Bankruptcy prediction models

Bankruptcy prediction models are commonly applied to distinguish failing companies from non-failing companies. This work discusses theoretical background of bankruptcy model construction such as method of analysis, testing, and measuring model accuracy, and shows common problems that model author has to deal with. Using the most famous Altman's models as an example, we examine evolution of these models in time and Altman's reactions to criticism of his assumptions and used methods. We also present models created in the Czech Republic and Slovakia