Comparison of the Results of a Data Envelopment Analysis Model and Logit Model in Assessing Business Financial Health
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TLDR
The main conclusion of the paper is that the DEA method is a suitable alternative in assessing the financial health of businesses from the analyzed sample and the results of this method are independent of any assumptions.Abstract:
This paper focuses on business financial health evaluation with the use of selected mathematical and statistical methods. The issue of financial health assessment and prediction of business failure is a widely discussed topic across various industries in Slovakia and abroad. The aim of this paper was to formulate a data envelopment analysis (DEA) model and to verify the estimation accuracy of this model in comparison with the logit model. The research was carried out on a sample of companies operating in the field of heat supply in Slovakia. For this sample of businesses, we selected appropriate financial indicators as determinants of bankruptcy. The indicators were selected using related empirical studies, a univariate logit model, and a correlation matrix. In this paper, we applied two main models: the BCC DEA model, processed in DEAFrontier software; and the logit model, processed in Statistica software. We compared the estimation accuracy of the constructed models using error type I and error type II. The main conclusion of the paper is that the DEA method is a suitable alternative in assessing the financial health of businesses from the analyzed sample. In contrast to the logit model, the results of this method are independent of any assumptions.read more
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Management and Economic Sustainability of the Slovak Industrial Companies with Medium Energy Intensity
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The Application of Graphic Methods and the DEA in Predicting the Risk of Bankruptcy
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Posted Content
Diagnostikovanie finančného zdravia podnikov pomocou metódy DEA: Aplikácia na podniky v Slovenskej republike [Diagnosing of the Corporate Financial Health Using DEA: an Application to Companies in the Slovak Republic]
TL;DR: In this paper, the authors presented a new proposal for diagnosing the corporate financial health by DEA, to predict financial distress of Slovak manufacturing companies using the proposed procedure, and to assess the potential of DEA as a tool for predicting financial distress.
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