Trend of Financial Ratios in the Business Failure Process

The main objective of this paper is to investigate how financial indicators and the trends of these financial indicators describe business failure process. We use a method of analyzing the dynamics of financial failure in a sample of companies. We use a sample of 163 companies which were declared bankrupt or dissolved, we depict the companies' behavior trajectories on their path to final failure. We analyze these trajectories to discover and describe empirical evidence of the different dynamics of bankruptcy. In conclusion, we will see that there are different failure trajectories. We can use these different trajectories to identify the indicators that warn of the risks of failure of the companies in the sample. Finally, we prove that we will obtain more information in the model when included financial indicators with their trend.