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Multidimensional discriminatory analysis as an effective method for predicting a financial crisis of enterprises, based on the example of dairy cooperatives in Poland (Wielowymiarowa analiza dyskryminacyjna jako skuteczna metoda przewidywania kryzysu finansowego przedsiebiorstw na przykladzie spoldzielni mleczarskich w Polsce)

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  • Maria Zuba

    (Wydzial Ekonomii, Wyzsza Szkola Ekonomii i Innowacji w Lublinie)

Abstract

The aim of this paper was to present multidimensional discriminatory analysis as an effective method for predicting a financial crisis of enterprises, based on the example of dairy cooperatives in Poland. The assessment of the ability of an economic entity to continue its activities in the future is a very important issue in the assessment of its financial situation. Survey included 41 milk cooperatives within four years (2002-2005) Survey showed that European Union accession by Poland positively influenced the levels of sale profitability, assets, own capital and employment. The degree of current liquidity slightly decreased but as far as cash was concerned that degree increased. But those levels were maintained within their standard limits. Surveyed dairies improved their financial capacity after European Union accession through faster recovering of funds engaged in current assets. In that situation their average indebtedness slightly increased but it did not concern long term indebtedness what stayed at the same level. Their ability to indebtedness service was poor although it improved in the majority of cases. Discriminatory models have described the financial condition of most dairy cooperatives as positive. Therefore, they confirmed the results of a conducted analysis of profitability, financial fluency and solvency. In case of only one dairy cooperative, on the basis of 2005 data, there was a prediction of a possibility of the threat of bankruptcy. One of the models directly assigned the case to the group of "potential bankrupts", whereas the other model allocated it to the group "in a temporarily poor economic-financial condition". Both predictions proved to be correct. The dairy cooperative in question was declared insolvent in 2007. Polish discriminatory models can be considered as an effective tool for the system of early warning against the worsening economic-financial situation of enterprises. However, it is necessary to apply more than one discriminatory model to verify the predictions regarding possible financial crises.

Suggested Citation

  • Maria Zuba, 2011. "Multidimensional discriminatory analysis as an effective method for predicting a financial crisis of enterprises, based on the example of dairy cooperatives in Poland (Wielowymiarowa analiza dyskrymin," Problemy Zarzadzania, University of Warsaw, Faculty of Management, vol. 9(31), pages 72-89.
    • Handle: RePEc:sgm:pzwzuw:v:9:i:31:y:2011:p:72-89
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    References listed on IDEAS

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    1. 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, September.
    2. Edward I. Altman, 1968. "The Prediction Of Corporate Bankruptcy: A Discriminant Analysis," Journal of Finance, American Finance Association, vol. 23(1), pages 193-194, March.
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