The ability of the turnaround index to assess going concern assumptions: Evidence from its application to Italian listed companies

In times of crisis, an entrepreneur often must decide whether to liquidate the company and the whole business or to renew it by activating a turnaround process. A tool increasingly used in international practice is the turnaround index, which can determine whether a company can continue its activities in the future according to the going concern assumption, which is the index measured as a function of the economic and financial performance of the company. This measure can take values between 0.1, for satisfactory performance and therefore unlikely to turn around, and 0.9, for unsatisfactory performance and therefore a high propensity to turnaround. The index determines whether there is a higher or lower risk for a company to enter into crisis. The aim of this paper is to test the effectiveness of the turnaround index in assessing the turnaround urgency by choosing a sample of the Italian companies.