Predicting Business Failure: An application of altman’s z-score models to publicity traded bulagarian companies

Abstract

Being able to predict firm in financial destress and potential has always been one of the main tasks for financial analysts, managers and owners. There are tremendous academic researches on predicting bankruptcy. However, Altman’s Z-score, is widely applied in assessing firm’s insolvency and is also as a basic indicator for such risk. The aim of this paper is an attempt of application of the Altman’s model to publicly traded companies on the Bulgarian stock exchange. The companies have been selected from different industries (manufacturing, non-manufacturing), following the approach suggested by the models. The results showed, that whatever the industry, the model seems to reflect the financial health of the com-pany and could be used in forecasting a potential downfall in the financial performance of a business. However, as accounting data are still used, it could be wise to consider the quality of the accounting infor-mation, policy and standards applied.