Cash Flow Analysis, Credit Risk Management In Commercial Banks

Credit risk management is the core content of modern commercial bank management. Also, it is the basis of existing and development of modern commercial banks. As the main tool of commercial banks, which used to identify and control the credit risk, financial analysis is used in very wide range and plays a very important role in Credit risk management. Moreover, it has made great contribution to keeping and developing the healthy development of commercial banks of China in the past decades.But at the same time, it is easy to see that the financial analysis system of commercial banks of China, which is widely used currently, is based on the balance sheet and profit& loss statement. In addition, most content of it comes from the financial analysis system of company and applies in immature way. So, there are lots of limitations itself. This thesis point out that cash flow analysis, which always ignored by commercial banks of China should be introduced in financial analysis system in order to get rid of limitations mentioned above and improve the quality of financial analysis system.There are lots of benefits in that way, such as:1.Getting out of the financial impact of accounting policy changes and reflecting the business situation of company objectively; 2. Reflecting the capacity of refund and quality of the profitability of company, so as to effectively identify the potential credit risk of company; 3.revealing the development stage of company, as well as the potential development in the future by analyzing the structure of cash flow and so on.Therefore, this thesis argues that the cash flow analysis plays an irreplaceable role in financial analysis system of credit risk management. In addition, financial analysis system must be consummated by introducing the cash flow analysis.Moreover, in order to help commercial banks of China to improve the ability of identifying and controlling the credit risk, this thesis also provides many methods, such as structure analysis of cash flow, eight models of cash flow for identifying the situation and ability of development of company, financial index system of cash flow analysis and so on.Finally, this thesis put the relative theory mentioned into practice through proceeding traditional financial analysis and cash flow analysis on JAC Company. The results of analysis above verify that, comparing to the traditional financial analysis, the cash flow analysis is more effective, precise and reliable. Also commercial banks of China could be stronger and healthier by identifying and controlling the credit risk effectively through cash flow analysis.