On the corporate financial risk early warning and control

Financial risk that a firm will be unable to meet its financial obligations. This risk is primarily a 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 firm will be unable to make the required interest and principal payments. Early warning and controlling 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.