Method of calculation
The "Poznanski" model (2004)
where:
Model description
The discriminant function of this model consists of four financial ratios that refer to profitability, financial liquidity and capital structure.
Interpretation of the Z(P)score

Z (P)= 0 critical value (bankruptcy threat for the function below the critical value)
 Z (P)≤ 0 "bankrupt" (distess zone)
 Z (P)> 0 "nonbankrupt" (safe zone)
 Model fit: 96% (the model correctly classified 96% of the examined companies).
 The higher the Z(P) value (0.1 and more), the better is the financial situation of a company and the lower is the bankruptcy threat within the forthcoming year.
 The increase of Z(P) value over time indicates the improvement of financial situation and decrease of bankruptcy threat.
 In the case of the Z(P) < 0 (which signalizes bankruptcy threat) it is recommended to run a detailed analysis of financial performance to detect which aspects require an immediate healing procedures.
Detailed decription of respective ratios and their impact on the Z(P)score value
Constant value 2.368
The constant, free factor results from statistical estimates when building the model, it allows setting the limit value of Z(P) at the level of zero.
X_{1 }– rate of return on assets
Method of calculation
Ratio's weight: +3.562
Units: %
Remarks
The ratio is calculated like the return on assets (ROA) ratio available in the eanaliza.pl system in the group of profitability ratios. It uses the data for the current period.
Ratio's interpretation
 A higher value of the ratio means greater ability of the company to generate profit based on its resources (assets).
 In the model, the ratio X_{1} has a weight with a positive sign, which means that the increase in the ratio (increase in profitability) will increase the value of the function Z(P).
 In case of a negative result (financial loss), the ratio X1 will decrease the value of the Z(P) function, increasing the risk of bankruptcy.
X_{2} – quick ratio
Method of calculation
Ratio's weight: +1.58
Units: times
Remarks
The ratio is partially calculated like the quick ratio available in the eanaliza.pl system in the group of liquidity ratios, but in the numerator we omit the shortterm prepayments. It uses the data for the current period.
Ratio's interpretation
 A higher value of the ratio means a higher level of liquidity which reduces the risk of bankruptcy.
 In the model, the X_{2 }ratio has a weight with a positive sign, which means that increase in the ratio, will increase the Z(P) function, reducing the bankruptcy risk
X_{3} – fixed capital coverage
Method of calculation
Ratio's weight: +4.288
Units: times
Remarks
The ratio is partially calculated like the long term solvency ratio based on fixed capital coverage available in the eanaliza.pl system in the group of general performance ratios, but in the denominator we take the value of total assets instead of fixed assets value. It uses the data for the current period.
Ratio's interpretation
 A higher value of the ratio means higher level of longterm sources of funds (fixed capital) in financing assets, which improves firm's stability and longterm solvency.
 Higher level of fixed capital reduces the bankruptcy risk, by reducing the level of shortterm liabilities (with maturity within one year).
X_{4} – profit margin on sales
Method of calculation
Ratio's weight: +6.719
Units: %
Remarks
The ratio is calculated like the gross profit margin ratio available in the eanaliza.pl system in the group of profitability ratios. It uses the data for the current period.
Ratio's interpretation
 A higher value of the ratio means greater ability of the company to generate profit based on sales.
 In the model, the ratio X4 has the highest weight with a positive sign, which means that the increase in the ratio (increase in profitability) will increase the value of the function Z(P).
 In case of a negative result (financial loss), the ratio X4 will decrease the value of the Z(P) function, increasing the risk of bankruptcy.
Based on:
HAMROL M., CZAJKA B., PIECHOCKI M. (2004). Upadłość przedsiębiorstwamodel analizy dyskryminacyjnej. Przegląd Organizacji 6, 3539. (in Polish)
KISIELIŃSKA J., WASZKOWSKI A. (2010). Polskie modele do prognozowania bankructwa przedsiębiorstw i ich weryfikacja. Zeszyty Naukowe SGGW 82. (in Polish)