外文翻译对企业财务风险的预警和控制.doc

科技学院
毕 业 设 计（英文翻译）

On the corporate financial risk early warning 译文内容 and control（对企业财务风险预警和控制）
译文出处 International Conference on Future Information Technology and Management Engineering

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On the corporate financial risk early warning and control

Abstract - Financial risk that a firm will be unable to meet its financial oblig
risk is primarilya function of the relative amount of debt that the firm uses to finance its
assets. A higher proportion of debt increases the likelihood that at some point the f unable to make the required interest and principal payments. Early warning and cont
financial risks effectively can provide a safe and steady operating environment. This paper believe that through analyzing the financial situation, preparing the cash-flow budget, establishing the financial risk index system and computational model to warn early the financial risk. On the other hand, through establishing effective capital structure, selecting correct fund-raising methods and keep the assets highly liquid to control the financial risk effectively.
Key words: Index Terms -financial risk; early warning index; contro effectively
1.INTRODUCTION
What is financial risk?
The financial risk is finance achievement and the risk of financial standing.The f risk separates the narrow sense and the broad sense.The narrow sense financial risk is into debt the causable by the business enterprise, concretely say to mean business ent because of lend funds but increment of lose the possibility of the ability of repaying the variability of the business enterprise profits (shareholder income);The broad sens financial risk means the finance system of business enterprise in objective existence because of various factor function that is hard or can not anticipate and control, mak enterprise realization of financial income and expectation financial income occurrence
from, as a result suffer a losing opportunity or possibility.
In this paper,financial risk refers to that because of the unreasonable structure and inappropriate financing, companies may lose solvency, which will lead to the declining in
expected return and even bankruptcy of investors.
How does financial risk?Financial risk arises through countless transactions of a
financial nature, including sales and purchases, investments and loans, and various other business activities.It can arise as a result of legal transactions, new projects, mergers and acquisitions, debt financing, the energy component of costs, or through the activities of
management, stakeholders, competitors, foreign governments, or weather. In today's s debt management is a necessary business strategy for corporate. Through debt managem corporate can make up the shortage of equity fund, and earn profit by using loan fu fund needed in production and management generally come from the issued shares (or o
equity funds) and debt. In which, the interest burden of debt (including bank loans, issued
corporate bonds, and trade credit) is definite. If debt takes up a high proportion
fund of the company or the company's profit rate is lower than the interest rate, then the
distributable profit of shareholders is reduced, the dividend is decreased, and the r investment is increased. For example, when a company's profit rate on fund is 10% a
corresponding interest rate of company's loan or the interest rate of issued bond' face is
8%,the interest income of shareholders will be higher than 10%; if a company's profit
fund is lower than 8%, the company would be required to pay loans or bonds interest by 8%,the income of common shareholders will be lower than profit rate on fund.In fact, the financial leverage resulting from company's fund raising is like a double-edged sword, and when the interest rate generated by fund raising is higher than interest rate, it will bring
growth effect to shareholders' income; otherwise, it is the financial risk of income Corporate usually encounter a wide variety of financial risks in production and management process. Because of the existence of financial risks, corporate are very
to achieve the initial financial benefits, and some of financial risks may even threaten the
normal operation and production of corporate. At present, in some corporate, financi are not received the attention from the management, then how could corporate predict potential finance risks and have an effective control on them after discovering finan
2. EARL Y WARNING INDICATOR SYSTEM OF FINANCIAL RISK
The financial risk identifies is manage to the financial risk contents before the disadvantageous risk just appeared or appeared, identify, with accurate held various risk of signal and it creation reason. The financial risk early warning wants before the
financial risk physically takes place and catches and keeps watch on various small ev change, with benefit prevention and for adopt an appropriate counterplan to fight for group wants to build up a perfect information management system, once discovering fin risk signal, the ability Be accurate to spread into a main personnel in time, in orde circumstances of gradually extension.
To effectively prevent financial risks, corporate should take some measures and e early warning indicator system for financial risk analysis.
2.1 Analyze the change income levels to timely detect risk signals
Corporate earnings include 3 levels: operating income, regular income and periodic income. Operating income means the remaining net income deducting operating costs, management cost, sale cost, tax and other additional cost from the total income. Regular income is the income based on the income deducting finance charges. While periodic income is the total of regular income and net non-operating income and expenditure. If a corporate has started to take a loss since the period of operating income, this corporate is
nearly bankrupt. If the periodic income is in the black, maybe this income is due to operations or accident, such as the sale of securities and real estate. If the operat in the black, while the regular income is in the red, then the crisis signal has app is because the corporate capital structure is irrational, borrowing scale is large,
burden is heavy. At this time, some early warning measures should be taken to avoid the
financial crises [1]81-82.
2.2 Develop the cash flow budget and analyze financial conditions
The development of corporate cash flow budget is one of the most important parts in financial management. Accurate cash flow budget can help financial managers analyze financial conditions and provide risk early warning signal. As the object of corporate finance is cash or cash flow, so in the short term, whether the corporate can survivenot is entirely dependent on whether it is in the black, but on whether there is sufficient cash for various expenses. The premise of the precaution is that corporation should have the pr For common stable business, its receivables, payables and inventory can hold steady, so
the net amount of cash flow generated by operating activities should be greater than
(otherwise, the dangerous signal occurs) [2]125-126. To accurately develop cash flow budget, corporate should summarize various specific objectives, Indicate future expected income,
