Abstract
The financial crisis undoubtedly had its tremendous negative impact upon the real sector on a national and global scale, as obvious from the number of company closures, business restructuring, shrink of production, and staff redundancies. It is therefore vital to assess the financial sustainability of Bulgarian companies, the main objective of such an assessment being to identify available opportunities for adopting adequate measures so as to support companies in the process of adapting to changing market requirements.The aim of this research paper is to predict major financial difficulties by applying models for assessing bankruptcy probabilities for companies and to suggest options for overcoming these difficulties. The aim thus set is accomplished through an empirical test of existing models in terms of Bulgarian SOFIX index public companies for a period of four years, from 2011 to 2014. The results from that test are then used as a benchmark for changing the financial, accounting, production, logistic, and marketing policy of companies and a guideline for financial managers in the decision-making process.
Highlights
The[1] main objective of any business entity is to achieve positive financial results which are evidence of sound managing practices as well as an indicator of profit and growth.[2]
There might be a variety of reasons behind that a deteriorated economic environment, customers being in financial distress, delayed payments to lenders and suppliers, etc. which are the major prerequisites for financial disturbances within a company
The financial analysis of each company is based on the assessment of its capital structure and market performance; analysis of its profitability and earnings; and evaluation of its assets and liquidity
Summary
-0.15 takes into consideration the characteristics of American companies and the conditions of the market in which they operate. Due to the loss reported by Neochim Plc over the last three years, the values of the ratio are zero This could be approached as a shortcoming of the presented model since a negative financial result does not necessarily indicate a bankruptcy probability for a company; The employment of Altman’s two-factor model, due to the reverse interpretation of obtained results, determines the companies which are subject to analysis as stable entities with very little bankruptcy probability. According to Altman’s two-factor model, Monbat Plc is stable, too, the value of the ratio growing from -2 to -5.7 in the period between 2012 and 2014; The results obtained after applying Altman’s five-factor model are relatively constant for each company, yet there are substantial differences when comparing them to other SOFIX index companies. Due to the specific nature of the calculations made for the index which gives the greatest importance to corporate profitability, quite logically
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