Research On Financial Risk Pre-warning Of Hunan Salt Industry Co., LTD Based On The Theory Of System Dynamics

Because of the complexity and variability of the business environment and enterprises themselves, enterprises always exist in the risky environment. As an age-old industry with a history of more than two thousand years, salt industry is a monopoly industry. But with the increasing demands to abolish food salt monopoly, the salt enterprises are losing the advantage and facing the enormous pressure. As a key back-up company to be listed in the future, Hunan Salt Industry Co., Ltd. has facing the more open market. Although the company has a solid foundation, because of the long government monopoly, it has strong planned-economy characteristics which result a weak market consciousness. In the presence of the coming reform of salt industry system and going listed, there is no doubt that the company will face more external risks and challenges. So, it has a great significance to establish a financial risk pre-warning system for Hunan Salt Industry Co., Ltd..Using analysis method of system dynamics, this thesis construct a financial risk pre-warning model with the characteristics of the Hunan Salt Industry Co., Ltd.. The system dynamics pre-warning model can compensate for some shortcomings of traditional financial early-warning model. Based on the theory of financial pre-warning and system dynamics, this thesis analyzes the financial status of the Hunan Salt Industry Co., Ltd. It follows the necessity and feasibility to build a financial risk pre-warning model based on system dynamics in the company. By analyzing salt company’s cash flow, the Cash Flow Forecasting Model is designed. And combining with financial analysis indicators, salt company’s Financial Risk Pre-warning Index Model is constructed. Based on the analysis of financial data from 2013 to 2014, using the two models mentioned above, this thesis predicts and analyses the company’s financial risk in 2015 and 2016. The author found that the company has good report earning and operating performance. But it still has potential risks in investment, financing, profitability and asset management. In the end, this thesis further analyses the causes of the risk formation and some possible preventive measures.The purpose of this thesis is to timely find the company’s financial problems and the causes through the model, and take effective measures to avoid financial risk. Besides, the result of the pre-warning will provide some reference to share holders, creditors, suppliers and other stake holders of Hunan Salt Industry Co., Ltd..