literature overview of the financial early-warning studies abroad began in the last century 30's, after 60 years to achieve a series of results, gradually formed the theory of financial early warning system for the study. According to information on the selected predictor variables used in the different models have been warning of financial risks can be divided as follows:with Altman as the representative of the financial indicators information class model to Beaver as the representative of the market rate of return information class model and cash flow information class model. Then on China's listed companies for financial early-warning status of the study conducted a survey of the twentieth century,90 years ago, the country's main economic sectors, and supported by state-owned enterprises when they operate in financial crisis or the plight of the State through administrative means to him injection of funds so that it "never bankrupt", so this period and previous national studies on financial early warning was virtually nonexistent. With the continuous deepening of reform, China's securities market has been the development of economic sector structure has undergone great changes in the domestic scholars started to pay attention of the bankruptcy and corporate crisis early warning early warning research. So, as our model of the financial early-warning started later than in Western countries, and mainly aimed at the company's financial indicators of ST research. The final analysis of the current financial early-warning studies the main problems:(1) the selection of predictor variables are not aware of a comprehensive theoretical framework, how to select the qualitative variables and quantitative variables is also a lack of theoretical support. (2) the research literature at home and abroad, most of the matching methods are used to select the sample, very few non-matching approach. (3) the financial early-warning model of listed companies is mostly provided by the emphasis on the balance sheet and income statement data on the use of indicators, but easy to lose sight of the cash flow statement and listed companies with the use of other data. (4) early-warning indicators can only reflect the results of the quantitative risk of a risk to the process and the root causes of inadequate and not detailed, is not conducive to the internal risk management techniques to deal with preventive measures. (5) data are essentially from the company's annual report that the annual report, the model parameters are based on annual data, based on very little data on the use of quarterly or monthly statements. (6) The existing early-warning models are not able to provide data on listed companies to make identification of true and false.ChapterⅢis a cash flow and the relationship between financial risk research. First introduced the cash flow and its advantages:(1) cash flow than the profits can better reflect the quality of corporate earnings; (2) cash flows to better reflect the solvency of the enterprise; (3) cash flow, financial flexibility to facilitate the evaluation of enterprises; (4) cash flow than the profits of a more difficult to be manipulated; (5) cash flow can be increased to some extent the comparability of accounting information between enterprises; (6) cash flow help to evaluate the future of listed companies, the ability to obtain cash for investors to make the right investment decision-making information. Then analyzes the definition and characteristics of financial risk types, summed up the financial risks of cash flow and the relationship between:(1) business operations during the inflow and outflow of cash amount and the difference between a large extent, restricts the level of corporate earnings and profit the degree of risk. (2) Cash inflows and outflows of the time difference, which restricts the level of corporate capital spending and liquidity risk. (3) through a cash flow status, you can put the main aspects of production and operation and the main process of a comprehensive, systematic and timely manner reflected. (4) Cash flow information comparable, more truthful, reliable, and for enterprises to provide a basis for financial risk control. (5) Cash flow from financing to provide for monitoring risk-related information. (6) Cash flow is the basis for monitoring long-term investment business, but also for enterprise risk monitoring, enterprise survival and development of the potential risks provide the basis for the forecast. Finally the cash flows of the financial early-warning based on the feasibility, necessity and theoretical framework.The fourth chapter is part of empirical research, first introduced is the choice of samples and data, and then build the model index system was established. This part is based on the cash basis of accounting system shall be based on the cash flow indicator system to build, the target selection through the statistical description, based on the results for the ordinary regression model variables in the second screening system for extracting the independent variables. According to the indicator system built using logistic regression method, the formation of the financial crisis before they occur one, two, three regression equations, the three regression equation as a forecasting model to verify the accuracy of their forecasts and false nature. Then logistic regression method to verify the rate of judicious. Finally, the empirical process of this paper to give a brief description of the first, pointing out that in this paper to build a model of the effects of year when the forecast is better, the effect of different reasons What does the question of whether an impact on the theoretical fields, and then pointed out that in this paper empirical part of the deficiencies and development.Chapter V:Conclusions and recommendations section. Main content of the main conclusions of paper-based as well as the response to these findings raised the company's internal control policy recommendations:(1) establishment of an independent risk management institutions; (2) the establishment of the cash budgeting system; (3) Construction of cash flow information system; (4) the establishment of cash flow early warning system.The contribution of this paper is to:(1) new data, sample selection convincing. This paper selected in 2008 the latest research data analysis of the listed company's cash flow on the impact of financial distress, and research methods have been applied to the capital market conditions. In order to ensure the integrity and credibility of the study, with this paper, the sample data selection process, including all of China's stock market in Shanghai and Shenzhen A share listed companies met the study criteria. Whereas the previous study of many of the sample listed companies tend to select only part of the data, comparison, data from this article more convincing. (2) to study a unique perspective. The past, listed companies, the financial early-warning indicators of the study design is often based on an accrual basis under the main index system, but this paper, analysis and summary of accrual and cash basis of the financial crisis early-warning indicators, based on the comparison pros and cons of the two indicators, the final choice to establish a cash flow-based system of early warning indicators of financial crises. Then according to the established index system of cash basis to build indicators based on cash flow model, and tested the model predictive power, while to determine which system (accrual basis and cash basis), the more reliable financial information provide favorable evidence. Of theoretical research has opened up a new direction, so that more micro-oriented study of the theory.Shortcomings of this article is that:(1) in 2008 belong to five years for the first time the company has been dealing with a small number of ST on the results of the study may have some impact. (2) As the author's knowledge is limited, the policy proposals will inevitably be naive of the Department, but also hope you to guide teachers and experts, not stingy.