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Journal number 1 ∘ Tea Munjishvili
The Development of a machine learning software system for predicting business financial results[1]


Expanded Summary 

In the article we research let's understand if the peculiarities of accounting and reporting in Georgia   to the size categories of enterprises according and what financial forecasts can be made according to the indicators reflecting the financial condition of enterprises.

Small-sized enterprises of the fourth category were selected as the objects of the study, because a large part of the enterprises operating in Georgia belong to the fourth category according to their indicators. For information, 13.12.23 According to the data, 1,675,893 individuals and 347,544 legal entities are recorded in the database of the Revenue Service. (According to the data of 2021, there are 123 enterprises of the first category, and 606 of the second category). A total of 13 enterprises were selected for the research: 6 enterprises of the 4th category, 7 enterprises of the 2nd and 3rd category.

The development of the mathematical model for evaluating financial sustainability of the business using the simulation method (selecting an adequate model for a specific enterprise from the existing models and the coefficients included in this model) is discussed in the paper . The implementation of this model is carried out by FinSim, the software package developed by us. The software is multilingual and it supports Georgian, English and other languages. It was developed based on the experience of Cyber1, Cyber2 - the systems developed by us and implemented in the teaching process. FinSim is located at FinSim.tsu.ge. Based on a general model, which can be considered as an exemplary model, it aims: first - to develop a specific economic-mathematical model for assessing the financial stability of the enterprise and predicting bankruptcy, which can be applied in the actual activity of the given enterprise; second – to learn and apply the technology for developing an economic-mathematical model for assessing financial stability and forecasting bankruptcy for  enterprise in the study process and based on it, to develop organizational and technical measures for ensuring financially sustainable operations of an enterprise based on modeling the arguments included in the model of a virtual enterprise.

The economic-mathematical model for assessing the financial stability and predicting bankruptcy using FinSim for  enterprise is developed by the so-called analyst, a person with special rights. This person has the right to make changes in the data, to develop a specific model for a specific enterprise and to enter the values of the coefficients found in the model in the database. The economic-mathematical model for assessing the financial stability and predicting bankruptcy of an enterprise is also developed for  enterprise by the student in the teaching process. The difference is that in the training mode, it is impossible to make changes to the data and fix the calculated values of the coefficients in the database.

Before developing the model using FinSim, it is necessary to analyze the primary data presented by the enterprises. The financial activity data of the enterprise is presented on the website www.kiber3.tsu.ge

 The data of the  enterprise is downloaded to Excel by the analyst

Modeling results appear in Excel in the client's computer. 5  types of registers are obtained: Registers of all the enterprises and models by years;

  • Registers of selected enterprises and models by years;
  • Registers of all the models of the selected enterprise by years;
  • Registers of the models developed by the analyst;
  • Single-variable modeling register.

Results. Submission of additional reporting of resulting problems "gap of the law" and as a result of assessment of financial sustainability of enterprises, in particular, on the need to submit basic reporting of small, 4th category enterprises;

     Detection of small enterprises in violation of the law:

• - to establish a minimum limit for the so-called For micro-enterprises, which will be abolished in the successful past, the obligation to establish reporting, indicating that micro-entrepreneurial individuals are exempted from taxes according to the Tax Code of Georgia - they are exempt from taxes (limit 30,000 GEL);

• - Adoption/implementation of the law previously stopped/inactive firms would be exempted from the right to submit a large report, this law is not beneficial for the state or society, many people are not a means of psychological influence for the phenomenon. 


  1. Mathematical methods, models and algorithms used in the evaluation of an enterprise financial sustainability, such as Altman's model, Olson's model, statistical method known as "scoring" and others are analyzed; The positive aspects of the models and the difficulties of using them in practice are discussed; It is shown that in the countries in transition to market economy (in Georgia, for example) there are no statistical data on the bankruptcy of enterprises, therefore, using such models unchangingly does not provide the desired result. In addition, Altman and other models are mainly designed for manufacturing companies in certain countries or groups of countries.It is unacceptable to use them to conduct a financial analysis in Georgian enterprises.
  2. It is substantiated that in the modeling mode it is appropriate to select a particular model out of various models of financial sustainability and bankruptcy prediction and based on that to develop a specific model for a specific enterprise which will differ from the standard model by the coefficient indicators.
  3. Logical-probability model is selected out of the mathematical models used in economics and appropriateness of applying this model for evaluating financial sustainability of an enterprise is substantiated. After receiving many versions of the financial sustainability model, the selection of the optimal one is carried out by the logical-probability model developed by us.
  4. FinSim simulator (address: FinSim.tsu.ge) developed by us allows:

- the modeling of evaluating the financial sustainability of the enterprise using Altman, Springeit, Chesser models. With this model, the assessment of the financial sustainability of the company is carried out with one and multiple variables (all included in the model).

  1. The hypotheses about the structure and content of the integrated indicator for evaluating the enterprise's financial condition is checked with FinSim; That means that the possibility of evaluating the financial condition of the enterprise with selected economic indicators is substantiated.
  2. The probability of reliability/unreliability of each indicator and combination of indicators is calculated based only on the logical connections between the selected economic indicators and considering the possible financial conditions of the enterprise.
  3. The share of each indicator and combination of indicators in the financial condition of the enterprise is calculated.
  4. Modeling of the impact of each indicator and the specific share of a combination of indicators on the expected financial condition of the enterprise is carried out.
  5. The financial development strategies of the enterprise are shown based on the modeling.
  6. The risk of financial unsustainability of the enterprise is calculated.
  7. Based on the modeling, the optimal version of enterprise development is selected, and this version can be used for monitoring the financial sustainability of the company.
  8. Based on the actual data, the financial sustainability of the enterprise is evaluated, and the forecast of the bankruptcy is carried out.
  9. In case the current trends of enterprise development are maintained, a forecast about the expected results is provided.
  10. Modeling and, accordingly, the conclusions made as a result of modeling are made based on the processing the data of the following enterprises: Nika 95, Sefo LLC, Offices LLC, Commerce LLC, Megobroba LLC, Farmakoni LLC and other.
  11. Teaching the theoretical issues of an enterprise’s financial sustainability and bankruptcy forecasting and development of decision-making skills using the knowledge obtained as a result of teaching is carried out with an electronic manual designed using the programmed teaching method. The manual is placed on the website Kiber3S. In-depth learning and self-examination in the issues learned with Kiber3S is carried out by solving the tasks used in the teaching process or similar ones. Here, it is impossible to get help or advice. Self-examination is performed using Kiber3SE.
  12. Necessary precondition for the application of FinSim in research or real activity to a specialist employed in the field of management is:

 • understanding the working principles of FinSim;

 • interpretation of the results obtained with FinSim;

 • justification/rejection of the results obtained by FinSim.

[1] The article is a collective work of the authors within the targeted research grant of the Faculty of Economics and Business: Tea Munjishvili, Lia Kozmanashvili, Leila Kadagishvili, Davit Sikharulidze, Shota Shaburishvili, Mikheil Chikviladze, Maka Khavtasi, Nino Dokhturishvili.