Listed Companies' Financial Crisis Early Warning System

The stock market in China is developing quickly since its beginning ten years ago. Facing the flourish stock market,How should a stock investor in China do? How should he analyze and select the stocks full of vitality? The first step is to analyze the financial statements of stock companies. Financial statement of stock company,which includes balance sheet,income statement and the statement of cash flows,is the result of the financial status and the operation of the stock company. But,the number of stock companies with financial crisis goes up rapidly and the stock company fights with risk weakly. So,it is necessary to set up financial crisis prediction modes to tell stock inverters how to select stock companies and to discriminate financial crisis.This essay researches eighty-two ST stock companies and eighty-two no ST stock companies of the stock market in China. First with section analysis and single variable,this essay analyzes the difference of twenty-one financial indexes between ST and no ST stock companies in five years basic financial data. At last,three financial crisis prediction modes are set up with six financial indexes which are the most important financial indexes in Linear Probability Model,Fisher Linear Analysis Model and Logistic Analysis Model. The research demonstrates that seventeen financial indexes are very effective with one or two years before the stock company is known as ST and the net asset reward ratio is the best effective. Three modes can predict financial crisis more correctly. With four years basic financial data the error differentiation ratio is in twenty-seven percent. With Logistic Analysis Model,the error differentiation ratio is the lowest. The error differentiation ratio is only 7.36 percent in one year basic financial data before the stock company is known as ST. Kelihua and Datangdianxin are examples to judge three modes correction ratio. This essay analyses that why Kelihua is knows as ST stock company. I predict that Datangdianxin will be a deficit company and explain the reason.