A Case Analysis of Risk Identification in Financial Reporting

Abstract

This paper studies the identification of financial risks of Pagoda, with the background of the listing boom of China's stock market from 2014 to 2015 and the market prosperity and hidden dangers it brought. With the impact of the epidemic, many companies have exposed their vulnerabilities, especially the financial risks faced by listed companies have become more prominent. The theme of the study is to identify the financial risks that Pagoda may face through financial data analysis and evaluate them using the Z-Score model. The paper first reviews the relevant literature on financial risk identification, pointing out that the combination of traditional methods and modern technology can improve the accuracy of risk identification. Then, the article analyzes the financial status of Pagoda as of June 30, 2024, and finds that its revenue and net profit both declined, and its debt-to-asset ratio increased significantly, showing a trend of deteriorating financial structure. Calculated by the Z-Score model, Pagoda's Z value is in the "gray area", indicating that its financial situation is unstable. The conclusion points out that Pagoda faces multiple challenges such as declining consumption capacity, intensified market competition, and increased marketing expenses, which lead to rising financial risks. To cope with these risks, it is recommended that the company optimize its franchise model, slow down the pace of strategic transformation, and establish a continuous financial risk early warning mechanism to ensure the healthy development and sustainability of the company.