Proceedings

3. FCF was computed for each fiscal year as the difference between the net cash
(NC) at the end and at the beginning of the analyzed period.
4. NC is expressed as the computed difference between the cash assets and the
cash liabilities.
5. The average weight of the FCF value in the total SF has been established,
computed for the weights specific to each fiscal year, from 2005 until 2009;
6. Based on the average weight of the FCF value in the total TO, FCF was
predicted for the fiscal years 2010,..., 2014, as the product between the TO
predicted for these years (2010,…, 2014) and the average weight obtained;
7. WACC was computed for the fiscal years 2008 and 2009 based on the
relation: WACC = [EV/ (EV+Dt] * ROCE + [Dt/ (EV+Dt] * Rd, and ROCE =
Rnet/EV, Rd = RNOA + (RNOA – ROCE) * EV/Dt, RNOA = Rop/At, where
(Mironiuc, 2006) :
- ROCE - return on common shareholders’ equity;
- Rnet - net result;
- Rop - operational result;
- RNOA - return on net operating assets;
- Rd – interest rate corresponding to the debts.
The category variables used to identify the profile of the insolvency risk were
obtained by discretizing the three indexes (IEV, IMC, IVFCF), using the SPSS 19.0
statistic software (Jaba, 2004). In order to determine the intervals corresponding to the
discretized variables categories, we have taken into account the average (m) and the
square deviation (σ) for each of the three indexes. Therefore, the selected intervals
include index values as follows: (-∞; m-σ/2) for a low index, [m-σ/2; m+σ/2) for a
medium index, and [m-σ/2; +∞) for a high index. The newly resulted variables are
synthesized in Table 2.
Ctg_I EV
Ctg_I MC
Ctg_I FCF
Table 2. Analyzed category variables
Symbol Meaning Interval relation
The category variable corresponding
to the index of the EV value increase
(-∞;-0.665) – low IEV; [-0.665; -0.035) - medium
IEV; [-0.035; +∞) - high IEV The category variable corresponding
to the index of the MC value increase
(-∞; -0.315) – low IMC; [-0.315;1.195) - medium
IMC; [1.195;+∞) - high IMC The category variable corresponding (-∞;-1.3) – low IVFCF; [-1.3;0.94) - medium IVFCF; to the index of the VFCF value [0.94;+∞) - high IVFCF increase
The analyzed category variables will be used to identify the profile of the insolvency
risk, by pointing out the associations between these variables and the state of the
analyzed company (be it insolvent or not).
2.3. Data and sample
The target population studied is composed of the companies quoted in the Bucharest
Stock Exchange (BSE). From this population, we have randomly extracted a sample
of 40 quoted companies (BSE), as follows: 20 insolvent companies whose bankruptcy
procedure started in 2010 and 20 companies whose shares can still be sold and that
have a profitable economic-financial activity. Their list is provided in Table 3.
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