The Enterprise Creditworthiness Evaluation – By Z” Score Model

• Authors: Sanja Vlaović Begović , Mirela Momčilović , Stevan Tomašević

Title variants

BS

OCENA KREDITNOG BONITETA PREDUZEĆA Z” – SCORE MODELOM

• Languages of publication: EN

Abstracts

EN

There are numerous models which are under contemporary business conditions used for assessment of creditworthiness and forecasting bankruptcy possibility of a enterprise. One of these models is Altman Z – score model. On the basis of adjustments of original model for possibility of bankruptcy forecasting, which is applicable just to enterprises with whose stocks are traded on organized market, a modified model was developed which is applicable only to enterprises with whose stocks are not traded on organized market. Altman made additional modification of model and formulated Z’’ score model that is applied on production and unproductive enterprises, as well as on enterprises that operate in developing countries. Stated models separate financially successful enterprises from those that are threatened by bankruptcy proceedings. On the basis of Z’’ score model Altman classified credit rating of enterprises and with it developed Z’’ score adjusted model. In this paper, we conducted the analyses of credit rating for 33 enterprises in restructuring and 90 enterprises that are not in restructuring, by using Z’’ score adjusted model, as well as determined possibility of occurrence of bankruptcy of enterprise on the basis of Z’ score model. Authors concluded that approximately 57% of analyzed enterprises in restructuring have the lowest credit rating, while possibility of occurrence of bankruptcy in the next two years for those enterprises is more than 90%. On the other hand, approximately 60% of enterprises which are not in restructuring have high credit rating and operate in safe zone, while approximately 6% of enterprises have the lowest credit rating with high possibility of occurrence of bankruptcy in the next two years.

Keywords

EN

credit rating; restructuring; Z-score; bankruptcy

BS

kreditni bonitet; restrukturiranje; Z –score; stečaj

• Publisher: Sciendo
• Journal: Economic Themes
• Year: 2014
• Volume: 52
• Issue: 2
• Pages: 184-196

Dates

published

2014-06-01

received

2014-02-09

accepted

2014-06-10

online

2015-03-25

Contributors

author

Sanja Vlaović Begović

• Higher Business School, Novi Sad, Serbia

author

Mirela Momčilović

• Higher Business School, Novi Sad, Serbia

author

Stevan Tomašević

• Higher Business School, Novi Sad, Serbia

References

• Altman, E.I. (1968) “Financial Ratios. Discriminant Analysis and the Prediction of Corporate Bankruptcy,” Journal of Finance, 23(4): 589-609.[Crossref]
• Altman, E.I. (1983) Corporate Financial Distress, New York, Wiley InterScience.
• Altman, E.I., Hartzell, J. and Peck, M. (1995) Emerging Markets Corporate Bonds: A Scoring System, Salomon Brothers Inc. New York.
• Altman, E.I. and Hotchkiss, E. (2006) Corporate Financial Distress & Bankruptcy, 3rdedition, Hoboken, NJ, J. Wiley & Sons.
• Altman, E.I., Danovi, A. and Falini, A. (2013) Z-Score Models' Application to Italian Companies Subject to Extraordinary Administration, Journal of Applied Finance, (1): 128-137.
• Anjum, S. (2012) Business bankruptcy prediction models: A significant study of the Altman's Z-score model, Asian Journal of Management Research, 3(1): 212-219.
• Samarakoon, P.L. and Hasan, T. (2003) Altman's Z-Score Models of Predicting Corporate Distress: Evidence from the Emerging Sri Lankan Stock Market, Journal of the Academy of Finance, vol. 1: 119-125. available at Accessed 10 December 2013.
• Samkin, G., Low, M. and Adams, T. (2012) The Use of Z-Scores to Predict Finance Company Collapses: A Research Note, New Zealand Journal of Applied Business Research, 10(2): 69-82.
• Stanišić, N., (2013) Analiza finansijskih izveštaja, available at SSRN: Accessed 27 November 2013.
• Beogradska berza, available at Accessed 20 November 2013.

Identifiers

DOI

10.1515/ethemes-2014-0013