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The Master's research paper on the theme: “Discriminant analysis and its application in the prediction of bankruptcy of the enterprise ” (adapted from Dnipropetrovsk training and production enterprise of Ukrainian Society of the Deaf) Student: Anastasia Bobrova, FC 10-M Supervisor: Associate Professor, Ph.D. in Economics, Victoria Varenik INTRODUCTION SLIDE 2. CONTENTS SECTION 1. THEORETICAL ASPECTS OF DISCRIMINANT ANALYSIS AND ITS APPLICATION IN THE PREDICTION OF BANKRUPTCY OF THE ENTERPRISE 1.1. The essence of discriminant analysis and its application in predicting bankruptcy of enterprises 1.2. Forecasting of bankruptcy of the enterprise on the basis of discriminant analysis 1.3. Analysis and evaluation of the use of discriminant analysis in predicting bankruptcy of enterprises in Ukraine SECTION 2. ASSESSMENT OF THE APPLICATION OF DISCRIMINANT ANALYSIS IN PREDICTING BANKRUPTCY IN DNIPROPETROVSK TRAINING AND PRODUCTION ENTERPRISE OF UKRAINIAN SOCIETY OF THE DEAF 2.1. Organizational and economic characteristics of Dnipropetrovsk training and production enterprise of Ukrainian Society of the Deaf 2.2. Practice in the application of discriminant analysis in predicting of bankruptcy of Dnipropetrovsk training and production enterprise of Ukrainian Society of the Deaf 2.3. Analysis of bankruptcy of Dnipropetrovsk training and production enterprise of Ukrainian Society of the Deaf SECTION 3. IMPROVING THE APPLICATION OF DISCRIMINANT ANALYSIS IN PREDICTING BANKRUPTCY IN DNIPROPETROVSK TRAINING AND PRODUCTION ENTERPRISE OF UKRAINIAN SOCIETY OF THE DEAF 3.1. Problems and prospects of application of discriminant analysis in predicting of bankruptcy in Dnipropetrovsk training and production enterprise of Ukrainian Society of the Deaf 3.2. Using the method of fuzzy sets for the diagnosis of risk of bankruptcy in Dnipropetrovsk training and production enterprise of Ukrainian Society of the Deaf 3.3. Development of models of diagnostics of bankruptcy with the help of discriminant analysis and building of the position identification matrix of Dnipropetrovsk training and production enterprise of Ukrainian Society of the Deaf on the choice of the system of anti-crisis financial management CONCLUSIONS AND SUGGESTIONS REFERENCES SLIDE 3. The purpose of the research is the theoretical and methodological synthesis and development of practical recommendations to improve the application of discriminant analysis in predicting the probability of bankruptcy. The object of the research is discriminant analysis. Subject of the research is discriminant analysis and its application in predicting bankruptcy of enterprises. The research base is Dnipropetrovsk training and production enterprise of Ukrainian Society of the Deaf that is engaged in the production of working clothes. SLIDE 4. THE ADVANTAGES AND DISADVANTAGES OF FOREIGN MODELS FOR DETERMINING THE PROBABILITY OF BANKRUPTCY Advantages Disadvantages 1. Low complexity of use while ensuring a sufficiently high accuracy of the results. 2. There is a possibility to compare the status of different objects. 3. Information for the calculation of all indicators is available and contained in the main reporting forms. 4. There is the opportunity not only to predict bankruptcy, but the evaluation of risk zones in which the enterprise is located. 5. High probability of evaluation and effectiveness in practice. 6. It can be used to confirm the results both individually and in the aggregate. 7. Taffler’s and Springate’s models are the most adapted to Ukrainian practice. 1. The specifics of individual countries are not taken into account. 2. The characteristics of the industry, the status of suppliers and competitors, income and consumer spending are not taken into account. 3. The balance sheet and the statement of financial performance are considered only. 4. There are various important indicators, which are due to differences in accounting for certain indicators, the impact of inflation on their formation, the mismatch between book value and market value of certain assets and other objective reasons. 5. Using different techniques is the risk of getting the opposite conclusions. 6. There may be situations where the companies with the worst performance of the coating and autonomy are fully functional and make a profit. 7. The models do not take into account specificity of the company activity depending on the industry. 8. There are differences in view of importance of individual indicators in the models. 