Understanding in time premonitory signals of a distress situation and taking actions to get out of these situations are financial management primary targets. Numerous contributions in accounting and finance have presented a plethora of studies about the Bankruptcy Prediction Models (BPMs) based on a statistical approach especially discriminant analysis, logit and probit techniques. The main issue sometimes seems to be that statistically meaning variables are not so meaningful in accounting.
The aim of this paper is to propose an BPM based on an alternative statistical approach to the discriminant analysis techniques. A specific model, based on accounting data, is developed to analyze the economic and financial conditions of the firms, using a new method called Maps Positioning Approach (MPA). The business distress is studied through financial ratios and through subsequent analysis of their statistical distributions.
Two fundamental dimensions are taken into consideration: the economic one (like profitability and growth) and the financial one (liability, capital structure, liquidity).
The use of these two dimensions allows to develop a graphical positioning system in which it is possible to appreciate the situation of each firm considered and their economic and financial condition, in order to evaluate the changes in the financial risk and default likelihood. Moreover, trough MPA the effectiveness of accounting ratios to predict bankruptcy is compared.