An Early Control Algorithm of Corporate Financial Risk Using Artificial Neural Networks

Table 1

Basic financial indicators of financial risk early warning.

Variable type	Variable name	Code	Definition
Development capacity	Total asset growth rate	X1	Total assets at the end of the period/total assets at the end of last year
	Net profit growth rate	X2	Net profit/shareholders’ equity
	Operating income growth rate	X3	Growth in operating income/total operating income in the previous year
Solvency	Liquidity ratio	X4	Total current assets/total current liabilities
	Currency ratio	X5	Closing balance of cash and cash equivalents/current liabilities
	Asset-liability ratio	X6	Total liabilities/total assets
Operating capacity	Receivable turnover ratio	X7	Sales revenue/average accounts receivable balance
	Inventory turnover	X8	Cost of sales/average inventory balance
	Current asset turnover	X9	Main business income/average balance of current assets
	Turnover of total assets	X10	Main business income/average total assets
Profitability	Return on assets	X11
	Net profit margin of total assets	X12	Net profit/total average assets
	Rate of return on common stockholders’ equity	X13	Net assets at the end of the period/net assets at the end of last year-1
	Operating profit rate	X14	Operating profit/total business income
	Earnings per share	X15
Human capital capability	Executive performance compensation	X16	Salary payable by senior executives
	Director performance compensation	X17	Employee remuneration payable by directors
	Production staff performance pay	X18	Salary payable by production staff