The Research on the Financial Early Warning System Based on Cash Flow

Now the listed companies in China are facing a severe problem about the financial situation because of the financial tsunami. Certainly, the stakeholders of the enterprises will experience different levels of loss. Therefore, the build of effective early-warning index system of financial crisis make a significance to corporate investors, creditors, operators, etc. This article indicates the financial data limitation of China´s listed companies, considers the cash flow as a vital factor in financial early-warning system and establishes three financial early-warning indexes based on cash flow, and then predicts three thresholds related with the three indexes respectively. The paper have a conclusion that the model on three financial early-warning indexes is applicable by calculation and empirical verification in listed companies in China.