Research On Financial Risk Of A Steel Company Based On Cash Flow

From the perspective of my country’s economic construction and social development,the steel industry is in a very important position,but there is still a problem of overcapacity in the steel industry on the macro level.Many steel companies are in a state of full loss,and are even on the verge of bankruptcy.The capital investment of steel companies is high,and if there is insufficient cash flow or poor operation,the company will face serious financial risks.In the environment of rapid development of capital market and information technology,opportunities and challenges exist.Companies need to identify their financial risks in a timely manner,adopt appropriate risk control measures,improve risk response capabilities,and improve the problems of unreasonable financial structure and insufficient cash flow,to win development opportunities for enterprises.Cash flow and financial risk are closely related.The traditional financial indicator system is very easy to be manipulated and cannot reflect the company’s cash flow ability.The effect of prediction and comparison is poor.Cash flow indicators can more reliably show the capital operation strength of a company,and reflect the level of revenue creation and profitability.Comparing the profitability of various companies,it is particularly important for companies to use cash flow information to identify financial risks.Therefore,taking A Steel Company as a case,this paper starts from cash flow indicators to identify its financial risks.Firstly,according to financial statements,financial risks are identified from three aspects: investment,financing and operation activities.The main risks include poor short-term liquidity of assets,high downward pressure on short-term debt repayment,and low cash income ratio of assets,slow recovery of assets;slow recovery of receivables,operating funds tight;low efficiency of capacity utilization,poor profit quality and so on.Secondly,the comprehensive fuzzy evaluation method is used to quantitatively evaluate the financial risk of A company,and it is calculated that the financial winds of financing,investment,and operation are all at the middle warning level.After analyzing the causes of the company’s risk,it is believed that A Steel Company has a series of problems such as unreasonable product sales methods,too single financing methods,and long investment project cycles,which cause it to face certain financial risks.Finally,taking the cash flow as the entry point,we put forward risk response measures: in terms of financing activities,it is necessary to broaden financing channels and choose a reasonable debt maturity;investment activities must carefully select investment projects,extend to the upstream and downstream of the industrial chain,and complete the transformation upgrade;operating activities must manage costs,improve accounts receivable and inventory management systems.