Abstract
Research background: The state of financial distress or imminent bankruptcy are very difficult situations that the management of every company wants to avoid. For these reasons, prediction of company bankruptcy or financial distress has been recently in a focus of economists and scientists in many countries over the world.
 Purpose of the article: Various financial indicators, mostly financial ratios, are usually used to predict the financial distress. In order to create a strong prediction model and a statistically significant prediction of bankruptcy, it is advisable to use a deep statistical analysis of the data. In this paper, we analysed the real financial ratios of Slovak companies from the year 2017. In the phase of data preparation for further analysis, we checked the existence of outliers and found that there are some companies that are multivariate outliers because are significantly different from other companies in the database. Thus, we deeply focused on these outlying companies and analysed whether to be an outlier is a sign of financial distress.
 Methods: We analysed whether there are much more non-prosperous companies in the set of outlier companies and if their financial indicators are significantly different from those of the prosperous companies. For these analyses, we used testing of the statistical hypotheses, such as the test for equality of means and chi-square test.
 Findings & Value added: The ratio of non-prosperous companies between the outliers is significantly higher than 50 % and the attributes of non-prosperity and being an outlier are dependent. The means of almost all financial ratios of prosperous and non-prosperous companies among outliers are significantly different.
Highlights
Identification of the impending financial problems of the company can be important for company owners or managers, and for business partners, potential or existing creditors or for employees (Kral et al, 2018, pp. 282–294)
We focused on the analysis of a database of Slovak companies and their financial ratios
In the database preparation phase, we checked the dataset for the existence of potential outlying values, onedimensional and as multivariate outliers according to Tabachnick and Fidell (2012)
Summary
Identification of the impending financial problems of the company can be important for company owners or managers, and for business partners, potential or existing creditors or for employees (Kral et al, 2018, pp. 282–294). In order to create a functioning prediction model with high prediction ability, it is important to undergo the data preparation phase and deeper statistical analysis of these prediction variables. For this reason, we deeply focus on the financial ratios of the Slovak companies to check the existence of potential outlying or extreme values. As a standard practice, it is appropriate to consider exclusion of such extreme values from further analyses not to distort the values of statistical characteristics, test results and resulting prediction models. On the other hand, extreme or outlying values of some financial indicators of the company may be important in identifying its financial difficulties
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callMore From: Equilibrium. Quarterly Journal of Economics and Economic Policy
Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
