A review of financial ratio tools for predicting contractor insolvency

There is a variety of financial ratio analytical methodologies for evaluation of construction companies corporate performance and identifying potential insolvent contractors. These methodologies comprise traditional approaches, subjective index and ratio models. The shortcomings of the financial ratio analytical methods are highlighted and some approachesto improving their efficiency presented. It has been suggested that standardizing the assessment criteria of subjective index methods for the construction industry can reduce the variation in different expert evaluations and so lead to a more uniform assessment. Secondly, the transformation approach has been recommended as a means of improving the efficiency of ratio models.