The verification of prediction and classification ability of selected Slovak prediction models and their emplacement in forecasts of financial health of a company in aspect of globalization

Abstract

Predicting financial health of a company is in this global world necessary for each business entity, especially for the international ones, as it´s very important to know financial stability. Forecasting business failure is a worldwide known term, in a global notion, and there is a lot of prediction models constructed to compute financial health of a company and, by that, state whether a company inclines to financial boom or bankruptcy. Globalized prediction models compute financial health of companies, but the vast majority of models predicting business failure are constructed solely for the conditions of a particular country or even just for a specific sector of a national economy. Field of financial predictions regarding to international view consists of elementary used models, for example, such as Altman´s Z-score or Beerman´s index, which are globally know and used as basic of many other modificated models. Following article deals with selected Slovak prediction models designed to Slovak conditions, states how these models stand in this global world, what is their international connection to the worldwide economies, and also states verification of their prediction ability in a specific sector. The verification of predictive ability of the models is defined by ROC analysis and through results the paper demonstrates the most suitable prediction models to use in the selected sector.

Financial Distress and Bankruptcy Prediction in Conditions of Slovak Republic

“…[16] Discriminant function for CH-index is as follows: The interpretation of the Ch-index is as follows: [16] CH < -5 unhealthy -5 < CH < 2.5 grey zone 2.5 < CH healthy CH-Index is also used widely, albeit less than Altman or IN05. Karpac, Bartosova [17]; Durica, Svabova [18] or Camska [11] used it in their research for example.…”

“…Its discriminant function is as follows: [19] G-Index is used similarly to CH-Index because of their similarity being based on agricultural companies. We can find it for examples in articles by Karpac, Bartosova [17]; Durica, Svabova [18] or Camska [11].…”

Evaluating the Financial Health of Agricultural Enterprises in the Conditions of the Slovak Republic Using Bankruptcy Models

“…Bankruptcy forecasting is a globally known concept, and there are many prediction models designed to calculate a company's financial health and, thus, whether the company is prone to expansion or failure. In the case of the use of predictive models, on the one hand, predictive models are globalized, but the vast majority of models measuring the financial health of companies are constructed exclusively under conditions applicable either to a specific economy or even to a concrete branch of a national economy [25].…”

“…Their relevance is also documented by several modifications, such as the Altman model [34][35][36]. Predicting the financial situation of agricultural companies using multidimensional discriminatory analysis has been the subject of several studies with confrontational results (e.g., Karpáč and Bartošová [25]; Bod'a and Úradníček [37]; Jedik and Stalgiene [38]; Karas et al [39]; Valašková et al [27]; Rajin et al [40]; Kiaupaite-Grushniene [2]; Popescu [41]).…”

Family Businesses in Global Economy and Evaluating their Financial Health Using Bankruptcy Models

“…Several different methods or models were created to identify risk of bankruptcy or financial distress of company. The accuracy of prediction models is reduced significantly if the model is used in another industry, another time or in a different business environment compared to the data used to derive the model (Karpac and Bartosova, 2020). The aim of this paper is to evaluate the financial health of agricultural family businesses using selected methods.…”