9. The lack of Ukrainian statistics of bankrupt enterprises, which could confirm or refute the reliability of the model. SLIDE 5. The share of unprofitable enterprises in the economy of Ukraine for 20052014 SLIDE 6. Evaluation of the influence factors on the prospects of development of the enterprises of Ukraine in 2015 (+ strengthening the influence of the factor; - reducing the impact factor) Enterprises Impact factor Agricultural Industri al Constr uction + Trading Transp ort The service sector + + High fuel prices + Lack of working capital + + Imperfect legislation + + High interest rates on loans + Low solvent demand - + + + High taxes - - + + - - High tariffs of natural monopolies + + Lack of funding + The lack of work orders + Competition from domestic enterprises - Growth in the physical volume of trade for most groups of food products + The decrease in the physical volume of trade for most groups of non-food products + The slowdown in the reduction in the volume of orders for domestic goods + The decrease in the volume of orders for imported goods + The shortage of fuel and lubricants + Dynamics of assets of Dnipropetrovsk UTOG for 2011-2014 1764 1640 1800 1600 1400 1709 1554 1418 1730 1456 1224 1000 UAH 1200 1000 800 600 400 200 0 2011 year non-current assets 2012 year current assets 2013 year 2014 year Slide 8. SLIDE 9. The calculation of the probability of bankruptcy Dnipropetrovsk UTOG-based discriminant analysis (20112014) (M is a minimal threat of bankruptcy; C – average threat of bankruptcy; – the high threat of bankruptcy; B5 – the probability of bankruptcy after 5 years; SPS – financially stable; NSF – precarious financial condition). Estimation of probability of bankruptcy THE DISCRIMINANT ANALYSIS MODEL 2011 2012 2013 2014 1. Z – criterion E. Altman М М М М 2. Y – criterion R. Taffler and G. Tishow М М М М 3. R – criterion Davydova–Belikova М М М М 4. Z − criterion. Hidaka and D. Stos M/NSF M/NSF M/NSF M/NSF 5.1. Biver Ratio SPS SPS SPS SPS 5.2. The coefficient of total liquidit SPS SPS SPS SPS 5.3. Return on equity net profit margin HPS SPS B5 B5 5.4. The concentration ratio of borrowed capital SPS SPS SPS SPS 5.5. The coverage ratio of own current assets capital B5 B5 B5 B5 6. Z − criterion R. Liz М М М М 7. Z − criterion K. Springate В С С С 8. N – criterion J. Fulmer М М М М 9. Z – criterion K. Berman М М М М 10. Z – criterion of Conan and Holder М М М М НФС SPS SPS SPS М М М М 5. Model Of Beaver 11. R – rating the number Saifullin - Kadykova 12. Z is the universal criterion of discriminant functions SLIDE 10. Assessment of the probability of bankruptcy using the coefficient of financing of difficult to liquid assets of Dnipropetrovsk training and production enterprise of Ukrainian Society of the Deaf for 2012-2014, ths. Index 2012 2013 2014 1). The average cost of non-current assets 1702 1597 1505 2). The average amount of current inventory 733 733 642 3). The average amount of equity 1752 1856 1942 4). The average amount of long-term bank loans 0 0 0 5). The average amount of short-term Bank loans 0 0 0 2435 2330 2147 2435 > 1752 2330 > 1856 2147 > 1942 The probability of bankruptcy is very high The probability of bankruptcy is very high The probability of bankruptcy is very high Р. 1 + Р. 2 The obtained inequality Interpretation of bankruptcy probabilities SLIDE 11. Stages of application of model-based fuzzy logic methods in Dnipropetrovsk training and production enterprise of Ukrainian Society of the Deaf 1 stage The definition of sets, subsets, and the selection of the list of indicators for the diagnosis of bankruptcy. 2 stage Assessing the significance of indicators based on the weight coefficients according to Fishburnes’s rule . 3 stage Classification of degree of risk and the values of selected indicators. 4 stage Assessment indicators: equity ratio; the ratio of current assets equity capital; the quick ratio absolute liquidity; asset turnover; return on equity; level of marketing; level of technical and technological renovation. 5 stage Classification of level of calculated indicators based on the selected criteria. 6 stage Risk assessments are based on formal arithmetic operations on assessing the risk of bankruptcy. 7 stage Linguistic recognition. recommendations. Formulation of conclusions and SLIDE 12. Estimation of probability of bankruptcy of Dnipropetrovsk UTOG on the results of applying the method of fuzzy sets for 2011-2014 Calculated values Хi Indicator name Хi 2011 2012 2013 2014 0,56627 0,5925 0,5823 0,6224 -0,0177 0,2058 0,3531 0,5474 -0,0588 0,1213 0,2025 0,3046 0,0650 0,0315 0,0190 0,0984 Asset turnover 1,2999 1,5114 1,6353 1,5684 The profitability of the entire capital -0,0214 0,0392 0,027 0,0261 Level of marketing -0,4706 0,8000 0,6617 0,5061 0,0028 -0,0014 0,0076 0,0056 0,41919 0,27889 0,36391 0,20704 medium risk of bankruptcy low risk of bankruptcy medium risk of bankruptcy low risk of bankruptcy The autonomy factor The ratio of current assets equity The quick ratio The absolute liquidity ratio The level of technological renovation The degree of risk The SLIDE 13. The position identification matrix of Dnipropetrovsk training and production enterprise of Ukrainian Society of the Deaf for selecting the system of anti-crisis financial management