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Break-Up Analysis: A Method to Regain Trust in Business Transactions

In: Accounting Information Systems for Decision Making

Author

Listed:
  • Bruno Maria Franceschetti

    (University of Macerata)

  • Claudia Koschtial

    (Technische Universität Bergakademie Freiberg)

  • Carsten Felden

    (Technische Universität Bergakademie Freiberg)

Abstract

The financial crisis resulted in a loss of trust; not only within the investment or banking sector, but in general between creditors and debtors, because many organizations faced insolvency. Such a financial situation can even result in a company’s bankruptcy. Therefore it is necessary to get a realistic understanding of the solvency or the possible insolvency of a company. The support of a decision on a debtor’s creditability is not yet sufficiently provided by the most prominent method (Altman’s Z’’-score). The paper presents a procedure called Break-Up Analysis (BUA). It helps to decide on the solvency of a company. The comparison of the BUA to Altman’s Z’’-score shows an improvement of the identification of solvent and insolvent companies by 22 %. The BUA enables herewith to regain trust in business transaction by not identifying only the insolvent companies but the solvent ones as well.

Suggested Citation

  • Bruno Maria Franceschetti & Claudia Koschtial & Carsten Felden, 2013. "Break-Up Analysis: A Method to Regain Trust in Business Transactions," Lecture Notes in Information Systems and Organization, in: Daniela Mancini & Eddy H. J. Vaassen & Renata Paola Dameri (ed.), Accounting Information Systems for Decision Making, edition 127, pages 203-219, Springer.
    • Handle: RePEc:spr:lnichp:978-3-642-35761-9_12
    DOI: 10.1007/978-3-642-35761-9_12
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