About The Possibility Of Forecast Losses Of Listed Companies Special Treatment - Cash Flow Indicator Applications

The idea of research is from the forecast for finance crisis of enterprise. According to the concerned Chinese security regulations, those enterprises which opening issue theirselves stock would be specially treated by the security administration if they had negative net profit in successional two years. If it had been happened, that stock trade would be impacted and it was possible to bring investment loss. Historically, many researchers devoted themselves to study the forecast for enterprise financial crisis by some financial indicators based on balance sheet and income statement.Those enterprises with issuing common stock had made the cash flow statement in the beginning of 1998.Therefore, in this paper I use both ST (specially treated) and Non-ST firms' data to analyze how cash-flow index reflection firms' financial crisis. By analyzing some data of 15 ST enterprises and 21 non-ST enterprises, the conclusion is there is a positive relationship between financial crisis and cash-flow index. It is possible to forecast one corporation witch would be specially treated as negative net profit in successional two years by using cash-flow index (including net income working index and cash working index).if one corporation with negative net profits would get successional negative net income, and be specially treated by the security administration when its cash working index was less than 0.5 before the year of getting negative net income. In other words, if one corporation's cash working index was less than 0.5 in the first year, and it had negative net income working index in the second year, it is likely of successional negative net profits and would be specially treated in the third year.