The Use Of Altman Equation For Bankruptcy Prediction In An Industrial Firm (Case Study)

2011 ◽  
Vol 7 (7) ◽  
Author(s):  
Khalid Al- Rawi ◽  
Raj Kiani ◽  
Rishma R Vedd
Keyword(s):  
Durable Goods ◽  
Financial Analysis ◽  
Bankruptcy Prediction ◽  
Financial Statement ◽  
Z Score ◽  
Financial Statement Analysis ◽  
Future Performance ◽  
Score Analysis ◽  
Study Results ◽  
The Given

Financial analysis provides the basis for understanding and evaluating the results of business operations and explaining how well a business is doing. In addition, the financial statement analysis can help creditors, investors, and managers answer the following questions: Can the company pay the interest and principal on its debt? Does the company reply too much on non-owner financing? Does the company earn an acceptable return on invested capital? Is the gross profit margin growing or shrinking? Does the company effectively use non-owner financing? Are costs under control? Is the companys market growing or shrinking? Do observed changes reflect opportunities or threats? Is the allocation of investment across different assets too high or too low? Furthermore, financial statement analysis reduces our reliance on hunches, guesses, and intuition. Above all, it reduces risk and/or uncertainty in decision making. Therefore, to reduce risk, uncertainty, and avoid bankruptcy one must appreciate the usefulness of financial statement analysis by using some tools and techniques to evaluate and project the future performance of the firm within a given industry.The researchers used the Altman z-score analysis to predict a firms insolvency. The study results for the period 2002-2004 indicated the weaknesses of Jordan Establishment for Marketing Durable goods. The z-score from the analysis (for the given period) was less than 1.81 (z-score <1.81).Evidence suggests that the firm has increased its debt and will be facing bankruptcy in the near future. In liquidity ratios, the percentage of the working capital is less than 1, indicating an increase in liabilities over assets. Leverage ratios increased from 41.7% to 56.7%, while inventory turnover decreased by 1.2 times through the given period. Net profit to total sales reduced from (1.3) to (1.8) for the same period. Also, the assets return percentage declined from (-9.29%) to (-10.3%), while the stock book value declined from (0.95) JD to (0.67) JD through the given period. The main features provide a gloomy picture and indicate inefficiencies within the firm.

Assessment of Financial Performance of Agricultural Cooperative Unions: The Case of West Harerghe Zone, Oromia Region, Ethiopia

2020 ◽  
Vol 8 (9) ◽  
pp. 86-104
Author(s):  
Buta Debela Bonsa ◽  
Kerima Rahmeto Ebrahim
Keyword(s):  
Financial Performance ◽  
Financial Analysis ◽  
Balance Sheet ◽  
Free Cash Flow ◽  
Financial Statement ◽  
Financial Statement Analysis ◽  
Agricultural Cooperative ◽  
Secondary Sources ◽  
Current Asset ◽  
Asset Turnover

Financial statement analysis involves comparing cooperative union performance and evaluating trends in the unions’ financial position over time. Managers use financial statement analysis to identify situations demanding attention; potential lenders use financial analysis to determine whether the union is creditworthy; and stockholders use financial analysis to help predict future earnings, dividends, and free cash flow.  This study is conducted on Assessment of Financial performance of Agricultural Cooperative unions: the Case of West Harerghe zone, Oromia region, Ethiopia. The general objective of this study was to evaluate financial performance of agricultural cooperative union. For this study, the researchers used both primary and secondary sources of data taken from purposively selected two cooperative unions (i.e. Burka Galeti and Chercher Oda bultum) since they do have audited financial statements out of five unions found in western Haraghe. The study also used FGD and interview with fiancé managers and employees of the union for further explanation. Based on the financial statement analysis the researchers found that the agricultural cooperatives are efficient and effective in asset utilization, activity and debt equity management ratios. However, the financial statement analysis showed that the current asset ratio is below the industry standard   that cannot cover its short term liabilities form its current asset section of the balance sheet. Moreover, the profitability ratio of the unions revealed that the agricultural cooperative unions are efficient to make profit but the margin of profit is below 25% that cannot make the union successful to cover all the incidental costs that are borne within short and long-term periods. The OLS model revealed that quick, fixed asset turnover, total asset turnover, inventory turnover and gross profit margin ratios are significantly and positively affecting ROA. As a result, the researchers recommend that the agricultural cooperative unions are expected to improve its effective and efficient management of the day to day activities of the union. Furthermore, the unions are expected to higher managers who have the caliber to manage each and every activities of the union and who are visionary to bring success for the unions.

scholarly journals BANKRUPTCY PREDICTION OF THE COMPANY USING ALTMAN Z–SCORE METHOD FOR THE CONVENTIONAL BANKS REGISTERED IN THE INDONESIA STOCKS EXCHANGE (BEI)

2017 ◽  
Vol 2 (02) ◽  
pp. 11
Author(s):  
Irwansyah .
Keyword(s):  
Stock Exchange ◽  
Secondary Data ◽  
Bankruptcy Prediction ◽  
Z Score ◽  
Gray Area ◽  
Analysis Technique ◽  
Score Analysis ◽  
Score Method ◽  
Score Model ◽  
Conventional Banks

