Att identifiera signaler för obestånd i tid
To be able to protect themselves from credit risk, the banks must constantly check the performance of the companies they have lent money to. There are many mathematical models for predicting financial distress. These models use accounting-based ratios, which often are historical and not representative for the present situation. This study describes how the banks do in practice to find signals of insolvency in time and the variables they are observing for doing that.In addition to financial reports which the company sends in to the bank at least once a year, also the relationship between them and information from different information agencies are of great importance to track signals of insolvency. Poor profitability is the primary cause of insolvency. It is caused mainly because of bad business and leadership. Eventually will poor profitability lead to consuming of equity capital and place the company in an illiquid situation. Then it may be difficult for the company to pay their bills and signals of insolvency become obvious and the banks start then to sharpen their attention on the companies and intensify the follow-up works.Another find-out of the study is that local factors which are contributing to failure are the large companies that are active in the area. When they are in a bad situation, it affects the suppliers. The big difference between service and manufacturing companies regarding insolvency is that service companies are more flexible regarding cutting down costs when bad times come.