Assessment of the bankruptcy risk based on the solvency ratio

Daniel Brîndescu-Olariu
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Daniel Brîndescu-Olariu: West University of Timisoara, Romania

Theoretical and Applied Economics, 2016, vol. XXIII, issue 3(608), Autumn, 257-266

Abstract: The current paper sets to develop a methodology for assessing the bankruptcy risk for Romanian companies based on the solvency ratio. A previous study performed over a paired sample of 1176 Romanian companies showed that the solvency ratio had potential for predicting bankruptcy, but was not able to set a benchmark because of the differences between the structure of the paired sample and the structure of the population. The present research was performed over a larger sample, that included 53252 yearly financial statements and that was similar in structure to the entire population of Romanian companies. The results allow for the proposal of a methodology for assessing the bankruptcy risk based on risk classes.

Keywords: ratio analysis; financial statements; corporate finance; accuracy; benchmark; risk classes. (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (1)

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