Abstract
The aim of this paper is to estimate the probability of bankruptcy of the companies from the Slovak electrical engineering industry based on data obtained from financial statements. Parameters of the predictive model were estimated using binary logistic regression. This model is able to predict the probability of a company’s bankruptcy based on values of significant explanatory variables (accounts payable turnover ratio (APTR), return on sales (ROS), quick ratio (QR), financial leverage (FL), net working capital/assets (NWC/A)). The model is constructed using the financial data of a large sample of electrical engineering companies from 2017. Resulting estimated odds ratios show that, in the electrical engineering industry, ROS, QR, and NWC/A significantly reduce the likelihood of bankruptcy. In other words, if these financial indicators increase, the probability of bankruptcy decreases. Our results are also applicable to other industries connected with industrial production, especially the mechanical engineering industry.
Highlights
The electrical engineering industry is linked with new initiatives and developments in order to meet the increased energy demands around the world
The scoring model of the financial performance of non-financial corporations and the probability of defaults was quantified according to the proposed model based on logistic regression
In the bankruptcy model for the electrical engineering industry, the estimated odds ratios have shown that the odds of bankruptcy significantly engineering industry, the estimated odds ratios have shown that the odds of bankruptcy significantly reduces the financial indicators Return on sales (ROS), quick ratio (QR) and NPW/A
Summary
The electrical engineering industry is linked with new initiatives and developments in order to meet the increased energy demands around the world. It is; essential that companies operating in this industry are financially sound. The electrical engineering industry is one of the dominant sectors of the Slovak industry. The development of the electrical engineering industry depends primarily on the automotive industry, where Slovakia is a world leader in motor vehicle production per capita. The electrical engineering industry has a long tradition in Slovakia and is one of the main pillars of this country’s industry. Slovak electrical engineering industry produces products of high and medium-demanding technology and with high added value, while localization quotient is higher than 1. According to the sales in 2017, manufacture of electrical equipment ranked first, and manufacture of computer, electronic and optical products ranked seventh among all industries in Slovakia
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