Project work – II

Presentation
Jan 2025-June 2025
Guided by: Prof.Arpit Deo Students Name:
Anant Tiwari EN21CS301093
Anant Jain EN21CS301092
Assistant Professor Akash Choudhary EN22CS3L1005
Department of Computer Science &
Engineering, Medi-Caps University
Business Success Prediction
Contents
❖ Introduction

❖ Literature Survey

❖ Research Gap

❖ Problem Identification

❖ Motivation

❖ Objectives

❖ Methodology

❖ References
Introduction
❖ Business failure has significant economic and social consequences,
affecting not only companies but also employees and communities.

❖ Traditional financial ratio-based models predict failure but may not apply
universally across industries due to unique sector-specific risks.

❖ This research aims to develop a more adaptable failure prediction model

using logistic regression, a statistical method that predicts binary outcomes
(e.g., failure or survival).
Introduction
❖ Logistic regression analyses both financial and non-financial factors,
providing a comprehensive view of the risk of failure.

❖ The developed model achieves an accuracy rate of over 94%, identifying

key indicators that contribute to business failure.

❖ This research offers a reliable, industry-specific tool for businesses to

assess risks, helping them take proactive measures to avoid failure and
improve sustainability.
Literature Survey
Author/Title/Year Methods Key Findings Research Gap
Beaver (1966) Univariate analysis of financial ratios Financial ratios are useful Focused only on
financial ratios, lacks
predictors of business failure. multivariate approach.
Altman (1968) Multiple Discriminant Analysis Developed Z-score model for Statistical limitations
(MDA) bankruptcy prediction. reduce accuracy.
Ohlson (1980) Logistic regression Introduced logit model for Does not address
business failure prediction. cooperatives or sector-
specific factors.
Dimitras et al. (1996) Rough set theory Identified new prediction Limited application to
techniques like rough set and cooperative societies.
AI.
Wu (2010) Hybrid models with AI Demonstrated advantages of Focused on large firms,
combining multiple models. ignoring SMEs and
cooperatives.
Mateos-Ronco & López Mas (2011) Logistic regression for cooperatives 94% prediction accuracy for Focused only on Spanish
agricultural cooperatives in cooperatives in the
Spain. agricultural sector.
Research Gaps

❖ Over-reliance on financial indicators, neglecting non-financial factors such as

governance, leadership, and market competition.
❖ Limited focus on cooperative societies, with most failure prediction models
designed for investor-owned companies.
❖ Inadequate exploration of machine learning techniques; traditional statistical
models dominate the field.
❖ External factors like economic conditions, government policies, and market
dynamics are rarely integrated into failure prediction models.
Research Gaps
❖ Most prediction models are designed to forecast failure within short time frames
(1–2 years), creating a need for models that predict failure over a longer horizon
(3–5 years) for early intervention.

❖ Existing failure prediction models are sample-specific and cannot be applied

across various sectors, regions, or time periods, limiting their broader applicability.

❖ Current models mainly focus on agricultural cooperatives, which limits their

application to cooperatives in other sectors such as manufacturing, retail, and
services.
 Problem Identification
❖ Increased Risk of Business Failures
Business failures have significant economic and social consequences for stakeholders (employees,
investors, and communities).Traditional failure prediction models are not sufficient for early detection
and prevention, especially in cooperative societies.
❖ Limited Research on Cooperative Societies
Most business failure studies focus on investor-owned companies.Cooperative societies have unique
characteristics, such as voluntary membership, capital structure variability, and social policies,
which existing models fail to consider.
❖ Ineffective Use of Predictive Indicators
Some financial statements may not accurately reflect the true financial condition due to creative
accounting or lack of internal controls.
Problem Identification
❖ Lack of Sector-Specific and Adaptable Models
Existing prediction models are often sector-specific or geographically limited.A model designed for
investor-owned companies may not apply to cooperatives due to differences in organizational
structure and objectives.

❖ Short-Term Prediction Horizon

Current models primarily focus on predicting failures within a 1–2 year time frame, which may be
too short for meaningful corrective measures.Long-term predictive models are needed to provide
early warning signs.
 Motivation
❖ Cooperative societies play a crucial role in economic and social development, especially in rural areas, by
supporting employment and providing essential services.

