Designing a Mathematical Model based on Cash Flows for Predicting Bankruptcy of accepted companies in Tehran stok Exchauge (TSE)

Abstract

In this research we have surveyed the ability of liquidity ratios abtain from cash flow statement to predict bankruptcy of companies that accepted in Tehran capital market. For this proposes we applied Regression Logistic Model (RLM) and other statistical techniques to predict bankruptcy in Tehran Stock Exchange (TSE). Evaluation of model was conducted by using information two groups of corporations which accepted in TSE .The first group composed of 40 numbers of bankrupted corporations and the second group composed of 40 bankruptcy companies. In order to designing mathematical model we used four following ratios:1) cash flows to assets ratio 2) cash flows to sum of liabilities ratio 3) cash flows to current liabilities ratio 4) cash flows to net sales ratio. Statistical results of model show a significant co-liner between cash flows to assets and cash flows to sales ratios. The result of research model indicates the validity of model among the sample group. Finally by elimination of cash flows to assets ratio, model designed and the result show , the model are valuable to predicting bankruptcy of corporations. Also model designed able to predict bankruptcy for two years before it occur and ability of prediction reduce whit past time, because of unclear prediction indexes.

Keywords

• cash ration
• cash flows, predicting bankruptcy and accepted company intehran capital. marke(tcm)