Study Of Listing Corporations’ Financial Early-Warning System Based On Free Cash Flow

Listed companies are the cornerstone of a market economy, its operating results not only affect the capital markets and investors, but also related to the country’s economic development. So it is necessary to establish a financial early-warning model to avoid financial crisis.The most important two aspects of construction of the financial early-warning model are financial early-warning indicators and methods. This article reflects on the early-warning of financial crisis from the perspective of indicators. Because of traditional financial indicators have some defects, to compensate for these shortcomings, this paper introduces the FCF in financial early-warning on the basis of analysis of related research at home and abroad. The aim is to build a more effective financial early-warning model.The first part introduces the research background and the significance of this paper, as well as research purposes and methods of this paper. Then the second part is the related theories of financial early-warning and free cash flow. The third part firstly explains the necessity of introducing free cash flow, then several calculation methods of free cash flow was introduced and analyzed their shortcomings, then puts forward the improvement of calculation method of the free cash flow in the end. The fourth part is empirical research, all possible financial index are tested for their correlation differences and, then choose indicators conformed to the requirements for the next step Logistic regression analysis, and to the inspection results. The last part is the research conclusions, confirms the improved measurement methods of free cash flow have better forecast effect in the financial early warning model, analyzes the shortcomings of this article and raises prospects.