Financial Failure Estimation of Textile, Clothing and Leather Industry Businesses Traded on BİST With Altman-Z Score Method

Abstract

Purpose –This study aims to determine whether businesses traded in textile, clothing and leather sectors on BIST have a risk of financial failure via Altman Z-Score model and key audit matters specified in independent audit reports

Design/methodology/approach –. Key audit matters started to be included in independent audit reports beginning from 2017 financial reporting period. The study, therefore, covers the evaluations of financial reports of 22 businesses in textile, clothing and leather sectors on BIST for the years 2017-2019. Financial ratios were calculated with the Altman Z Score model in order to determine the financial failure risks of companies in textile, clothing and leather industries between 2017-2019 and the financial failure risk levels and key audit matters were compared.

Findings – It was concluded that the businesses in the study -apart from two of them- in textile, clothing and leather sectors in Turkey are not in a very good financial state and they are at high financial risk.

Discussion – Companies may go through financially troubled times now and then. Not every company with financial failure is bound to go bankrupt in a short time, however many companies in bad financial condition have such a possibility. That is why focusing on studies based on predictive financial failures of businesses has become necessary. Z-Score model developed by Altman (1968) is a widely used model to measure the financial failure of businesses.