❖ Early prediction of business failure can help cooperatives implement corrective measures, reduce financial
losses, and avoid bankruptcy. This can safeguard jobs, protect stakeholders, and ensure long-term
sustainability.

❖ Most existing models are developed for investor-owned companies and do not consider the unique financial
structure and policies of cooperatives.

❖ This research aligns with our academic interests in machine learning, business analytics, and financial
prediction models, motivating us to explore a less-researched domain and contribute a meaningful solution to
the cooperative sector.
Objectives
❖ To collect and preprocess knee X-ray images from Mendeley and Kaggle datasets.

❖ To preprocess and clean the collected data by handling missing values, outliers, and ensuring
consistency.

❖ To apply feature selection techniques such as correlation analysis and recursive feature elimination
to identify key predictors of business success.

❖ To implement and compare different machine learning models, including Random Forest, Neural
Networks, and Support Vector Machines, for accurate predictions.

❖ To evaluate model performance using key metrics such as accuracy, precision, recall, F1-score, and
ROC-AUC score.
 Methodology
1. Data Collection 2. Data Preprocessing

• Sources of Data: • Data Cleaning:

Publicly available datasets (financial Handling missing values using imputation
reports, industry reports, market techniques (mean, median, mode, or ML-
research studies). based methods).
Business performance indicators, Removing duplicates and irrelevant data
economic trends, and company- entries.
specific attributes.
• Outlier Detection and Treatment:
• Data Acquisition: Using statistical methods (e.g., Z-score,
Scraping or downloading datasets from IQR) to detect anomalies.
government portals, financial Applying transformations or capping
databases, and research platforms. techniques to manage outliers.
Ensuring data authenticity and
reliability.
 Methodology
3. Feature Selection 4. Model Development and Selection of
Machine Learning Algorithms:
Correlation Analysis: Identifying highly
correlated features to remove redundancy. Random Forest: Robust for handling large
datasets and feature importance analysis.
Recursive Feature Elimination (RFE):
Selecting the most relevant predictors by Neural Networks: Effective for capturing
iteratively eliminating less important features. complex relationships in data.

Principal Component Analysis (PCA) Logistic Regression: Suitable for binary

(Optional): Reducing dimensionality while classification tasks, providing probabilistic
retaining essential information. interpretations and working well with
linearly separable data.
 Methodology
5. Model Evaluation: 6. Results and Analysis
Comparative Analysis: Comparing model
Accuracy: Measures overall correctness of performances based on evaluation metrics.
predictions.
Feature Importance Analysis: Identifying
Precision & Recall: Evaluates the reliability which factors contribute the most to business
of positive predictions. success.

F1-Score: Balances precision and recall for Visualization of Results: Using graphs and
better assessment. heatmaps to present findings effectively.

ROC-AUC Score: Analyzes the trade-off

between sensitivity and
specificity.
 References
❖ Altman, E. I. (1968). Financial Ratios, Discriminant Analysis, and the Prediction of Corporate
Bankruptcy. Journal of Finance, 23(4), 589-609.

❖ Beaver, W. H. (1966). Financial Ratios as Predictors of Failure. Journal of Accounting Research, 4,71-
111.

❖ Fawcett, T. (2006). An Introduction to ROC Analysis. Pattern Recognition Letters, 27(8), 861-874.

❖ Gentry, J. A., Newbold, P., & Whitford, D. T. (1985). Predicting Bankruptcy: If Cash Flow is King,
Why Not Make Cash Flow King? Financial Analysts Journal, 41(5), 47-56.

❖ Laitinen, E. K., & Kankaanpaa, M. (1999). Comparative Analysis of Failure Prediction Methods:The
Finnish Case. European Accounting Review, 8(1), 67-92.
References

❖ Ohlson, J. A. (1980). Financial Ratios and the Probabilistic Prediction of Bankruptcy. Journal of
Accounting Research, 18(1), 109-131.

❖ Sun, J., & Li, H. (2012). Financial Distress Prediction Using Support Vector Machines:
Ensemble Models and Feature Selection. Expert Systems with Applications, 39(8), 7510-7518.
Thank You!