Pavol Kral

Department of Economics, University of Zilina,

Slovakia

pavol.kral@fpedas.uniza.sk

Comprehensive assessment of the selected indicators of financial analysis in the context of failing companies

Hussam Musa

Department of Finance and Accounting, Matej Bel University in Banska Bystrica, Slovakia

hussam.musa@umb.sk

George Lazaroiu

Faculty of Socio-Human Sciences, Spiru Haret University,

Romania

phd_lazaroiu@yahoo.com

Maria Misankova

Department of Economics, University of Zilina,

Slovakia

maria.misankova@fpedas.uniza.sk

Jaromir Vrbka

The Institute of Technology and Business in Ceske Budejovice,

School of Expertness and Valuation, Czech Republic

vrbka@mail.vstecb.cz 

Abstract. Financial ratios can be considered a crucial determinant of reliability for the bankruptcy prediction models. Therefore, it is necessary to be vigilant during the preparation of bankruptcy prediction models so that to include those ratios, which ensure the highest degree of predictive power. The aim of this paper is to define the so-called etalon unsuccessful business that can serve as a standard comparative basis for other unsuccessful companies operating in Slovak Republic. Own quantification of the selected ratios was created on the database of the published financial statements of several thousand businesses operating in Slovak Republic between 2014 and 2015. This database has undergone extensive filtration of extreme data for maximal objectification of the results. Universal criterion for inclusion of a enterprise into the category of unsuccessful enterprises through the values of the three ratios (R1, L3, Z4) have been created. This criterion was named as unsuccessfulness indicators while respecting the applicable legal standards of Slovak Republic governing the conditions of unsuccessfulness.

Received: June, 2018

1st Revision: October, 2018

Accepted: November, 2018

DOI: 10.14254/2071-8330.2018/11-4/20

JEL Classification: C53, G33

Keywords: failing companies, bankruptcy prediction, financial ratios