The Role of Financial Ratios to Predict Financial Distress: A Case Study of Sample Small and Medium Enterprises Algerians in the Period (2009-2014)

This study aims to obtain the best collection of financial ratios from the financial list which can be used to forecast the failure or success of the establishments, using the statistics method known by the Factorial Discriminant Analysis “FDA” to build a model predictable about the financial failure. The sample contains 54 small and medium enterprises under the period 2009 to 2014. Results confirm the exiting of 22 failed 22 establishments, while the rest are good. Tow financial ratios from 18 indicate their ability to distinguish between the failed and good establishment. The ratios of profit before taxation to the total debts and the ratios are able to build a predictable model with quality of grading %76, 2. Keywords: The risk of failure, failure ratios, forecast, analysis, factorial discrimination analysis