Research on early-warning and control model of enterprise finance based on System Dynamics

Traditional financial early-warning models which are static, lagging risk assessment methods only show the "result" of financial risk, but not explain the "cause". The author analyzes and simulates systematically the transmission" mechanism of enterprise financial risk in virtue of System Dynamics directed towards source of financial risk. Then, according to formation process of free cash flow, the enterprise financial early-warning and control model which include a causal loop diagram and variable equations is established. Finally, this paper achieves the organic integration of financial early-warning and risk control through policy simulation that can change the variable parameters and observe its dynamic development, which is based on the computer simulation technology. This study provides a new way for the enterprise strengthening its anti-risk ability and adaptability in complex environment.