Business′ Financial Problems Prediction - Croatian Experience

Actual development in economy, characterized with global crisis, emphasizes the importance of financial instability prediction. Financial instability in transitional countries is often predicted using the model derived using the data from companies operating in developed countries. Some researches have found that simple application of those models in different environment like transitional do not obtain the same result like when applied in developed country. Therefore, new GCE3 model was derived using the data from Croatian companies’ sample. New model, carried out by using the multiple discriminant analysis, include six independent variables that consist of solvency and liquidity ratios, as well as ratio Total revenues/total expenses. Analysis of model classification accuracy favours the possibilities of its practical usage in wide area of everyday business activities making it very useful financial instability prediction tool.