An entropy-GRA model for financial risk evaluation—A case study of listed enterprises in baoding

Abstract

Financial risk is the most synthetic form of business crisis and financial risk evaluation has been a widely and continually studied topic in the field of corporate finance. The purpose of this study is to evaluate the financial soundness by using the Entropy-GRA model. This study constructed an efficient financial risk evaluation model and showed that the grey system theory proposed by the study is to supplement the limitations of using traditional statistic methods and it's more suitable to evaluate the financial risk of business. The study used four financial indicators to classify eleven items of financial ratios as research variables through entropy to determine the weight and Grey Relational Analysis (GRA) to find the significant financial ratio variables affecting the financial risk of listed enterprises in Baoding.