Yellow Signal on Corporate Operations

Abstract

Apart from external factors affecting corporate financial results, there exist a number of internal issues which may result in downturn of its financial performance. For the first part, this paper will discuss what situations corporate management has to consider as a “yellow signal” of the company’s performance. “Yellow signal” here means qualitative state of company’s operations which may lead to further deterioration of its performances. The later part proposes hypothesis that gives levels of financial indices which need to be considered as “Yellow signal.” This hypothesis was tested against five Japanese corporations which recently requested lenders to refinance and/or forgive its debts. The results indicated those hypotheses are found generally correct.