Study Of Financial Risk For M Biotechnology Co.,Ltd.

Financial risk analysis includes three parts:risk identification,risk measurement,and risk control.We took financial records of M Biotech Enterprise to analyze the risk of bankruptcy of the business and provide early warning promptly.Appropriate and effective methods should be adopted to maintain safe and normal financial operations as well as to protect the economic interests of investors.M Biotech Enterprise belongs to one of the SMEs and is concerned about keeping the minimum profit to operate the business.In the past seven years,M Biotech Enterprise has experienced shareholders’ termination of investment,the impact of the COVID19 epidemic,and the market overhanging.Based on the monthly balance sheet of M Biotech Enterprise,this study extracted the data of 71 months from the year 2016 to 2021 and selected operating capital,debt Ratio,profitability,liability,cash flow,total assets,and sales capacity as the parameters to establish an Optimized Altman Model(OAM).The OAM is based on the effective parameters of the enterprise’s financial statements for each month,which can provide an early warning of a financial crisis being occurred within a year.This study is to provide a financial risk early warning for the company.Technically,it is based on the adjusted parameters to optimize the Altman Model by using principal component analysis to reduce the parameters to market,capital,and strategy.At this point,OAM can get the occurrence probability of bankrupt via the ratio of assets and liabilities,to identify the company’s finance risk.When the liabilities are higher than the assets,and the company’s finance is unable to repay its debts,then the bankruptcy of the company is assured.An early warning is issued to suggest the changing of operating strategy in a timely and effective manner in sales and dealing with the company’s financial crisis.The OAM has been tested via Logistic regression analysis as an early warning of financial risk for the M Biotech Enterprise.It is also recommended to use the financial early risk warning provided by the OAM to solve problems related to financial difficulties being concerned for the SMEs.