A Review of Bankruptcy Forecasting: Theories, Models, and Techniques

Authors

  • Haoran Yu * Department of Economics and Management, Three Valleys University of China, Yichang 443002, China.
  • Victoria Nozick Department of Operations and Information Management, Aston Business School, Aston University, Birmingham B4 7ET, United Kingdom. https://orcid.org/0009-0004-3258-1724

https://doi.org/10.22105/aaa.v2i1.56

Abstract

Bankruptcy is an almost ancient and prevalent category. According to the law, bankruptcy means the inability of a business entity to pay its debts. Bankruptcy can be considered from two aspects: bankruptcy from an accounting perspective and bankruptcy from an international law perspective. Bankruptcy prediction models are also proposed. Bankruptcy prediction models are divided into three categories from the point of view of time interval: point models, interval models, and probabilistic models. Of course, different methods for predicting bankruptcy exist, such as ratio analysis and market risk. As mentioned above, various bankruptcy models exist, such as  Altman, Springate, Ohlson, Fulmer, Zmijewski, Zavgren, Shirata, etc. This study deals with the theoretical analysis of each of these models. This study aims to present and explain models for predicting bankruptcy. Finally, it can be stated that it does not matter which model and which criterion (financial or non-financial) is used to indicate distress and bankruptcy; the important thing is to use the models for prediction and, consequently, to take the necessary and appropriate policies according to the prevailing conditions in the business unit to prevent and avert this financial event.

Keywords:

Financial crisis patterns, Bankruptcy models, Bankruptcy prediction methods, Ratio analysis and market risk

References

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Published

2025-03-27

Issue

Vol. 2 No. 1 (2025): Accounting and Auditing with Applications

Section

Articles

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Copyright (c) 2025 Accounting and Auditing with Applications

Creative Commons License

This work is licensed under a Creative Commons Attribution 4.0 International License.

How to Cite

Yu, H. ., & Nozick, V. . (2025). A Review of Bankruptcy Forecasting: Theories, Models, and Techniques. Accounting and Auditing With Applications , 2(1), 23-32. https://doi.org/10.22105/aaa.v2i1.56

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