Comparison Bankruptcy Models for Prediction of the Financial Health of Slovak Civil Engineering Companies
Keywords:
Altman model, Taffler model, Index IN05, Quick test, Binkert model, Credit worthiness index, building industry, bankruptcy, restructuring, models of creditworthinessAbstract
Purpose of the article Main purpose of the paper is give new inside how to compare selected creditworthy and bankruptcy models and to determine which one model is appropriate for private building companies in Slovakia.
Methodology/methods The analysis was based on real selection of companies from static point of view (one year data) and selection of companies being actually in recession from dynamic point of view (4 years data). Static analysis was carried out for 1360 private Slovak civil engineering companies. From a dynamic point of view, we have analyzed the predictive value of the IN05 model for bankrupt companies over four full consecutive calendar years immediately prior to their bankruptcy (dynamic point of view). The number of bankrupt companies was 35. Informative value of chosen indicators is in case of dynamic analyze evaluated according to number of correct or incorrect predictions.
Scientific aim The scientific aim is to analyze selected creditworthy and bankruptcy models and to detect their informative value for private building companies in Slovakia. The paper contributes to the literature regarding the analysis of financial health of the Slovak companies. Our study expands and complements existing study which analyze the creditworthy and bankruptcy models.
Findings We found out, that the best model is index IN05. The results of our analyses have come to comparable results. Based on them index IN05 and Altman model showed up as the most reliable for building industry.
Conclusions Informative value of chosen indicators is in case of dynamic analyze evaluated according to number of correct or incorrect predictions. This method was not suitable to use for static analysis based on a real sample. The results of the static analysis were based on the comparison of the examined models in the individual categories (structure of success) and at the same time within the whole sample. Better was considered a model that had a more successful structure of success in terms of business (company). Indicators of creditworthiness and bankruptcy should be a part of a deeper analysis of the financial situation of a companies. If a company has attempted to ascertain the status only through these indicators, it should choose at least two indicators. In the case of private domestic construction companies, we would recommend the combination of the IN05 and the Altman model as they complete with each other appropriately.
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