Analysis of probability of the enterprise bankruptcy

Nikolov Oleksandr
graduate student of the Department of Economic Analysis, Odessa National Economic University, Odessa, E-mail:alekssnoopdog@gmail.com, ORCID ID: https://orcid.org/0000-0003-4625-3364

Cite this article:

Nikolov O. (2021) Analysis of probability of the enterprise bankruptcy. Ed.: V.V. Kovalenko (ed.-in-ch.) and others [Analiz ymovirnosti ryzyku bankrutstva pidpryiemstva; za red.: V.V. Kovalenko (gol. red.)], Scientific Bulletin of the Odessa National Economic University (ISSN 2313-4569), Odessa National Economics University, Odessa, No. 9-10 (286-287), pp. 112-118.

Abstract

The article considers domestic and foreign models for assessing the probability of bankruptcy, their application in practice and analysis of the results of their use to assess the probability of bankruptcy in a Ukrainian enterprise. Peculiarities, advantages and disadvantages of bankruptcy probability assessment models are determined: the five-factor Altman model, the Springgate model, the Beaver coefficient and the Tereshchenko model in practical application, which allow you to effectively and efficiently assess the financial condition of the enterprise. The analysis of the probability of bankruptcy was carried out on the example of the industrial enterprise PJSC "Odessa Cable Plant" Odeskabel". This company is the absolute leader in the cable industry in Ukraine, has vast experience and capabilities, but in recent years there has been a marked deterioration in key indicators of profitability, liquidity and financial stability (this necessitates assessing the probability of bankruptcy based on selected models). It is proved that the domestic model Tereshchenko gives relatively soft results on the threat of bankruptcy. It is determined that foreign models are less common in Ukraine due to the peculiarities of the economic situation and imperfect market conditions. Thus, the existing models need to be modified and adapted to effectively assess the solvency and probability of bankruptcy of Ukrainian enterprises. The considered models of bankruptcy forecasting give different results, therefore in practice it is necessary to apply not one separate model, but their set, for achievement of balanced results. Thus, we can conclude that at present there is a need for further study of the application of models to analyse the probability of bankruptcy of enterprises in various sectors of the economy, taking into account their size, capital structure and internal indicators.

Keywords

risk, bankruptcy, model, enterprise, probability.

JEL classification: G00; DOI: 10.32680/2409-9260-2021-9-10-286-287-112-118

UD classification: 336.279:657

References

1. Altman, E. I. (1968). Financial Ratios, Discriminant Analysis and the Prediction of Corporate Bankruptcy. The Journal of Finance., № 23 (4). Retrieved from http://www.defaultrisk. com/_pdf6j4/Financial_Ratios_Discriminant_Anlss_ n_Prdctn_o_Crprt_Bnkrptc.pdf
2. PJSC “Odessa Cable Plant “Odeskabel” (2021). Official web-site. Retrieved from https:// odeskabel.com/ua/ [in Ukrainian].
3. Stock market infrastructure development agency of Ukraine (2021). Official web-site. Retrieved from https://smida.gov.ua [in Ukrainian].
4. Pogrebnyak A. Y. (2014). Comparative analysis of methods for assessing the probability of bankruptcy in the system of crisis management at the enterprise. Biznes Inform, №. 7, 344-352 [in Ukrainian].
5. Moroz S. I. (2012). Comparative analysis of existing models for predicting the probability of bankruptcy of enterprises. Ekonomichni nauky, №. 9 (2), 437-442 [in Ukrainian].
6. Baranovska O. M. (2008). Analysis of financial condition as a tool to prevent the crisis and bring the company out of it. Visnyk Prydniprovs'koi derzhavnoi akademii budivnytstva ta arkhitektury, №12, 36-40 [in Ukrainian].
7. Heaton J. B. (2020). The Altman Z Score Does Not Predict Bankruptcy. AIRA Journal, № 33 (3), 32-34. Retrieved from https://papers.ssrn.com
8. Beaver W. (1966). Financial Ratios as Predictors of Failure. Empirical Research in Accounting, Selected Studies 1966, Supplement to: Journal of Accounting Research. Vol. 4, 71- 111.
9. Yankovets T. M., Chernyuk Y. V. (2016). Comparison of modern models of diagnostics of probability of bankruptcy of the enterprise: foreign and domestic experience. Investments: practice and experience, № 20, 60-61 [in Ukrainian].
10. Tereshchenko O. O. (2003). Discriminant model of the integrated assessment of the financial condition of the enterprise». Ekonomika Ukrainy, № 8, 38-44 [in Ukrainian].
11. Semenova E. D., Tarasova K. I. (2017). Accounting and analytical support for statistical risk assessment at enterprises. Ekonomika i finansy, № 14, 47-56 [in Russian].