APPLICATION OF ALTMAN Z-SCORE FOR VIABILITY OF SMALL AND MEDIUM ENTERPRISES

Abstract

Small and medium enterprises (SME) are the focus of numerous scientific studies, Abstract: European and national programs. Their revenue-generating capability attracts the attention of investors, government institutions and other partners. This can be observed in a number of attempts to define SMEs by The Bolton Report and The European Commission. The Small Business Act places a focus on the need for methods to assess the viability of SMEs. The Z-score model developed by Edward Altman predicts publicly held enterprises default within 2 years. Altman's original model works with financial indicators of large corporations. Therefore, as a way to improve decision-making, it is possible to create a modified model based on the Altman's original model to help determine the viability of SMEs. Through using Bulgarian enterprises empirical data, the model could be adapted to the specific conditions in Bulgaria and predict whether small and medium enterprises will default within two years with a certain predictive power.