The so-called enterprise financial early warning, that is, financial failure early warning, refers to the use of financial statements, business plans and other related accounting information provided by enterprises, the use of accounting, statistics, finance, enterprise management, marketing theory, the use of ratio analysis, comparative analysis, factor analysis and other analytical methods, to analyze and predict the business activities and financial activities of enterprises, in order to find out the potential business risks and financial risks in enterprise management activities, and to issue an early warning to enterprise operators before the crisis occurs. Moreover, as an important subsystem of enterprise management early warning system, it can also provide reliable basis for enterprises to correctly operate, improve business decisions and effectively allocate resources.
When the key factors that may endanger the financial situation of the enterprise appear, the financial failure early warning system can give a warning in advance to remind the enterprise operators to make preparations or take countermeasures to reduce financial losses.