EuroEconomica, Vol 35, No 2 (2016)

Bankruptcy Prediction Based on the Autonomy Ratio

Daniel Brîndescu-Olariu


The theory and practice of the financial ratio analysis suggest the existence of a negative correlation between the autonomy ratio and the bankruptcy risk. Previous studies conducted on a sample of companies from Timis County (largest county in Romania) confirm this hypothesis and recommend the autonomy ratio as a useful tool for measuring the bankruptcy risk two years in advance.

The objective of the current research was to develop a methodology for measuring the bankruptcy risk that would be applicable for the companies from the Timis County (specific methodologies are considered necessary for each region).

The target population consisted of all the companies from Timis County with annual sales of over 10,000 lei (aprox. 2,200 Euros). The research was performed over all the target population.

The study has thus included 53,252 yearly financial statements from the period 2007 – 2010. The results of the study allow for the setting of benchmarks, as well as the configuration of a methodology of analysis.

The proposed methodology cannot predict with perfect accuracy the state of the company, but it allows for a valuation of the risk level to which the company is subjected.


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