The need of bankruptcy prediction in the company

Abstract

The obvious symptoms show up in a company’s financial statements about a year or two before a company goes real bankruptcy. The aim of the article is to define the concept of bankruptcy and to provide the main aspects of bankruptcy prediction. The accurate financial failure predicting can provide time for corporate managers to take actions and save the business from financial insolvency. This article notes that managers have a natural tendency to underestimate risks and overestimate their ability to save an insolvent or near insolvent company. Therefore, the accurate prediction of bankruptcy has been an important and widely studied topic in the accounting and finance field for a long time. In terms of the successful identification of the relationship within data of company and industry, better business modeling and investment decisions can be found and implemented.