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Break-Up Analysis: A Method to Regain Trust in Business Transactions

  • Bruno Maria Franceschetti
  • Claudia Koschtial
  • Carsten Felden
Chapter
Part of the Lecture Notes in Information Systems and Organisation book series (LNISO, volume 3)

Abstract

The financial crisis resulted in a loss of trust; not only within the investment or banking sector, but in general between creditors and debtors, because many organizations faced insolvency. Such a financial situation can even result in a company’s bankruptcy. Therefore it is necessary to get a realistic understanding of the solvency or the possible insolvency of a company. The support of a decision on a debtor’s creditability is not yet sufficiently provided by the most prominent method (Altman’s Z’’-score). The paper presents a procedure called Break-Up Analysis (BUA). It helps to decide on the solvency of a company. The comparison of the BUA to Altman’s Z’’-score shows an improvement of the identification of solvent and insolvent companies by 22 %. The BUA enables herewith to regain trust in business transaction by not identifying only the insolvent companies but the solvent ones as well.

Keywords

Solvency  Bankruptcy  Bankruptcy prediction model Financial data analysis  Break-Up analysis  Z-score  

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Copyright information

© Springer-Verlag Berlin Heidelberg 2013

Authors and Affiliations

  • Bruno Maria Franceschetti
    • 1
  • Claudia Koschtial
    • 2
  • Carsten Felden
    • 2
  1. 1.University of MacerataMacerataItaly
  2. 2.Technische Universität Bergakademie FreibergFreibergGermany

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