Research Article

A Financial Risk Early Warning of Listed Companies Based on PCA and BP Neural Network

Table 1

The detail of selected financial indicators.

Types of indexIndicator nameDefinitionCalculationVariable symbol

LabelSTThe company has financial problems and the stock is marked for special treatment (ST)Yes or no

ProfitabilityNet fixed assetsA metric that evaluates the net value of a company’s fixed assetsTotal fixed asset purchase price + capital improvements)–(accumulated depreciation + fixed asset liabilities)X1
Operating profitIts total earnings from its core business functions for a given periodRevenue—operating costs—cost of goods sold (COGS)—other day-to-day expensesX2
Return on total assets (ROTA)A ratio that measures a company’s earnings before interest and taxes relative to its total net assetsEbit/average total assetsX3
Operating profit marginA performance ratio that reflects the percentage of profit a company produces from its operationsOperating income/net sales revenueX4
Cost to sales ratioA financial ratio that compares a company’s expenses generated by sales activity to its revenueCost of sales/total revenueX5
Return on equity (ROE)This index reflects the return level of shareholders’ equity and is used to measure the efficiency of the company’s own capitalNet income/shareholders’ equityX6
Gross profit marginA measure of profitability that shows the percentage of revenue that exceeds the cost of goods sold(Net sales—cost of goods sold)/net salesX7
Cost rateThe ratio between the cost of using funds and the amount effectively raisedTotal cost/total revenueX8

SolvencyCurrent ratio (CR)A liquidity ratio that measures a company’s ability to pay short-term obligations or those due within one yearCurrent assets/current liabilitiesX9
Quick ratio (QR)A measure of a company’s ability to meet its short-term obligations with its most liquid assets(Current assets—inventories—prepaid expenses)/current liabilitiesX10
Cash ratioA liquidity measure that shows a company’s ability to cover its short-term obligations using only cash and cash equivalentsCash and cash equivalents/current liabilitiesX11
Debt-to-assets ratioShowing how much of a business is owned by creditors compared with how much of the company’s assets are owned by shareholdersTotal debt/total assetsX12
Capitalization ratioA measure of the proportion of debt in a company’s capital base, its funds from lenders and stockholdersTotal debt/capitalizationX13
Liquidation value ratioThe ratio of tangible assets to liabilities reflects the company’s ability to pay off all debts(Liquidation value of assets–book value of liabilities)/total liabilitiesX14

Development capabilityMain business’s increasing rate of incomeA measure of the company’s product life cycle and judge the stage of the company’s development(Current period revenue—prior period revenue)/prior period revenueX15
Net profit margin ratioAn index used to evaluate the quality of net incomeNet profit/revenueX16
Net assets growth rateA ratio reflects the expansion speed of the capital scale of the enterprise(Current period net assets—prior period net assets)/prior period net assetsX17
Total assets growth rateAn index to analyze the capital accumulation ability and development ability of enterprises in that yearAsset growth/total assetsX18

Cash flowCash flow from operating activitiesCash flows generated by all transactions and events other than investment activities and financing activities of the enterpriseFunds from operations + changes in working capitalX19
Current assetsCurrent assets are all the assets of a company that are expected to be sold or used as a result of standard business operations over the next yearCurrent assets are all the assets of a company that are expected to be sold or used as a result of standard business operations over the next yearX20
Current liabilitiesCurrent liabilities are a company’s debts or obligations that are due to be paid to creditors within one yearCurrent liabilities are a company’s debts or obligations that are due to be paid to creditors within one yearX21
Cash flow to sales ratioAssets that can be realized or utilized by an enterprise within an operating cycle of one year or moreOperating cashflow/net salesX22
Return on assets (ROA)A measure of net profit generated per unit of assetsNet income/average total assetsX23

Operating capacityOperating cash flow to net profit ratioA measure of the current profitability of a businessOperating cash flow/net profitX24
Operating cash flow ratioThe value of cash flow compared to other itemOperating cash flow/current liabilitiesX25
Closing balanceThe total in an account at the end of a reporting periodNet cash flow + opening balanceX26