The Role of Failure Prediction Models in Evaluating Investment Portfolio Performance: An Analytical Study of a Long-Term Investment Portfolio (Libya During the Period 2020-2023)

Abstract

This study aims to evaluate the financial performance of a long-term investment portfolio through the application of the Ferner & Hamilton model for predicting financial failure. The study seeks to assess the model’s ability to provide early detection of potential financial risks that may تواجه the portfolio. It also analyzes key financial indicators, including liquidity, profitability, and capital structure, in order to develop a comprehensive and accurate understanding of the portfolio’s financial position.

The study adopts a descriptive-analytical approach, whereby the financial data of the portfolio were analyzed over a specified period. The Ferner & Hamilton model was applied by calculating the (Z) coefficient to determine the degree of the portfolio’s exposure to financial failure risk, The findings indicate that the investment portfolio is exposed to a potential risk of financial failure based on the value of the (Z) coefficient, despite maintaining a satisfactory level of short-term liquidity and its ability to cover operating expenses. Furthermore, the results reveal that the portfolio achieved an acceptable return on assets, reflecting a relatively efficient management of investments. A slight fluctuation was also observed in short-term liabilities relative to total assets.

In light of these findings, the study recommends that portfolio management exercise caution regarding financial failure risks, enhance the efficiency of resource allocation, and maximize returns. It also emphasizes the importance of periodically adopting financial failure prediction models to support financial decision-making and mitigate future risks.