Abstract:

This paper is focused on the topic of models predicting financial distress. These approaches are also known as bankruptcy models. The aim of this paper is to compare results for models created in different conditions. On one hand there are national approaches (in our case Czech formulas), on the other hand there are models from developed economies. Formulas from developed economies were created sooner and they are based on financial accounting data of publicly traded enterprises or at least of enterprises operating on the most developed markets. Czech models were created later after replacing centrally planned economy by market economy when the entities had been started to be exposed to the risk of business default. Although there exist critiques against using models predicting financial distress in different time, area and other conditions this research would like to prove that models from developed economies have enough accuracy also for the Czech businesses. The analysis uses methods as Type I Error and Type II Error. The models are verified on the financial accounting of Czech enterprises classified as defaulted as well as non-defaulted.