Financial Early Warning Research Of Modified Z Model Based On Financial Elements

With the reform and opening-up of more than 30 years,our country capital market has been facing rapid development and has become an important part of economic system.Theoretically,the company will have a brighter future when being listed for transactions.However,we found that some enterprises not only fail to obtain sustainable development,but also face financial difficulties in reality.Steel industry enterprises are facing high financial risk.Expansion of investment scale and production capacity do not bring benefits to the growth of earnings.Therefore,how to analyze financial situation of listed companies of the steel industry correctly to help to complete the supply side of reform and to improve competitive force becomes very necessary and important.Based on this situation,this article tries to develop early warning model for specific industry(e.g.steel industry).We can apply the research approach to other industries,so as to enrich further domestic research on financial early warning theory and establish a complete system of early warning models of all domestic industries.This will help senior managers not only make scientific and rational management decisions more quickly and more properly,but also take timely measures to reduce the possibility of being in financial trouble,so as to realize sustainable financial development.Shareholders and creditors can also apply public financial statement data to the model to assess the corresponding enterprise,which can help them make reasonable investment decisions or ask companies in financial distress for debt repayment or transfer in order to reduce their economic losses.Construction and evaluation of financial early warning model gives government relevant departments an intuitive understanding of present situation and difficulties of industry development.Government relevant departments can help enterprises to get through those challenges through establishment of related policies and measures for the administration,which is conducive to the overall health of sustained and steady economy development.This article no longer selects indicators based on the traditional three ability analysis framework.Instead,it establishes the index system based on financial elements within the framework of five states.And then make descriptive analysis and non-parametric test.Those actions can make index connotation more specific and meaningful,avoiding inaccuracy of the discriminant model due to inaccuracy of the index itself.Through the Mann-Whitney U,we can select indicators which have significant differences after discriminant analysis and ultimately determine the discriminant model.This article selects samples for all 39 listed companies of steel industry and constructs a modified Z model.Z=-0.527X1+0.519X2+0.471X3.And cost of sales ratio is indicated asX1,tax revenue proportion is indicated asX2and the weighted average return on equity after deducting non-recurring gains and losses is indicated asX3.The value of 7.88 is the critical point of financial distress which shows financial crisis the listed company of steel industry is facing.Overall,the accurate rate of modified Z model is 89.74%.When we apply financial data of 12 listed companies of steel industry in 2013 to the analysis model,the discriminant model shows that all these companies are in financial risk,consistent with actual situation.In conclusion,the warning effect of discriminant model is ideal.And through contrast test,we found that whether using the revised financial indicators based on financial elements will influence accuracy of the model.Because when the financial index is revised,it can reflect the content of index more accurately.So,using revised financial index can significantly enhance the prediction effect of the model.