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The Potential Of The Equity Working Capital In The Prediction Of Bankruptcy

Author

Listed:
  • Daniel BRÎNDESCU – OLARIU

    (Universitatea de Vest, Timișoara)

Abstract

The current study evaluates the potential of the equity working capital in predicting corporate bankruptcy. The population subjected to the analysis included all companies form Timis County (largest Romanian County) with yearly sales of over 10000 lei. The interest for the equity working capital was based on the recommendations of the literature, as well as on the availability of information concerning its values to all stakeholders. The event on which the research was focused was represented by the manifestation of bankruptcy 2 years after the date of the financial statements of reference. All tests were performed over a paired sample of 1176 companies (largest paired sample used in Romania in financial ratios research). The methodology employed in evaluating the potential of the equity working capital was based on the general accuracy ensured by the ratio (64.5%) and the Area Under the ROC Curve (0.672). The results confirm the practical utility of the equity working capital in the prediction of bankruptcy.

Suggested Citation

  • Daniel BRÎNDESCU – OLARIU, 2014. "The Potential Of The Equity Working Capital In The Prediction Of Bankruptcy," Management Intercultural, Romanian Foundation for Business Intelligence, Editorial Department, issue 31, pages 25-32, November.
    • Handle: RePEc:cmj:interc:y:2014:i:31:p:25-32
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    Citations

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    Cited by:

    1. Daniel BRÎNDESCU – OLARIU, 2014. "Labor Productivity As A Factor For Bankruptcy Prediction," SEA - Practical Application of Science, Romanian Foundation for Business Intelligence, Editorial Department, issue 6, pages 33-36, December.
    2. Firescu Victoria & Popescu Jenica & Popa Bogdan, 2017. "Comparative Analysis Of Bankruptcy Risk For Some Romanian Societies Listed On Bucharest Stock Exchange," Annals - Economy Series, Constantin Brancusi University, Faculty of Economics, vol. 6, pages 138-146, December.
    3. Daniel BRÎNDESCU-OLARIU, 2016. "Bankruptcy prediction based on the debt ratio," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania / Editura Economica, vol. 0(2(607), S), pages 145-156, Summer.
    4. Daniel BRINDESCU-OLARIU, 2015. "The Potential Of The Debt Ratio In The Prediction Of Corporate Bankruptcy," Journal of Public Administration, Finance and Law, Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, vol. 0(Special i), pages 37-45, September.
    5. Daniel BRÎNDESCU–OLARIU, 2016. "Solvency Ratio As A Tool For Bankruptcy Prediction," EcoForum, "Stefan cel Mare" University of Suceava, Romania, Faculty of Economics and Public Administration - Economy, Business Administration and Tourism Department., vol. 5(2), pages 1-40, July.
    6. Daniel BRÎNDESCU – OLARIU, 2016. "Multivariate Model For Corporate Bankruptcy Prediction In Romania," Network Intelligence Studies, Romanian Foundation for Business Intelligence, Editorial Department, issue 7, pages 69-83, June.

    More about this item

    Keywords

    Bankruptcy; Equity working capital; Risk; Financial ratio; Financial analysis; Financial statements;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics

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