Study On Precaution Of Enterprises' Financial Failure

It is not reality for any enterprise to prevent financial failure completily in market economy. Under the special condition, some enterprises are always got into the mess of fianacial failure, which can be predicted in advance by people. Based on the summarization to the research fruits of financial failure abroad, this paper discusses the relationship between financial failure and bankrupt and discusses the relationship between financial failure and ST(special treasurement). This paper analyses and evaluates those familiar predition models about financial failure after introducing the definition, functions and characters about prior warning of financial failure. At the part of empirical study, this paper chooses 124 A-stock listed companies from Stock Exchange of Shanghai and Shenzhen as research samples, makes use of the Step Method to filter the 13 possible variables (including 3 debt-paying ability indexes, 3 operating ability indexes, 4 profitability indexes and 3 cash flow indexes) in analysis and finally sets up discrimimant models by Fisher discrimimant rules with the samples' financial data. Then this paper validates the stability of these models using the Self-validation and Cross-validation before analyzing the prediction ability of these models with Outside-validation. The results show: in 13 possible variables, operating fund ratio, stock turnover ratio, total assets turnover ratio, rate of return on total assets and rate of retained profit to total assets have an important influence on finance and the accurate rates of our models are 86.8% for -0-year data and 79.82% for -1-year data. Finally, this paper validates the feability and validity of these models with -1-year financial data of 58 ST listed companies and 58 non-ST listed companies between 1998 and 1999. The result proves these models are feasible and effective. The accurate rate calculated by these models is 88.07% for -1-year data from ST listed companies and non-ST listed companies.This paper is divided into six parts. In the first part, it introduces the research purpose and the present situation abroad. In the second part, it firstly introduces the definitions and research subjects about financial failure. Based on the analysis of the relationship between financial failure and bankrupt and of the relationship between financial failure and ST, the understandability to financial failure and the special reseach subject in this paper are put forward. In the third part, it analyses and evaluates those familiar prediction models after introducing the definition, functions and charactersabout precaution of financial failure. In the fourth part, it proves the predictability to enterprises' financial failure and screens out those financial ratios which reflect the situation that one enterprise' finance is defeated. In the fifth part, it ulteriorly tests the maneuverability and validity of those models with the data from ST listed companies and non-ST companies. The last part is conclusion.