Cash-flows ratios as predictors of corporate failure

The aim of this paper is to investigate whether a model utilizing cash-flow ratios in combination with other categories of financial ratios results in a model superior to a model that does not include cash-flow ratios. The study uses both, operating cash-flow and the traditional definition of cash-flow, as proxies for cash-flow ratios. Other categories of ratios are profitability, activity, liquidity and leverage ratios. The results of the analysis show the superiority of the model using cash-flow ratios over the second model that does not include cash-flow ratios.