ESTIMATES USING STOCHASTIC METHODS FOR SME'S RISK OF BANKRUPTCY

Nowadays, when the classical mechanisms of a market economy are implemented and fully functional, financial analysis may directly improve the economic life of businesses. The search for sources of capital and their efficient allocation requires, for increased profitability and value of an economic entity, reliance, in retrospective financial analysis, on certain financial methods and techniques to assess firm's financial performance at a given moment. Economic theory has always been interested in developing methods to predict the risk of bankruptcy starting from rates correlated with the state of "health" or "weakness" of economic entities. One of the methods commonly used in current financial analysis is the Score function. Comparing a priori and a posteriori probabilities allows one to determine the Score areas where the risk of bankruptcy is higher. This paper presents, first, the theory of the Score function method for financial analysis of an economic entity and, second, the results obtained when applying this methodology for SMEs in Romanian development macro-regions. The bankruptcy risk for some SMEs is approximated and the strengths and weaknesses of financial management in order to design new strategies are identified. Changes induced by the current economic and financial crisis may involve, when the probability is a priori, an exchange of the bankruptcy rate. The techniques presented and applied in this paper, allowed us, for each considered macro-region, to obtain a general picture of the economic and financial situation of SMEs and allowed for a global diagnosis and a synthesis of their economic and financial situation.