Prediction Of Failure For Shareholding Agricultural Companies In Iraq

Abstract

Abstract: Early prediction of financial failure gives the administration a good enough chance to prepare and to treat the factor causing this to happen. This research aims at predicting financial failure of agricultural companies using the financial data of these companies for the period 2005- 2017. Altman model was applies using 5 financial ratios, 2 of which were indexes of activity, one of profitability, one of leverage, and the last one was related to distribution of profit. The model indicated that the companies achieved values less than 1.8, and this means that the shareholding agricultural companies are at risk of financial failure, their economic position is weak, and they are operating in the red zone. This is a negative indicator of the companies’ performance. Probit model was estimated to recognize the impact of the factors on the probability of failure. It turned out that the index of the net retained profits to the existing assets which is related to the administration’s policy of profit distribution is one of the most affecting factors on the possibility of financial failure of the companies; if it increased by one unit, the failure probability would increase by 9.96, hence, the research recommended not to rely on financial indicators only, but also to adopt a quantitative financial method in making decisions so as to have a clear vision of the financial situation of the companies.