Abstract:

Many economists and analysts from all over the world have been trying to find a method to assess company health and predict its eventual financial distress for many years. No economy is a small isolated island and the bankruptcy of a company can also influence a situation on the other side of the world. But companies are very complicated organisms and that is why it is not a simple task to estimate company future development.The best-known model of prediction called Z-Score was introduced by E.I. Altman in the USA more than forty years ago, in 1968. This model was modified several times. The Z-Score model was verified not only by the author but also by other analysts many times. Some analysts criticize that the model doesn’t give correct results. Above all, it is not able to detect the coming crisis within a sufficient time period.The aim of this article is to evaluate whether the Altman’s Model provides correct results, when applying to Czech firms, and comparing our results with the original Altman's study results. At the same time it will be effort to analyse the values of ratios which are contained in the Altman’s model – comparing ratio values of the original Altman’s company sample with ratio values of Czech companies.