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Business evaluation systems: credit risk assessment by using a linear combination of financial ratios

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  • Antonio Focacci

Abstract

As a direct consequence of the new Basel 2 Accord for banking and Solvency 2 for insurance, the financial services industry is searching for the development of new quantitative approaches in order to evaluate operational credit risks more effectively. Starting from these premises, this paper develops a method to assess credit risks consisting of a combination of widely used ratios in the financial statement analysis with the aim to present a synthetic business comparative evaluation model. Without any pretension to be exhaustive, some empirical cases are reported as application of the method to real figures pertaining to the listed companies.

Suggested Citation

  • Antonio Focacci, 2008. "Business evaluation systems: credit risk assessment by using a linear combination of financial ratios," International Journal of Business and Systems Research, Inderscience Enterprises Ltd, vol. 2(4), pages 387-399.
    • Handle: RePEc:ids:ijbsre:v:2:y:2008:i:4:p:387-399
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