Forecasting the financial distress of mining companies: Tool for testing the key performance indicators

Abstract

There are numerous studies and research work related to the forecasting of financial distress of companies. Developed theoretical and practical models were used for forecasting such problems. Application of specific model is relatively novel analytical approach and represents an indicator which sometimes could have large importance for decision makers. Indicators for production and business aspects are represented by one of the most suitable synthetic parameters - Altman Financial Distress Ratio, which is sum of weighted individual parameters. The aim of this paper is to present a method for forecasting the financial distress, mainly based on financial parameters of a company. Calculation of financial parameters was based on the public annual financial reports of companies included in the example. Authors applied the Altman Z-score model on sample of two mining companies, to establish accuracy of this model and possibility for application on other mining companies.