Some Remarks on the Quantification of the Company Financial Health

Abstract

In the field of company management arose several models which task is the prediction of company bankruptcy. According to a study of Aziz and Dar (Corp Govern 6(1): 18–33, 2006), the aim of bankruptcy prediction models is primarily the early detection of financial difficulties and then adoption and application of the most appropriate corrective actions. Detection of financial difficulties is very difficult; its cause is becoming more diverse. The aim of this paper is to analyse company financial health, the causes of company bankruptcies, and the characteristics of those companies and to clarify the forecasting tools (or bankruptcy prediction models). For these purposes, qualitative analysis was used which is mainly focused on the compilation of the results from the present studies. In addition to analysing the causes of company bankruptcies, we focused on the summary of the models that are used for predicting company bankruptcies and proved in advance to anticipate the impending financial difficulties of the company.