Financial Instability Prediction in Manufacturing and Service Industry
AbstractThis article presents an attempt to derive models for financial instability prediction in manufacturing and service industry especially suitable for transitional environments. Research results indicate that the most important ratios – independent variables that discriminate financially stable from unstable companies consist of liquidity, solvency and profitability ratios. Financial instability models have high degree of diagnostic and prognostic power what was statistically validated on the sample units. Aforementioned predictive ability makes these models appropriate tools for predicting the degree of financial stability of company’s business partners as well as useful instrument in estimating the appropriateness of going concern assumption for company itself. Financial instability models can be used, not only as instrument for choosing adequate business partners, but also as a tool for estimating the level and trends of financial stability in manufacturing and service industry on macro level preseting in this way instrument for macro policy decision makers.
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Bibliographic InfoArticle provided by Faculty of Economics in Osijek, Croatia in its journal Interdisciplinary Management Research.
Volume (Year): 5 (2009)
Issue (Month): ()
Financial crisis; bankruptcy; loss above equity; financial instability prediction models; discriminant analysis; manufacturing and service industry;
Find related papers by JEL classification:
- G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
- O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
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- Edmister, Robert O., 1972. "An Empirical Test of Financial Ratio Analysis for Small Business Failure Prediction," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 7(02), pages 1477-1493, March.
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