Cash Flow-based Study Of The Financial Early-warning

Opportunity and risk like a pair of inseparable companions, since China join into the WTO, market gradually opening up and rapid development bring us opportunity at the same time bring us risk. For the enterprise, financial risk is very important, and be connected with the fate of the whole enterprise. So it is necessary to establish a timely and accurate financial early warming.Today cash is so important, measuring the sustainable development of an enterprise is no longer just take profits as the only measure, what’s more, in the measure of enterprise development ability cash is better than profit. However, the previous study of financial warning is mostly based on the data of the balance sheet to construct the model, these data will be change of the different accounting policies and accounting estimates. In addition to,affected by manipulation. Therefore, the reliability remains to be proven. In contrast, the cash flow statement is based on cash basis, not affected by the accounting policies and accounting estimates, also won’t affected by manipulation, the reliability is better. Based on the above views, this paper, from the perspective of cash flow to build the financial early warning model., based on the perspective of cash flow from the debt paying ability, cash getting ability, financial flexibility, development ability, the structure of the cash flow, and non-financial indicators to choose the early warning indicators, and according to The empirical analysis to establish the financial early warming model. In order to guarantee the reliability of the early warning model, this paper also through the test group to inspect the early warning model, confirmed the accuracy of the early warning models.The study found that:(1) Financial early warning model based on cash flow index can predict the financial situation of enterprise. Through the significant analysis, we obtained 12 different financial index between ST and non-ST before three years, They are cash flow cover ratio;cash flow ratio; cash flow-to-debt-ratio; cash ratio; cash flow of operating activities per share; cash recovery of total assets; main income ratio; cash investment ratio; top ten shareholders holdings. It fully shows that financial early warning model based on index of cash-flow can predict function of the enterprise financial situation.(2) From the accuracy of prediction, ST companies is better than the non-ST companies, it is say that it’s easier to mistaken non-ST companies for ST companies. So we remind enterprises should pay special attention to improve the prediction accuracy of nonST.According to the research results, on the one hand, When the authorities judge whether a company’s stock is ST, they should pay attention to the cash flow, which is easier to find the surface profit but it has in financial crisis in fact. It can make judgment more reasonable and more reliable; on the other hand, the enterprise should cultivate awareness of risk management and make management professional reflect the changes of the cash flow at any time in order to enhance the risk strain capacity of enterprises.