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Comparison of the models of financial distress prediction

Author

Listed:
  • Jiří Omelka

    (Mendel University in Brno, Faculty of Business and Economics, Department of Business Economics, Zemědělská 1, 613 00 Brno, Czech Republic)

  • Michaela Beranová

    (Mendel University in Brno, Faculty of Business and Economics, Department of Business Economics, Zemědělská 1, 613 00 Brno, Czech Republic)

  • Jakub Tabas

    (Mendel University in Brno, Faculty of Business and Economics, Department of Business Economics, Zemědělská 1, 613 00 Brno, Czech Republic)

Abstract

Prediction of the financial distress is generally supposed as approximation if a business entity is closed on bankruptcy or at least on serious financial problems. Financial distress is defined as such a situation when a company is not able to satisfy its liabilities in any forms, or when its liabilities are higher than its assets. Classification of financial situation of business entities represents a multidisciplinary scientific issue that uses not only the economic theoretical bases but interacts to the statistical, respectively to econometric approaches as well.The first models of financial distress prediction have originated in the sixties of the 20th century. One of the most known is the Altman's model followed by a range of others which are constructed on more or less conformable bases. In many existing models it is possible to find common elements which could be marked as elementary indicators of potential financial distress of a company.The objective of this article is, based on the comparison of existing models of prediction of financial distress, to define the set of basic indicators of company's financial distress at conjoined identification of their critical aspects. The sample defined this way will be a background for future research focused on determination of one-dimensional model of financial distress prediction which would subsequently become a basis for construction of multi-dimensional prediction model.

Suggested Citation

  • Jiří Omelka & Michaela Beranová & Jakub Tabas, 2013. "Comparison of the models of financial distress prediction," Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, Mendel University Press, vol. 61(7), pages 2587-2592.
    • Handle: RePEc:mup:actaun:actaun_2013061072587
    DOI: 10.11118/actaun201361072587
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    References listed on IDEAS

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    1. 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.
    2. Beaver, Wh, 1966. "Financial Ratios As Predictors Of Failure - Reply," Journal of Accounting Research, Wiley Blackwell, vol. 4, pages 123-127.
    3. Beaver, Wh, 1966. "Financial Ratios As Predictors Of Failure," Journal of Accounting Research, Wiley Blackwell, vol. 4, pages 71-111.
    4. 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.
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    1. Anna Kania Widiatami & Nanny Dewi Tanzil & Cahya Irawadi & Ahmad Nurkhin, 2020. "Audit Committee¡¯s Role in Moderating the Effect of Financial Distress Towards Going Concern Audit Opinion," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 11(4), pages 432-442, July.

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