| Traditional accounting is an activity that is carried out under the historical cost principle and objective principle to record the performance of a company during certain period of time, using various financial ratioes. Those ratios are used to reflect the company's historical performance. As far as forcasting the future performance by use of past financial ratios is concerned, financial directors determine it by their own understandings in a rather subjectve manner. Inevitably this would result in forcasting errors which in turn would bring losses to the company itself, the banks and investors as a whole. In this situation, it becomes even more significant to forcast the future performance of companies, especially when in financial distress, in an objective, systemaic, scientific and precise manner, by use of the combining knowledge of finance, econometrics and statistics.Since the 1930s a number of foreign scholars have done a series of researches in this field. In the late 1990s, domestic scholars, who have used various econometrical methods and got considerabl achievement, began the research of financial distress on Chinese public companies. However, there still are deficiencies of current researches, which mainly lie in two aspects. Firstly, there are big differences among the financial ratios of various industries while most of domestic researchers did not make industry cluster analysis. They directly set up a financial distress forecasting model for all industries, and that will result in impreciseness of those models. Secondly, the econometrics methods involved in the modeling process imply specific preconditions which differ from one another.Some methods were wrong used because some researcher did not pay enough attention to these oreconditions. In addition, most related researchers focused on the ST companies. The forcasting model using the financial ratios of companies that had two years straight losses does not have a high practical value. |
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