The Research on Financial Early Warning of China’s New Energy Listed Company

As we all know, resource consumption and environmental pollution, especially climate warming has become the focus of the world since the 21st century. Under this background, the development of new energy companies and their financial situation have also been concerned by investors and other stakeholders. Given this situation, the paper analyzes the financial risk of China’s new energy companies since 2008 in a sample of 165 listed companies in Sohu Securities Network division of China’s new energy sector, and draws a few of relevant conclusions in the end.


Introduction
With the development of the economy and society, the environmental problems that human beings are facing have become worse and worse.The production of nonrenewable resources like petroleum and coal has declined year by year.All of the countries in the world are facing the same significant issue which is to find alternative energy sources.As the biggest developing country, China's economic development is rapid, and the per capita GDP is increasing constantly.It is a process associated with the consumption of energy and environmental pollution.Some relevant statistical data showed that China's total energy consumption has reached 30.66 billion tons of standard coal in 2009.Compared with the data of 2005, the total of energy consumption increases by 29.94%.China's economy belongs to extensive economy, which is along with serious environmental pollution in the process of development.Emissions of greenhouse gases are contributing to climate warming.In addition, the hazy weather is even more serious.Faced with such serious energy consumption and environmental pollution, it is necessary for us to make full use of the alternative new energy to achieve sustainable developments imminent.In China, a lot of listed companies related to energies are making use of new energies in order to achieve sustainable development.As a result, the investors and other stakeholders pay more attention to new energy companies.
After the economic crisis in 2008, the state of listed companies' operation is unstable.The financial problems have being appearing, which have bad influences on companies' business.Investors also face greater risks of the enterprise.Considering about the two points, researching the financial risk of new energy listed companies has an important practical significance.
In addition, the Z-score model as a multiple discriminant analysis model evaluating the enterprise financial status is widely used in real estate, automobile and machinery and other industries of the listed company financial warning system.However, dose this model also apply to financial early warning analysis new energy enterprise?So the paper analyzes the financial risk of China's new energy companies since 2008 in a sample of 165 listed companies in Sohu Securities Network division of China's new energy sector, and concludes a few of relevant conclusions in the end.

Research Overview
The research on companies' financial warning system is on the basis of the enterprise financial analysis.The economy of the Western developed countries started early and developed rapidly in the next few decades.Their market system is sound.Therefore the research on companies' financial warning system is more mature, and large numbers of remarkable achievements have been made.2. The   companies' investment payback period is long, the proportion of non-current assets account for the company's total assets is large, the difference between the current assets and current liabilities is less, and the companies' recent profit ability is not strong.All of these factors contribute the low Z value of listed companies.But this doesn't mean that the companies exist significant financial risk.Jinshan Gufen is a electric power enterprise, whose total assets is 6.24 billion yuan in 2009, and the current assets is 1.87 billion yuan accounting for 29.97% of total assets.Its current liabilities is 2.17 billion yuan, and the working capital is 300 million yuan.Since 2008, Jinshan Gufen has the original 28.02 million yuan net profit growth to $2012 by 192 million yuan, an average growth rate of 4.24%.But because of the less working capital, the Z value calculated is lower.However it doesn't mean that Jinshan Gufen is in poor financial situation, on the verge of bankruptcy.
In the new energy plate, the enterprises belonging to mechanical industry, energy industry and electric power industry account for large proportion.The common characteristics of listed companies in these industries is that the payback period is long, the non-current assets account for large proportion, the liquidity ratio is less, and the net profit growth is slow.All of these factors have a great influence on the Z value distribution of listed company in the new energy sector.
By concrete analysis of listed companies' Z values in new energy plate in 2012, we found that the share of companies whose Z value is lower than 1.8 is as high as 91%.Among them, the amount of listed companies in power industry is 17.There are 9 general and special equipment manufacturing enterprises.The number of metal,oil and coal industry listed companies is 13.There are 5 listed companies in the housing construction industry, and 4 enterprises in transportation industry.All of these listed companies have a longer payback period than other enterprises, and their upfront investment is large.Especially the listed company of real estate construction, their asset-liability ratio is higher, generally over 50%.As a result, their Z value is lower.So only using the Z value model to forecast the financial risk is unilateral.
It is important to note that, among the 93 listed companies in new energy plant, WoEr HeCai, RongXin GuFen, TianLong GuangDian, JiangHe ChuangJian, DongShan JingMi, ZhongMei NengYuan and DongFang RiSheng have a lower Z value compared with the first four years, especially TianLong GuangDian.The Z value of TianLong GuangDian in 2012 is 0.52.By contrast, its Z value in 2008-2011 respectively are 2.98, 5.25, 4.92 and 2.98.The main cause of this gap is that its current ratio in 2012 drops by 52.23% compared with 2011, the current assets fall by 28.92%, and the liabilities increase by 49.4%.The decrease of current assets and increase of current liabilities at the same time, make TianLong GuangDian face with severe repayment risk.
In addition, we find that the Z value of listed companies is not the higher the better.Although the Z value is higher, the smaller the financial risk of the enterprise, the Z value too high may lead to idle funds.In the new energy sector, the Z value is the highest in Yunnan Zhuye.Its Z value is as high as 41.43 in 2010.Yunnan Zhuye's liquid assets is 1.01 billion yuan in 2010, the monetary funds is 929 million yuan, accounting for 91.98% of the current assets, and the liquidity ratio is as high as 54.36.Although the company's short-term solvency risk is very small, or little, the monetary fund is too much, and it likely exists the problems of idle funds, a waste of corporate resources.

Conclusion
By using the Z-Score model analyze the financial status of listed companies of Chinese new energy sector, we draw the following conclusions.
First of all, in the new energy sector, some enterprises need to adjust the financial strategy and business strategy, on the basis of making full use of the working capital, to reduce the enterprise short-term debt risk and avoid the enterprise capital chain rupture risk which caused by the emergency.
Second, the Z-score model does not apply to all types of enterprises.Different enterprises can properly adjust the variable when using the Z-score model.General manufacturing enterprises can directly use the Z-score model to analyze the enterprise financial problems, and the enterprise which the investment payback period is long, and the assets are mainly composed of non-current assets can modify the Z value model, such as modify the variable X 1 into the variable which related to its asset-liability ratio, fully considering the non-current assets and non-current liabilities' influence on enterprise financial condition, or increasing other relevant financial ratio index, to comprehensive analyze the enterprise financial early warning system.

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