Selection of risk factors of bankruptcy of an enterprise based on the method of main components

Abstract

Authors: Alexandra Alexandrovna Zakharova zacharovaa@mail.ru

Elena Viktorovna Telipenko KochetkovaEV@mail.ru

The article presents the rationale of the choiceof main componentsolutionsfor theactual problemof selecting the mostsignificant risk factors of bankruptcy.To evaluate financial and economic activities of an enterprise they use a metric which includes some main sections: assessment of a status; assessment of liquidity; assessment of business solvency; assessment of business activity; assessment of profitability. Every group has from 6 to 12 different coefficients (in total 41).  The use of all these sections in the system of bankruptcy risk management hampers processes of modeling and forecasting activity. Therefore cut of variable numbers is necessary for analysis using the method of main components.The method of main components is meant for structuring of data by means of reduction of many test variables to fewer number of variables (components or factors), which would explain the majority of variation in values of researched data. Testing of this method was made on data of accounting statements from 33 engineering works. Аs a result of applying the methodof the 33indicators of financialandeconomic activity ofthe enterprisewasselected 10 the most significant.The use of the method of main components allow: 1) revealing the most important  operating rate of an enterprise; 2) forecasting revenue of an enterprise; 3) if it is necessary correcting  results to provide planned results.The use of the method of main components allow revealing the most important factors of external and internal environment of an enterprise negative influence of which can lead to bankruptcy or on the contrary positive influence of which can reduce a risk level.Number of indicators is reducedto avoidduplication of information, thus reducing the complexity ofdecision-makingin the analysisof financialconditionand business operationsof the enterprise.