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Analysis of Solvency of Building Companies

Student: Ovechkina Darya

Supervisor: Lyubov Keldina

Faculty: Faculty of Economics

Educational Programme: Economics (Bachelor)

Final Grade: 9

Year of Graduation: 2019

The main purpose of this research is to develop a model to assess solvency and determine the bankruptcy probability of construction companies, a third of which is unprofitable, and their proportion among the total number of bankrupt is 20% in 2017 and 2018, according to statistics. Linguistic analysis was applied to formulate definition of bankruptcy, insolvency and the risk of bankruptcy. The advantage of using logistic regression as a basic mathematical tool for model construction is proved by the method of hierarchy analysis. Frequency analysis, classification and the "from the opposite" method on the basis of the construction industry features contributed to the selection of the coefficients set for the model. The result is a model constructed by using the principal component method to solve the multicollinearity problem. The model is significant and allows to get correct predictions with a probability of 65%. The greatest importance for maintaining solvency is the rate of assets turnover, which is consistent with such characteristics of the construction industry as the cyclical nature of production and preferential work on borrowed capital.

Full text (added October 23, 2019)

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