Research On The Construction And Application Of GM Company's Financial Risk Early Warning Indicator System

In recent years,the photovoltaic industry has been rapidly developed in China,and the overall scale of the industry has once been out of control.By April 2018,the National Energy Administration had issued regulations for controlling the scale of photovoltaic industry.Since then,the National Development and Reform Commission,the Ministry of Finance and the National Energy Administration jointly issued the "531" photovoltaic policy.This new policy has put great pressure on domestic photovoltaic companies,leading to a more intense competition of market environment.As a result,the financial risks are sharply increased.Timely and effective analysis,early warning and prevention of financial risks have become the key tasks for the development of photovoltaic enterprises.Therefore,it is very necessary to improve early warning of financial risk for photovoltaic enterprises.Firstly,the the domestic and foreign literature on early warning of financial risk is systematically reviewed.At the same time,the important concepts and theories involved in this paper are introduced,which provides a basis for the analysis in the later sections.Subsequently,the basic operating situation of GM company is introduced,the main risks existed in GM company are analyzed,the current situation and problems in financial risk management of GM company are explored,and the necessity and feasibility of establishing an early warning system of financial risks for GM company are clarified.Afterward,based on the experience of scholars,the actual situation of GM company,and the financial data of the company from 2013 to 2017,the early warning system of financial risks including operational risk,debt repayment risk,investment risk and external risk is developed for the company.In this process,the entropy method is used to determine the weight of every early warning indicator,the Pearson correlation analysis method is employed to identify important indicators,and the efficacy coefficient method is utilized to calculate the early warning indicators.It is found that the overall early warning level of the company in the past five years is light warning.Finally,the application results of the early warning index system of financial risks are analyzed,and this system is proved to be effective.In this paper,the basic operating situations and related institutional arrangements of GM Company are obtained,and the main sources of financial risks of this company are recognized through on-the-spot investigations.Meanwhile,based on the characteristics of the industry and and the research experience of scholars,an early warning indicator system of financial risks that can effectively monitors the potential risks is established for this company.This system gives the management of this company enough time to discover and control financial risks.In this way,the ability of risk aversion of this company can be improved,and the financial crisis can be avoid.