<p>Background: During the year 2002 approximately 27 000 people lost their jobs because of companies filing for bancruptcy. In 2002 the number of companies filing for bancruptcy in Sweden were 6740. This is approximately twice as many as in the year of 1974 when the first major study concerning bancruptcies in Sweden was carried out. The accumulated amount of unpaid bancruptcy claims for the period 1991 – 1997 was 51 billion SEK. Several swedish banks estimates that approximately one third of these bancruptcies could be avoided. </p><p>Purpose: Create a checklist for issuing- and evaluation of company loans. </p><p>Execution: Only financial information available in annual reports have been used in this study. A targetpopulation with companies filing for bancruptcy in the year 2001 has been derived. The targetpopulation has been evaluated in comparison with a controlpopulation for the same period of time. </p><p>Outcome: Two variables, high long term liabilities to total assets and a low degree of equity to total assets, showed high predictability five years prior to bancruptcy. According to our study there are four variables useful for prediction of financial distress two to three years prior to bancruptcy. (1) An increased degree of long term liabilities to total assets, (2) a decrease in untaxed reserves, (3) decreasing profitability more than two years in a row from a already low level and (4) an increase in assets financed with long term liabilities.</p>

Background: During the year 2002 approximately 27 000 people lost their jobs because of companies filing for bancruptcy. In 2002 the number of companies filing for bancruptcy in Sweden were 6740. This is approximately twice as many as in the year of 1974 when the first major study concerning bancruptcies in Sweden was carried out. The accumulated amount of unpaid bancruptcy claims for the period 1991 – 1997 was 51 billion SEK. Several swedish banks estimates that approximately one third of these bancruptcies could be avoided. Purpose: Create a checklist for issuing- and evaluation of company loans. Execution: Only financial information available in annual reports have been used in this study. A targetpopulation with companies filing for bancruptcy in the year 2001 has been derived. The targetpopulation has been evaluated in comparison with a controlpopulation for the same period of time. Outcome: Two variables, high long term liabilities to total assets and a low degree of equity to total assets, showed high predictability five years prior to bancruptcy. According to our study there are four variables useful for prediction of financial distress two to three years prior to bancruptcy. (1) An increased degree of long term liabilities to total assets, (2) a decrease in untaxed reserves, (3) decreasing profitability more than two years in a row from a already low level and (4) an increase in assets financed with long term liabilities.