6 Journal of Environmental Protection and Ecology Vol.16, No 2, pp. 528_538 (2015) PREDICTION OF FIRMS’ FINANCIAL DISTRESS: THE CASE OF THE GREEK FISH-FARMING INDUSTRY C. LEMONAKIS a* , Z. ANDREOPOULOU* b , I. SFENDOURAKIS c , K. LIANOUDAKI d , A. GAREFALAKIS e a Researcher, Technological Institute of Crete, e-mail:clemonakis@hotmail.com b* correspondant author, Associate Professor, Aristotle University of Thessaloniki, randreop@for.auth.gr c MSc University of Portsmouth d Msc in Economics, University of Athens e Adjunct Lecturer, Technological Institute of Crete Abstract. The economic crisis in recent years has brought significant challenges in almost all business and shown that exogenous factors act as catalysts in markets. As a consequence of such a result, there is a need to highlight the importance of creating predictability models for analyzing potential future behavior, namely creating models for assessing potential economic impact that contribute a lot in avoiding firms’ financial default. Our study is focused in describing previous models for predicting firms’ bankruptcy. We use factors such as profitability, activity, liquidity, age, size, growth rate and capital structure, as the most significant ratios affecting the distress event in the Greek fish-farming industry and the impact of each ratio in prediction models. We propose a model in which indicators used are critical for firms’ financial viability. The aim of this study is to find signals of firms’ financial distress activity as well as actions need to be taken to avoid it, in order to provide the management with certain strategic movements to carry out to avoid potential failure. Keywords: Greek fish-farming industry, financial ratios, profitability, activity, liquidity, financial distress AIMS AND BACKGROUND According to data published by many researchers the fish-farming is a rapidly developing sector of the Greek economy. Greece produces about 65,000 tons of sea bream and sea bass every year. Plus a great amount of that production exports worldwide. In Greece there is a 4,000 kilometers coastline around the mainland and 11,000 kilometers around Greek islands which can be used for fishery operations. The main advantage lays to the fact that the natural environment provides identical conditions for the development of such a kind of industry. In Greek waters exists over 250 marine creatures. The industry success is based on these natural conditions such as: mild climate, clean water, 3000 islands and long coastline. The most important farmed species are sea bream and sea bass. During the year 2000 to 2006 the Greek fisheries amounting nearly 500 million Euros, from which 236 million came from structural fund of the European Community. Greece produces 60% of the sea bass and sea bream farmed in European Union and almost the half of worldwide production. Three quarters of this production exported in European Union state members. In this research we develop two models, in order to provide information according to actions that should be taken, by firms’ management teams and some important elements on strengthening their capability for further development. We assume that Greek fish-farming industry has been marked by