![]() ![]() ![]() Although there is no uniform definition of the concept of bankruptcy, it is advisable to follow the definition of Dimitras et al. In general, knowing these risks allows us to quantify the risk of bankruptcy. The financial risk is determined by the level of indebtedness, while the economic risk depends on the ratio of fixed and variable costs. ( 2012) the risk of bankruptcy of an enterprise is closely linked to economic and financial risks. To date, empirical studies have found that inefficiency, high corporate indebtedness, and solvency problems are a prerequisite for bankruptcy ( Altman 1968). By taking early remedy measures, businesses can prevent future bankruptcy events ( Gundová 2015). Bankruptcy prediction methods can, with a certain degree of probability, alert a company to a negative situation. We pay close attention to predictions of bankruptcy due to the fact that it is important from the point of view of creditors, employees, and other entities around the affected company that would feel the effect the bankruptcy brings ( Štefko et al. These results can help businesses to improve their financial health and competitiveness.ĭetermining the probability of bankruptcy is becoming one of the most important risk management tasks. The paper identified the key indicators of the future success of businesses in the analysed sample. In contrast to the Logit model, its results are independent of any assumptions. The main conclusion is that the DEA method is a suitable alternative for predicting the failure of the analysed sample of businesses. Also, an optimal cut-off point for the ADD model and Logit model was determined. The estimation accuracy of the Additive DEA model (ADD model) was compared with the Logit model to determine the reliability of the DEA method. ![]() The research was based on several studies which also used the DEA method to predict future financial difficulties and bankruptcies of studied businesses. Analysed businesses have a significant relatively stable position in the given industry. The research sample consisted of 343 businesses active in the heating industry in Slovakia. Therefore, the Data Envelopment Analysis (DEA) method has been applied, as it allows for the free choice of financial indicators. However, such tools are based on strictly defined financial indicators. Existing bankruptcy prediction models are a suitable tool for predicting the financial difficulties of businesses. The paper deals with methods of predicting bankruptcy of a business with the aim of choosing a prediction method which will have exact results. ![]()
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