Altman model for prediction of financial health within polish enterprises

Jaromir Vrbka

Ing. Jaromir Vrbka, MBA, PhD., Institute of Technology and Business in Ceske Budejovice, Okruzni 517/10, 37001 Ceske Budejovice, Czech Republic, vrbka@mail.vstecb.cz

*Corresponding author

Abstract

In this case, database was created from financial statements using Amadeus program to determine the banker prediction. First of all, we investigated the level of individual economic indicators that capture aspects of liquidity, and profitability. When selecting companies whose data entered the database, we also considered the number of years since the company established, the size of the company, and several characteristics of the industry to be necessary. The most common causes of population indebtedness include poor financial literacy, efforts to achieve a standard of living that does not correspond to financial possibilities, and the absence of a cash reserve in the event of sudden financial distress. With the help of bankruptcy models that predict the company's future financial difficulties, we will try to discover the causes of bankruptcy. The advantage of these models is that they reduce subjectivity in the determination of indicators, and therefore the results are more credible. The first part focuses on the definition of basic concepts and procedures in the prediction of the financial health of businesses and individual authors and creators of bankruptcy models in Poland. There is an enormous number of models of financial distress prediction, and in this article, we list some sources at the state of financial distress prediction. Subsequently, we determine the methodology by which we proceed in assessing the economic recovery of Polish companies. We have identified individual companies as stable or unstable in terms of their financial health. In the case of instability, we have further considered what could have been the cause of this instability.

Keywords: financial distress, bankruptcy, Z-score model, prediction