bankruptcy prediction models

Bankruptcy prediction models are analytical tools used to assess the likelihood of a company or individual failing to meet their financial obligations. These models utilize various indicators, such as financial ratios, historical data, and economic trends, to evaluate risk factors. Commonly known models include Altman's Z-score and logistic regression. By analyzing these factors, stakeholders—like investors, creditors, and managers—can make informed decisions. Essentially, these models help forecast potential financial troubles, providing insights to mitigate risks before bankruptcy occurs.