cash flow, financial condition and invest plan in a quantized way and establish rol flow budget considering ten days, month, quarter, year as the period.
2.3 Establish risk analysis indicator system and timely monitor financial risk
The following indicators are those financial indictors commonly used in the anal
financial risk by financi managers l
1, profitability
In the long run, if a corporate wants to stay away from the financial crisis, good
profitability is a must, then its external financing capacity and liquidation of de will be stronger. Indicators include:
Net present value rate of total assets = (cash flow generated in operating activities+ dividends or cash obtained from interest payments+ cash interest payments+ cash to pay
income tax) / average total assets
Net present value rate of sale = cash flow generated by operating activities / n of sale income
Profitability of stockholder interest = net profit/ average stockholder interest 2, Solvency
Basically, the risk of corporate is caused by debts and a corporate operated by capital will have only operating risk not financial risk. Therefore, weighing the fi of trading on the equity to determine the debt ratio should compare the profitability on the equity and the cost rate of debt capital, only if the former is greater than principal and interest can be paid back in time to achieve the financial leverage pr same time, debt-paying ability also should be taken into account, that is, the amoun or the allocation of strength debt of its financial the liquidity; various whether it
among reasonable. Assessment indicators are as follows: indicators reflecting short-term
solvency such as current ratio, quick ratio, etc; indicators reflecting long-term so as asset-liability ratio, equity multiplier, long-term liabilities and working capit retained earnings ratio and debt equity ratio, etc.
3. Economic efficiency
Economic efficiency will directly embody the degree of corporate management.
Indicators reflecting the asset management include turnover rate of accounting receiv balance rate between production and demand, among which: balance rate between product and demand=products sales/industrial output value.
4.Corporate developmental potential
Indicators measuring corporate developmental potential include sales growth and c maintenance and increment ratio. This paper applies improved efficiency coefficient
to conduct comprehensive evaluation and standardizeseveral values for each evaluation indicator---oneis satisfied value, while the other is non-allowed value. Then design and calculate individual efficiency coefficient of each indicators, utilize Delphi method to determine each indicator weight, and use weighted arithmetic mean or weighted geometric
mean to obtain the average, that is, comprehensive efficiency coefficient. This metho used to quantify the financial situation of corporate.
5. Financial flexibility
Financial flexibility means the capacity that corporate has to take effective measures to
change the flow and time of cash flow for the purpose of adapting to unanticipated ne opportunities, which is mainly related to the net cash flow generated by companies o
activities. Indicators reflecting financial flexibility include: working capital used to test the liquidity level of corporate total assets, ratio of total assets, redemption rate for due debt capital, ratio of actual net assets to tangible long-term assets, accounts receivable and
inventory turnover rate, etc.
3. THE CONSTRUCTION OF EARLY WARNING MODEL IN FINANCIAL RISK
Financial managers can use computer technology (such as Excel financial analysis software) to integrate the financial risk indicators which need to be analyzed to design a
"financial risk analysis model." Establish fundamental region of data (or establish a
connection) and calculation analysis region, then create formulas and data connectivity relations for each analytical indicators in the cell of calculation analysis area in order to automatically figure out the value of each indicator, finally compare the value of each
indicator with industry-standard value or reference value, consequently get the early data at any time. For example，the values in the table are automatically generated after
establishment of analytical formulas-"short-term solvency ratio" and "long-term solvency ratio", while the data used in formulas are connected to the accounting statement of each period. Thus, when the data in the accounting statements of each period are updated, the
analytical values which need to be calculated in the model are generated automaticall
financial executives analyze the situation of financial risks of each period timely .Other financial risk analysis models are also designed like this and analyzed integrated tog
4.STRENGTHEN THE FINANCIAL BUDGET MANAGEMENT OF ENTERPRISES
(TO GROUP COMPANY AS THE EXAMPLE)
1.Build up the organization organization of finance budget management
Then the Legal Representative's management to the group finance budget work of gr
company is negative total responsibility, establish from relevant the working talent section constitute of finance budget management committee, mainly draw up the target, policy of
finance budget, draw up the concrete measure and way of finance budget management, r
equilibrium finance budget project, the organization bottom reaches finance budget and moderates to solve finance budget to draw up with the problem in the performance, performance circumstance organize audit and investigate finance budget, speed up business
enterprise completion finance budget target.
2.The norm finance budget draws up procedure and method
According to the whole development strategy of the group company, according to the
procedure of "up and down combine, the ratings draw up, pursue the class gather", at of foundation up, put forward the business enterprise group finance budget target.Eac carries out the finance budget that the section reaches under the budget committee a to the business enterprise finance target and policy and combines oneself characteri the performance condition of estimate and puts forward detailed this section financ project, the finance budget committee should carry on full moderate, put forward the of first step adjustment to the problem of detection, and the feedback give to carry out a
section to give correction concerning the budget, again from finance budget committee class the bottom reach each budget performance section performance.
3.Work well to control to control with after the event in the budgetary before t
control, matter
Each budget carries out a section to periodically report the performance circumst finance budget, to new circumstance, new problem and appear deviation bigger and impo item, specially pay attention to check to seek reason to put forward the measure sugg improvement management management.Well make use of solid the information system carry on finance supervision
4.Well make use of solid the information system carry on finance supervision The establishment, sound and internal finance supervises and controls a mechanism, effective measure that guards against and dissolves financial risk.Supervision in the includes accountancy's control and management to control 2 types.The group finance supervises and controls a work esta