Which Altman Model Do We Actually Use?
The aim of this paper is to critically evaluate the terms that are described by various authors in Czech literature, compare those terms with the terms used by the original Altman model, use data from selected enterprises to show whether enterprises could be considered at risk of bankruptcy due to such inaccuracies and verify whether the average Z-score values for small enterprises within the Zlín Region are greater than 3. The data were analysed using a one-sample t-test and the Altman model for enterprises that are not publicly-traded. Financial statements for 2007 through 2011 were used in the data analysis. The one-sample t-test showed that the sample of 32 small enterprises from the Zlín Region had good financial health. The largest percentage change that was associated with a decline in performance was demonstrated when adding net profit to retained earnings (-16.64%). The largest percentage change that was associated with an improvement in performance was demonstrated when using current assets instead of working capital (33.07%). Replacing retained earnings with net profit reduced the enterprise’s performance (a percentage change of -24.43%). Adding funds from profit and net profit to retained earnings reduced performance by 0.17 percentage points. We recommend using net working capital to calculate the X1 ratio. Retained earnings should be used to calculate the X2 ratio. Only sales should be used to calculate the X5 ratio. For manufacturing enterprises that are not publicly-traded, we recommend using equation (8). Publicly-traded enterprises may use equation (2). Enterprises that provide services and enterprises in emerging markets may use equation (4).
Volume (Year): 17 (2014)
Issue (Month): 2 ()
|Contact details of provider:|| Postal: Studentská 13, 370 05 České Budĕjovice|
Web page: http://acta.ef.jcu.cz/
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Edward I. Altman, 1968. "Financial Ratios, Discriminant Analysis And The Prediction Of Corporate Bankruptcy," Journal of Finance, American Finance Association, vol. 23(4), pages 589-609, 09.
- Grice, John Stephen & Ingram, Robert W., 2001. "Tests of the generalizability of Altman's bankruptcy prediction model," Journal of Business Research, Elsevier, vol. 54(1), pages 53-61, October.
When requesting a correction, please mention this item's handle: RePEc:boh:actaub:v:17:y:2014:i:2:p:103-111. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Šárka Steinová)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.