Financial Pre-warning Research Of Equipment Manufacturing Listed Companies-based On The Analysis Of Cash Flow

Many domestic and foreign enterprises faced losses or even bankruptcy becausethe real economy was hit heavily by the outbreak of global financial crisis in2008.The internal cause of enterprise bankruptcy is long-term losses, and the external factoris inability of repaying matured debts. On the premise that the enterprises can operatesustainably, repaying debts needs cash,which mainly depends on an enterprise’sability to create cash flow. It mainly concentrated in the operating activities forenterprises to create cash flow. Therefore, financial pre-warning research based oncash flow from the operating activities has practical guiding significance.Equipment manufacturing industry is a strategic industry related to nationaleconomic security and national defense security. But, huge investment and longproduction cycle lead to higher inventory balance, with big ratio of raw materials,semi-finished products among the inventory amount. So inventory turnover for theindustry is low, and capital occupying amount of inventory is also high. In addition,two factors cause that the earnings quality is bad, including high proportion for theaccounts receivable among income due to the special sales way and low turnover ratiofor the accounts receivable. Low inventory turnover and bad earnings quality havenegative influence on cash flow adequacy, not conducive to enterprise’s debt repayingon time and fully, increasing the probability of financial crisis for enterprises. Thefinancial crisis warning research for the equipment manufacturing industry hasimportant significance for countries and enterprises.Firstly, this paper does theoretical research through the normative researchmethod and builds up the financial pre-warning index system suitable for equipmentmanufacturing listed companies, based on the theoretical analysis of financial crisisand financial analysis of equipment manufacturing industry. Secondly, by theempirical research method, the paper makes a statistical analysis of the financialpre-warning indexes above, obtaining the logic regression equation as well as theprobability equation of financial crisis. The author uses the test samples to evaluatepredicting accuracy of the logic regression equation, finding that predicting accuracyis higher and higher with the drawing near of ST and the total predicting accuracy forthree years in a row is more than75%. So the logic regression model has a certain of theoretical and practical value. The probability equation reveals that, for equipmentmanufacturing industry, the possibility of financial crisis shows a negative correlationwith debt paying ability, operating ability and profitability. In addition, we can inferthat net cash flow from operating activities has an important effect on the occurrenceof financial crisis. The empirical conclusion creatively proves that pre-warning to STcontributes to forewarning enterprise bankruptcy. Finally, in this paper, somemeasures and suggestions are put forward for equipment manufacturing enterprises toguard against financial crisis, including improving managers’ financial crisisconsciousness, establishing the financial pre-warning system, strengthening internalcontrol, improving the financial ability, making reasonable cash reserves andstrengthening the accounts receivable management.