Determining the Probability of Bankruptcy of Production Enterprise

Abstract

The main aim of this publication is to research and substantiate the possibilities of using traditional methods of analyzing the financial position of entrepreneurial entities in conjunction with the methodology for determining the probability of bankruptcy of enterprise. The country’s economy is characterized by a financial and economic crisis, which caused a powerful wave of bankruptcies, which intensified scientific and applied research directed towards introduction of an effective system of early warning and response to the threat of critical bankruptcy at domestic enterprises. Both foreign and domestic methods of analysis of the probability of bankruptcy of enterprise are researched, their advantages, disadvantages and possibility of application are defined. The reasons for the bankruptcy of domestic economic entities are highlighted and a set of actions within the framework of the anti-crisis financial management to prevent bankruptcy is proposed. Both the Western and domestic models of bankruptcy probability assessment are considered. As an example of the Western model, the Altman’s five-factor model and the Springate model were chosen, as an example of the domestic model – the one by O. Tereshchenko and A. V. Matviychuk. The purpose of use of the models analyzed in the article is to determine the financial stability of enterprise in order to assess its financial potential. Also the benefits of using these models among other existing ones along with the factors that may impact them are highlighted. For the example of application of these models data of PJSC «Kyiv Vitamin Plant» was used. Stabilization of finances of enterprises was and will be a priority direction of financial stabilization of both the individual enterprise and the economic system. A practical solution to this problem is possible only by replacing the existing financial policy with flexible forms of it and ensuring the stability of the enterprise operation. Depending on the probability of bankruptcy, regulatory measures such as entering the voluntary administration or the transition to anti-crisis management be implemented.

Keywords

• bankruptcy
• financial position
• financial analysis
• stabilization of finances