Theoretical and Applied Economics
No. 2 / 2016 (607), Summer
Bankruptcy prediction based on the debt ratio
West University of Timisoara, Romania
Abstract. The theory and practice of the financial ratio analysis suggest the existence of an important positive correlation between the debt ratio and the bankruptcy risk. Previous studies conducted on a sample of Romanian companies confirm this hypothesis and recommend the debt ratio as a useful tool for measuring the bankruptcy risk two years in advance.
The objective of the current research was to develop a methodology for measuring the bankruptcy risk that would be applicable for Romanian companies.
The target population consisted of all Romanian companies with annual sales of over 10,000 lei (aprox. 2,200 Euros). The research was performed over all the target population from Timis County (largest county in Romania).
The study has thus included 53,252 yearly financial statements from the period 2007-2010. The results of the study allow for the setting of benchmarks, as well as the configuration of a methodology of analysis.
The proposed methodology cannot predict with perfect accuracy the state of the company, but it allows for a valuation of the risk level to which the company is subjected.
Contents
The prerequisites of social development when planning for decentralization
Testing the validity of the Feldstein-Horioka Puzzle: New evidence from structural breaks for Turkey
The role of institutional pressures in developing countries. Implications for IFRS
Children’s health insurance coverage in the United States: The role of parents’ ethnicity and immigration status
Axiomatical examination of the neoclassical economic model. Logical assessment of the assumptions of neoclassical economic model
An empirical investigation of banking sector development and economic growth in a panel of selected SAARC countries
A common agency within bureaucracy
From public services to networks of social enterprises. Strategic trends for South-Eastern Europe
The relationship between inclusive growth, inequality and poverty in Africa
Investigation of relation between foreign portfolio investments and stock prices: Time varying asymmetric causality analysis
Asymmetric stochastic volatility in central and eastern European stock markets
Bankruptcy prediction based on the debt ratio
The effects of saving-investment gap on economic growth in developing countries: A clustering and panel data analysis
Impact of educational expenditure on economic growth in major Asian countries: Evidence from econometric analysis
Developing a financial inclusion index and inclusive growth in India
A comprehensive view on the manifestations of aggregate demand and aggregate supply shocks in Greece, Ireland, Italy and Portugal
Examining the determinants of FDI inflows in India
A review of corruption based on the social and economic evolution of Ancient Greece and Ancient Rome
Estimating the exchange rate in the context of Romania's integration in the Eurozone