Considerations on the Methods of Prediction of an Entity’s Bankruptcy

Abstract

Assessing and evaluating the financial health of an entity requires assessing the risks accompanying the activity, some of which indicate vulnerability, while others predict bankruptcy. The study of the bankruptcy causes has shown that this phenomenon is a consequence of the progressive degradation of the entity’s financial situation and may be predictable long enough before its appearance by means of some accounting and banking methods. To what extent do these methods allow the detection of the signals of degradation, which anticipate bankruptcy? Is it enough to use just a single method? Is it necessary to combine several methods of analysis? These are some questions that support the desirability of this theme.