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When an individual decides to go into business, it can be an intimidating experience for him or her because of the many important business decisions to be made prior to entering the free market. In unforeseen ways, these decisions can have a tremendous impact on the operation and ultimate success of a new business.

The purpose of this paper was to determine whether a model utilizing a number of economic variables in combination with financial ratios results in a model superior to the traditional models including the financial ratios alone. A sample of 110 manufacturing companies which had become bankrupt between 1990 and 1997 were identified from the F & S Index and matched to 110 non‐failed companies on the basis total assets, financial statement date and four digit industry code. The proposed model predicted correctly 87.82 and 87.50 percent of the estimation and holdout samples, respectively. The significance of the coefficients in each year’s model was evaluated by using the t‐statistic corresponding to each coefficient’s value. The overall models are significant at ∝‐level of 0.05.

This paper uses annual accounting data to show that the frequency of occurrence of the first and second digits contained in the income numbers of companies, listed in the Istanbul Stock Exchange, does not deviate significantly from expectations.

We test for the presence of non‐linear dynamics in real stock return, in the American, British, and Japanese equity markets. Evidence on non‐linearities will have important implications for financial analysts. The results provide evidence of nonlinear structure in stock returns, in the three markets, suggesting that linear models, such as Ordinary Least Squares or Vector Autoregressive (VAR), may not always be appropriate for analyzing data.