Interdependence Between Indicators Used for Identifying Impending Bankruptcy and Selected Indicators

Anna Siekelova (), Ivana Podhorska and Katarina Valaskova
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Anna Siekelova: University of Zilina
Ivana Podhorska: University of Zilina

A chapter in Finance in Central and Southeastern Europe, 2017, pp 125-134 from Springer

Abstract: Abstract Account receivables are a sum of money owed to a company by its debtors. Receivables are recorded by a company’s accountants and reported on the balance sheet, and they include all debts owed to the company, even if the debts are not currently due. They are a part of current assets. Company’s receivables may occur from a variety of titles. Each of these forms affects the financial situation in a different way. The majority of receivables has the nature of trade credit. Offering trade credit is a strategic tool in the hands of the company but many payments in commercial transactions not only between businesses but also between businesses and public authorities are much later than were agreed. Therefore, we can conclude that the offering trade credit is largely linked to credit risks. Term credit risk has assessed the risk associated with the fact that the customer fails to pay its obligations properly and on time or at all. Every year thousands of businesses go bankrupt just because of late payments not only in Europe but also in the world. In this chapter, we will focus on the relationship between the absolute amount of trade receivables and the ratio of equity to liabilities represented as indicators used for identifying impending bankruptcy and the relationship between the days sales outstanding and the mentioned ratio.

Keywords: Receivables; Credit risk; Bankruptcy; Pearson correlation coefficient (search for similar items in EconPapers)
Date: 2017
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DOI: 10.1007/978-3-319-64662-6_7

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