RESEARCH REGARDING THE USE OF DISCRIMINANT ANALYSIS FOR ASSESSING THE BANKRUPTCY RISK OF AGRICULTURAL COMPANIES
Published in Scientific Papers. Series "Management, Economic Engineering in Agriculture and rural development", Vol. 14 ISSUE 4
Written by Agatha POPESCU
The paper aimed to apply the discriminant analysis using Altman Z' Score model in order to predict bankruptcy risk of the agricultural companies, using a study case regarding three representative companies dealing with dairy farming in Ilfov County of Romania. The results discriminated the companies according to their financial statement and ratios and mainly Z Score values. The company F1 proved the most difficult financial statement being classified in the Distress zone every year ( Z'=1.003 in the year 2011, 1.098 in the year 2012 and 0.971 in the year 2013). For this reason, this company is bankrupt. The company F2 was situated in the "Grey zone" every year, because the financial situation is not so good, but it i able to pay a part of its debts. However, it is in danger to fail in the future, if measures to recover are not taken in time. (Z'=1.436 in the year 2011, 1.269 in the year 2012 and 1.343 in the year 2013). The company F3 registered a different situation from a year to another. In the first two years, 2011 and 2012, it was facing a difficult financial statement being placed in the "Distress zone". In the year 2013, the financial statement has recovered due to the measures taken by managers and it passed in the "Safe zone", characterized by a good financial situation and solvency, enabling it to pay all its debts.(Z'=1.126 in the year 2011, 0.928 in the year 2012 and 3.189 in the year 2013). The agricultural companies dealing with dairy farming have a low profitability, and the degree of bankruptcy risk is high. For this reason, managers have to keep under control the financial indicators any moment and take urgent measures to recover by the end of the year as their company not to fail.