Measuring the Probability of Bankruptcy for Food Companies

The present research is devoted to measuring the probability of bankruptcy for small and medium-sized companies in food industry in Russia. According to the statistics, food industry falls into the top ten industries with the greatest ratio of bankrupts. Furthermore, amount of unsettled accounts payable is increasing in this industry. On the level of outstanding debt food industry takes first place in manufacturing industry and seventh among all fields of Russian economy. Estimations of bankruptcy predicting models, was carried out by means of the logit regression. The database includes 330 observations: 110 bankrupts and 220 non-bankrupts. Besides financial factors reflecting profitability, liquidity, trade and capital structure, influence of firm specialization on producing some special products was also taken into consideration. According to the findings, profitability and capital structure have considerable negative influence probability of failure. Moreover, specialization of company on production of meat and production milk increase likelihood of bankruptcy. Meanwhile, firm specialization on production of drinks reduces probability of bankruptcy.