Abstract
Authors study the nature of insolvency both from the legal point of view and scientist position as well as updating tendencies of an insolvency of enterprises in recent years. The subject of the study has been selected company’s survival potential that is analyzed with financial ratio analysis using bankruptcy prediction models. Considering research results, authors identify models that are applicable to a particular industry. Authors put primary metal industry (NACE 24) for the study. The aim of the paper is to investigate the survival potential of enterprises by testing existing parametric models of insolvency forecasting and assessing their potential for use in the economic conditions of Latvia. During the investigation has been reviewed the concept of the financially healthy company and its relation with the main success development factors.
Highlights
The value of knowledge is the ability to apply it practically by predicting the situation and determining preventive actions
This paper is concentrated on scientist corporate bankruptcy prediction models to determine non-financial organization probability of bankruptcy
Asset Turnover Ratio (ATR) measures revenues generated to the value of assets (Saksonova, 2006)
Summary
The value of knowledge is the ability to apply it practically by predicting the situation and determining preventive actions. This paper is concentrated on scientist corporate bankruptcy prediction models to determine non-financial organization probability of bankruptcy. Company’s financial stability prediction has always been a popular topic among scientists and researchers. Subject matter investigation became especially trendy when facing 2007–2009 financial crisis (Amini, Cont, & Minca, 2016). Authors believe that in the conditions of economic instability caused by political and crisis processes, each entity must evaluate its own risks. The inability of companies to conduct qualitative financial risk assessment meeting timely requirements and developing strategic goals could lead a company from insolvency process till legally recognized bankruptcy. Corporate financial distress could lead to domino effect affecting both stake–/ shareholders.
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