The stock market has played an important role in today's China economy. Due to the fact that a number of the listed companies did not generate the return that the investors expected, the research on the causes of financial failure and predicting such financial failure becomes very important for future capital market development. The paper selected 43 ST(Special Treat) and 43 Non-ST companies as sample, using financial ratio and the factor analysis model to compare and analyse. This study especially analyses profitability, operation efficiency and development ability of firms and focuses on the design of an early warning system for possible financial failure of the listed companies by using factor analysis.