FORECASTING OF BUSINESS BANKRUPTCY BASED ON LINEAR DISCRIMINANT ANALYSIS

Abstract

Bankruptcy forecasting becomes an overriding need that makes it possible to identify the root problems and deficiencies in enterprise performance and consider the influence of different external factors, and thus, forecast the probability of bankruptcy and take measures to avoid it. Under recessional conditions of the functioning of domestic enterprises, the ability to predict timely the first signs of insolvency, which subsequently may cause bankruptcy, is of importance. Therefore, diagnostics and prevention of adverse impacts are relevant. The purpose of the research is to analyze discriminant models of corporate bankruptcy prediction and examine financial indicators affecting activity. The article regards the definition and essence of the terms of “bankruptcy” and “crisis”. The authors analyze qualitative and quantitative methods of estimation of the financial standing of a company and elucidate their benefits and drawbacks to usage in modern Ukraine. It is proved the need to apply qualitative methods of evaluation of bankruptcy risks which consist of integral indices based on the empirical study of the bulk of enterprises, the part of which collapsed. The procedure of bankruptcy diagnostics is specified. Domestic and foreign analysis methods of corporate bankruptcy risks are characterized, and their advantages, disadvantages and application options are determined. It is covered the multifactor models of domestic and foreign academic economists, namely, the models by Altman, Springate, Lis, Taffler&Tishow, and Tereshenko. The analysis of financial indicators characterizing the financial standing of a company and affecting diagnostic findings on bankruptcy risks was carried out. The research justifies the need to develop modern domestic methods and models of bankruptcy forecasting, which allow companies to respond to crises promptly.