Research On Financial Risk Evaluation And Prevention Of Chunlan Company

With the acceleration of China's economic transformation and upgrade,manufacturing industry faces labor cost advantage to weaken,backward level of industry,environment and resource consumption,export slowdown,etc.As one of the earliest open industries in China,the household appliance manufacturing industry faces the reality of market space saturation,shrinking profit space and high inventory.Jiangsu Chunlan Refrigeration Equipment Company Limited was one of the world's seven major air conditioning manufacturers.But the main business has been in decline,since Chunlan turned to diversification strategies.With the strategy to return to main business,the company is faced with more intense competition now.Therefore,the purpose of this paper is to properly evaluate financial risk of Chunlan,and put forward measures to prevent financial risks.This will provide references for Chunlan strengthening business.This paper identifies the financial risk of Chunlan and the causes,combining with enterprise information and industry background.According to the results of identification,there is short-term solvency risk and investment risk on operational assets in the operation of Chunlan.Besides,Chunlan also has serious main business risk,inventory liquidating risk and the risk of accounts receivable recovery.The above risks are mainly caused by industry competiton and the internal management problem of Chunlan.This paper establishes the original evaluation index system of financial risk,based on the results of the above identification.On the basis,this paper establishes a comprehensive evaluation model of financial risk for chunlan company,applying the principal component analysis(PCA).Moreover,proper assessment standard is introduced to the model.The model is applied to evaluating financial risk of the Chunlan.The result of the comparison with peer companies shows that the overall financial risk level of Chunlan is high,and the risks of main business and inventory liquidating are the most serious.The trend analysis showes that Chunlan had the highest overall financial risk in 2015,with the lowest level of financial risk in 2013.The sharp rise in financial risk level was due to the disappearance of the original positive factor,and the uniform worsening of all financial risk factors.Finally,this paper puts forward appropriate prevention measures from institutional culture,main business,raising capital and investment aspects,referring to evaluation results and the background of Chunlan.This study can provide some reference for financial risk evaluation and prevention of Chunlan.It can also be partially applied to other enterprises.Furthermore,the study provides some ideas for theoretical research on evaluating index selection,evaluation method selection and comprehensive evaluation model establishment.