Theory Of Corporate Financial Distress And Financial Distress Prediction

In the past half century, the financial plight seriously affect the operations of the enterprise, the risk of credit institutions, the interests of investors, or even the whole country’s economic development. Especially some micro-enterprises’financial plight has shown the impact on macro-financial stability of the system in the Asian financial crisis. The company’s financial difficulties have become an important part of the financial risk assessment. With the deepening of China’s economic reform and the process of reform and opening up, China’s listed companies in the highly competitive market environment is bound to face the challenges of financial distress. Therefore, the analysis of financial distress deep-seated reasons, to achieve the purpose of effective prevention and accurate prediction is becoming a hot topic in China’s financial risk.Since the pioneering study of financial distress prediction by Altman, analysis and forecast of financial difficulties have found the breakthrough. In recent years, many scholars have done a lot of useful work in this area. However, the current study is lack of systematic theoretical guidance, especially in the premise of improving model prediction accuracy, how to reduce the number of training samples, how to shorten the model’running time and how to optimize the model parameters. The outcome is still less and some aspects of the research is still at an early and exploratory stage.With the rapid development of China’s market economic system reform and capital markets, corporate financial distress prediction studies increasingly urgent demand for the urgent need to improve economic forecasting methods, and establish an effective economic early warning system. It has not just an academic question, but also become an important factor to affect the healthy development of China’s capital market. This study is to identify all appropriate corporate financial distress prediction methods.The theory of financial distress, the use of standardized research methods, in accordance with the research background-Theoretical Analysis-Status description and Causes of-learn from experience-perfect proposal,"the idea of writing. First on the background and significance of the financial plight of the theory of financial distress prediction research, and research status are described. Second, the theoretical basis of financial distress. Again, the status of financially troubled enterprises to describe, analyze the reasons for the formation and performance of the corporate financial distress. Finally, comparative analysis of univariate and multivariate financial distress prediction methods to get some inspiration, and into financial difficulties enterprises have some of the countermeasures. The full text is divided into seven sections:The first chapter is an introduction. Introduced the background of this study to compare the research status of the theory of corporate financial distress, and pointed out that China scholars in the course of the study of financial distress are several restrictions. And describes the structural arrangement and the main research methods of the paper.The second chapter is the theoretical basis of financial distress. First of all, the cash flow theory than for a reservoir, the current assets in the reservoir water, the water changes reflect the enterprise’s financial situation is good or bad, cash flow theory can explain the reasons for the formation of corporate financial distress and cash flow is insufficient Corporate Financial Distress for three reasons. Then introduces the theory of factor analysis, the theory of factor analysis the factors that affect troubled and describes the eight reasons that lead to business in financial trouble.The third chapter is the reasons for the formation and performance of financial distress. Right into the understanding of the causes of financial distress, the country is often attributed to poor management of the business. In fact, poor management may be the most important but not the only factor, the economic downturn, the enterprise’s industry into recession and capital structure is irrational and may lead to financial difficulties. In this paper the causes of financial distress including The macro-and microeconomic reasons.The fourth chapter studies prediction methods and evaluation of the financial distress. Financial Distress Prediction methods include univariate analysis, multivariate analysis and binding assay of equalization and quantization. The univariate analysis makes judgments by each of the five financial ratios which affect its forecast accuracy of financial distress, then it conclusion that financial more accurate distress prediction need a different financial ratios for different circumstances. Multivariate analysis and the qualitative combination of quantitative analysis are method to determine severity of financial distress through assignment, the difference is multivariate analysis need multi-variable assignment of various financial indicators, while binding assay of qualization and quantization divided enterprise risk for3qualitative factors by the business shortcomings, operating errors and bankruptcy signs, and make assignment depending on the size of the impact of each factor. The fifth chapter is about countermeasures of financial distress. After finding the way of turning around distress, then we need the method of turning around. In China, countermeasures of financial distress include the general reorganization of assets, bankruptcy, debt restructuring. The sixth chapter study the analysis and forecast of the financial distress of the East Star Airlines Co, Ltd.This article describes the background East Star Airlines, analyses the causes of its financial distress and made some inspiration.The final chapter gets the conclusion including summarizing the conclusions of study, the limitations of the study and direction of future efforts.