Normalized abnormal financial change rate
factor.formula
Normalized abnormal financial change rate (F):
Growth Benchmark:
in:
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Financial indicator F represents the specific financial items that need to be examined. In practical applications, the following six items can be selected for calculation:
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Inventory: Measures the changes in the company's inventory level.
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Accounts Receivable: Measures the changes in the company's credit sales business.
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Prepayments: Measures the changes in the company's prepaid accounts.
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Other Receivables: Measures the changes in the company's other receivables.
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Advances from Customers: Measures the changes in the company's advances. (Positive is used here because an increase in advances is usually a good signal, and the negative sign in the formula offsets it)
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Sales and Administrative Expenses: Measures the changes in the company's sales and administrative expenses.
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Gross Profit: Measures the changes in the company's gross profit. (Positive is used here, and an increase in gross profit is usually a good signal, and the negative sign in the formula cancels out).
Using the above formula, the corresponding absolute value of abnormal changes is calculated respectively, and then divided by total assets for standardization to obtain the abnormal change rate.
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The value of financial account F at the end of the current quarter (q).
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The value of financial item F in the same month of the current quarter, four quarters ago, in the same period last year (q-4).
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Growth benchmark is used to measure the normal growth of a company. It is calculated as the ratio of cash inflow from operating activities in the current quarter to cash inflow from operating activities in the same quarter last year. Selecting cash inflow from operating activities instead of revenue can more truly reflect the company's actual sales and collections, and avoid profit manipulation.
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Total cash inflows from operating activities during the current quarter (q).
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Total cash inflows from operating activities for the same month in the same period last year (Q-4) four quarters ago as in the current quarter.
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Total Assets at the end of the current quarter (q). Using Total Assets as the denominator, the abnormal changes are normalized to eliminate the impact of differences in company size and make the abnormal levels more comparable across companies.
factor.explanation
The standardized abnormal financial change rate is designed to capture unusual changes in a company's financial statements. This factor identifies financial anomalies that deviate significantly from normal levels by comparing the current quarter's financial account values with the same period last year and taking into account the company's overall cash inflow growth. Standardization can eliminate the impact of differences in company size, making the degree of abnormal financial changes between different companies comparable.
Risk Warning: If the abnormal change rate calculated by this factor is too high or too low, it may represent anomalies in the company's financial statements. Generally, stocks with a standardized abnormal financial change rate of less than -2 times the standard deviation may indicate a high financial risk, such as inventory backlogs, a significant increase in accounts receivable, and abnormal expenses. These abnormal signals may indicate a deterioration in the company's fundamentals or a risk of financial fraud. Investors should remain cautious and conduct further in-depth analysis.
Note: Factors are only provided for reference in quantitative analysis and do not constitute any investment advice. Investors should consider a variety of factors and make independent judgments.