The subject of the article is evaluation of the relation between the type of liquidity strategy adopted in terms of income and risk, and the value of the discriminant function ZH applied when evaluating the probability of corporate bankruptcy. The study has been based on data from the financial reports of 55 construction and food industry companies quoted on the Warsaw Stock Exchange.

The outcome of the study can prove useful in finance management, particularly while determining the level and the internal structure of gross circulating capital. The study shows that the majority of companies adopted a moderate liquidity strategy, although many of them also opt for aggressive strategies which boosted earnings, although at the same time undermined financial stability. According to the analyses presented in the article, companies following aggressive strategies achieve, on average, lower functional ZH values. Therefore, they are more likely to run into financial difficulties, which may even lead to bankruptcy. On the other hand, companies pursuing more conservative liquidity strategies usually report higher functional ZH values. The analyses show that the more aggressive the liquidity strategy, the higher the bankruptcy risk. When companies move towards more moderate or even conservative strategies, the decrease in the ZH index is usually small, and so is the relative risk of bankruptcy.