Acta Montanistica Slovaca Ročník 17 (2012), číslo 2, 111-118 111 Forecasting Companies’ Future Economic Development Jaroslav Dvořáček, Radmila Sousedíková 1 , Pavel Barták 2 , Jiří Štěrba 3 and Kamil Novák 4 The subject of this paper is financial forecasting. The objective is to predict whether a company can continue in successful operation or is jeopardised by default. The paper takes into account an application of discriminate analysis concerning data files of 85 non-bankrupt, and 85 bankrupt firms in the Czech Republic, at which point mining companies are in minority, industrial enterprises predominate. 5-8 input variables in the form of ratios and indexes have been used for the analysis. The non-bankrupt vis-à-vis bankrupt classification accuracy is defined. Key words: Bankruptcy, Discriminate analysis, Prediction accuracy Introduction In the past decades, it was the principal objective of the mining industries to provide for minerals, many of which were reported as strategic. State ownership of these industries rather belittled the importance of economic and financial implications of running these industries. The paradigm changed markedly after 1989. Financial and economic issues have become of primary interest since then. For mining companies but in fact for any firm, it is of essential interest to know what will be the economic footing of their business partners in future. Then, the problem can be defined as the ability of predicting the future economic situation of corporate businesses in general. Current financial and economic problems worldwide stress the importance of accurate forecasting of corporate business developments. Predicting economic developments of a corporate business implies an assessment of the probability of its success or failure. Inability to pay their mature debts is the principal reason of firms’ default. Efforts of predicting risk of bankruptcy, as based on assessments of financial conditions testified by related financial statement documents, were first made in the thirties of the last century. Dvořáček et al. (2008) have referred to some literature on the problem. Although many different methods have been applied in the area of our interest, all efforts have been commonly oriented by exploiting standard financial information resources, namely bookkeeping documents. Also, the accuracy of prognostications concerning future economic developments has been involved in these studies. Nevertheless, all the studies available have not analysed the reasons of assessing some firms’ performances wrongly. Background This paper’s investigations were initiated by knowledge concerning final stages of mining company operations in the Czech Republic, as related to the trend of restricting mining activities in the latter part of the last century. Justifiable reasons exist to maintain that parallel developments, and similar company behaviour strategies can be identified also in other industries. From a material standpoint, business is nothing else but a fabrication of products or performing of services, but economically, irrespective of the actual business, it is just a circulation of capital. Originally, it is the capitalisťs own capital (share capital, etc.) or the outside capital (credits, loans, etc.). The capital pays for fixed assets (landed property, buildings, machines, etc.), current assets (raw materials and others inputs), and hiring of workforce. A classical production process starts with the processing of raw materials or semi-products; operation adds the value of fixed assets (depreciations) and workforce to the semi- finished products. Further processing of the semi-finished products is finalised by the production of goods - wares for the market. Marketing and sales of the wares change them into receivables that - being realised - transform again to capital. This capital is a fresh input of the running process of the capital circulation. It refreshes consumed current assets, pays for the workforce, and redresses the balance of fixed assets. A part 1 prof. Ing. Jaroslav Dvořáček, CSc., RNDr. Radmila Sousedíková, Ph.D., Institut ekonomiky a systémů řízení, Hornicko-geologická fakulta, VŠB-Technická univerzita Ostrava, 17. listopadu 15, 708 33 Ostrava, Česká republika 2 Ing. Pavel Barták, Ph.D., KÁMEN OSTROMĚŘ s.r.o., Nádražní 414, 507 52 Ostroměř, Česká republika 3 Ing. Jiří Štěrba Ph.D., Institut kombinovaného studia Most, Hornicko-geologická fakulta, VŠB-Technická univerzita Ostrava, 17. Listopadu 15, 708 00 Ostrava, Česká republika 4 Ing. Kamil Novák, Ph.D., ArcelorMittal S.A. a. de la Liberte, L-2930, Luxembourg