Application of Altman and Springate model in predicting financial failure: An application on BIST Automotive sector

It is known that the automotive industry has a large share in the world economy. As in every sector, it is important for companies to make predictions about their future in the automotive industry. Economic crises, wars, epidemics, etc. occurring around the world. As a result, changes occur in the financial situations of companies. Predictions about the financial situation of companies are of great importance for investors. Among the financial failure risk predictions, the most commonly used Altman Z' Score model and the Springate S model were selected. In our study, the concept and causes of financial failure, the definitions of the Altman Z' model and the Springate model, their historical development and the criteria used in the models are explained. In this study, 19 companies in the automotive industry traded on Borsa Istanbul between 2020-2022 were considered as a sample. Balance sheet and income statement data of the companies were obtained through the Public Disclosure Platform. First of all, the criteria used in both models were determined and the data obtained according to these criteria were extracted. According to the Altman Z' model, in 2020 with the impact of Covid-19, 5 companies are in the financially risky zone and 10 companies are in the gray zone. In 2021, when Covid-19 is over, 6 companies are in the risk zone and 8 companies are in the gray zone. In 2022, 4 companies are in the risky zone and 12 companies are in the gray zone. According to the Springate S score model, it was observed that 10 companies were risky in 2020, 10 companies were risky in 2021, and 9 companies were in the risky region in 2022. Looking at the data obtained, it was concluded that the Altman Z' score model and the Springate S score model are mostly compatible and the Covid-19 effect did not financially affect the automotive industry much.