Application of Discriminant Models in Assessing the Probability of Bankruptcy in the Real Estate Development Industry

Abstract

Abstract

Bankruptcy prediction constitutes a key area of research in finance, particularly in the context of young, high-risk companies or entities that remain outside the stock exchange market. A crucial element, therefore, is the development of tools that can classify the analyzed enterprises as “healthy” entities — not at risk of bankruptcy, “distressed” entities — classified as potential bankrupts, and “infected” entities — those facing a significant threat of bankruptcy. Consequently, an essential criterion is the accurate assessment of a company’s ability to continue as a going concern. The identification of causes and symptoms associated with the threat to business continuity is carried out using a range of analytical tools. An assessment of the current financial condition can be an effective evaluation tool used by a company’s stakeholders, including lenders, business partners, investors, and auditors. The methods and models of financial analysis are extensively discussed in both Polish and international literature. The purpose of this article is to present the possibilities of applying discriminant models for bankruptcy prediction, to assess the financial condition of enterprises based on ratio analysis, and, ultimately, to compare the obtained results using the example of the real estate development industry.