This study was conducted to prove the accuracy of bankruptcy prediction of Altman Z-Score model on conventional banks listed on the Indonesia Stock Exchange. The data used in this study is secondary data obtained from the annual financial statements of conventional banks during the period of 2013-2016 mentioned on the official website of the Indonesia Stock Exchange. The data analysis technique used is bankruptcy prediction of Altman Z-Score model, using five variables representing liquidity ratios X1, profitability ratios X2 and X3, and activity ratios X4 and X5. The formula Z-score = 1.2X1 + 1.4X2 + 3.3X3 + 0.6X4 + X5. When Z-Score criteria is Z > 2.90 it is categorized as a healthy company. Z-Score between 1.23 to 2.90 is categorized as a company in area. While Z-Score Z < 1.23 is categorized as a potential bankrupt company. Based on the results of the research, Z-Score analysis that has been done in the period of 2013-2016 indicating that most conventional banks are predicted bankrupt. The lowest score of the Z-Score is 1.23. Only one Bank Jtrust Indonesia Tbk (BCIC bank code) is in a healthy category. Bank Mandiri (Persero) Tbk with BMRI bank code, has been increasing from the prediction of bankruptcy category to the prediction of gray area category.Keywords: Altman Z-Score, Conventional Banks Listed on BEI 2013-2016, Prediction of Bankruptcy.

scholarly journals Topics In Finance Part II - Financial Analysis

2010 ◽  
Vol 3 (3) ◽  
pp. 81-88
Author(s):  
Judy Laux
Keyword(s):  
Financial Management ◽  
Financial Analysis ◽  
Financial Statement ◽  
Managerial Behavior ◽  
Financial Statement Analysis ◽  
Stock Valuation

The second article in a series designed to supplement the introductory financial management course, this essay addresses financial statement analysis, including its impact on stock valuation, disclosure, and managerial behavior.

scholarly journals Application of Altman Bankruptcy prediction model in Ghana

2019 ◽  
Vol 7 (1) ◽  
pp. 63-72
Author(s):  
Alhassan Musah ◽  
Josephine Agyimaa Agyirakwah
Keyword(s):  
Stock Exchange ◽  
Final Analysis ◽  
Bankruptcy Prediction ◽  
Financial Statement ◽  
Z Score ◽  
Listed Firms ◽  
Distressed Firms ◽  
Financially Distressed ◽  
Score Model ◽  
Ghana Stock Exchange

The study examined the applicability of the Altman Z-score model in predicting bankrupt companies or financially distressed companies on the Ghana Stock Exchange. A sample 10 listed firms were selected and one other company to be used for validation purposes. The validation process involved data for 2016 and 2017 for Aluworks which represented a distressed company and GOIL Ghana Limited which represented non-distressed company. The final analysis was based on a random sample of 10 listed firms using their 2017 financial statement. The results of the initial prediction showed 50 percent of the companies were correctly predicted whiles the others were misclassified. Additional analyses showed that the size of the company influence the probability of bankruptcy whiles the nature of the business does not. The conclusion drawn shows that the Altman Z-score cannot accurately predict financially distressed firms in Ghana but can still be useful in giving signals.

scholarly journals Innovación en el proceso de enseñanza-aprendizaje por competencias de la asignatura Análisis de Estados Financieros / Innovation in the teaching-learning process by competencies of the subject Financial Statement Analysis

2015 ◽  
Vol 11 (22) ◽  
pp. 33-44
Author(s):  
Gisela, León, ◽  
Rossanna Crespo
Keyword(s):  
Action Research ◽  
Learning Process ◽  
Financial Analysis ◽  
Financial Statement ◽  
Educational Model ◽  
Financial Statement Analysis ◽  
Construction Of Knowledge ◽  
Comprehensive Education ◽  
The Subject ◽  
Teaching Learning

ResumenLa innovación en el proceso de desarrollo curricular por competencias de la asignatura Análisis de Estados Financieros fue desarrollada en el contexto de la Especialidad en Pedagogía. Con esta perspectiva, hemos elaborado un programa de la asignatura basado en los lineamientos del Modelo Educativo de la PUCMM (2011) y los lineamientos internacionales sobre el Análisis Financiero en función del perfil de egreso de los gestores financieros. Los resultados obtenidos muestran que enfocar la enseñanza por competencias se apoya en una formación integral del estudiante más allá de los contenidos disciplinares, pues promueven la construcción de conocimientos a través de una participación activa en su proceso de enseñanza aprendizaje.AbstractInnovation in the process of curriculum development competencies of the course Financial Statement Analysis was developed in the context of the Specialty in pedagogy. With this in mind, we have developed a course syllabus based on the guidelines of the educational model of the PUCMM (2011) and international guidelines on Financial Analysis by graduate profile of financial managers. The results show that teaching competency focus is supported by a student comprehensive education, beyond the disciplinary content, because they promote the construction of knowledge through active participation in the teaching-learning process. Action-research was used in the investigation. 

Pets.com, Inc.: Assessing Financial Performance and Risks in the e-Commerce Industry

2004 ◽  
Vol 19 (4) ◽  
pp. 567-582 ◽  
Author(s):  
John M. Coulter ◽  
Thomas J. Vogel
Keyword(s):  
Initial Public Offering ◽  
Business Models ◽  
Prediction Models ◽  
Bankruptcy Prediction ◽  
Financial Statement ◽  
First Year ◽  
Financial Statement Analysis ◽  
Going Concern ◽  
Public Offering ◽  
Risk Disclosures

Pets.com, Inc. (Pets) was formed as an Internet retailer of pet supplies in 1999. After experiencing rapid sales growth and hemorrhaging cash in it s first year, an initial public offering (IPO) was scheduled for February 2000. In this instructional case, you will evaluate the ability of this real-world company to continue as a going concern by analyzing the financial information and business risk disclosures included in Pets' Prospectus. The case is ideal for an auditing class as it provides a background to examine how going concern and fraud risks impact the audit reporting decision. A focus on corporate governance issues, financial statement analysis techniques, bankruptcy prediction models, and e-commerce company business models would also make this case useful for financial accounting courses (e.g., accounting theory and/or financial statement analysis).

scholarly journals Analysis of Financial Performance of Chennai Petroleum Corporation Limited, Chennai, India

2015 ◽  
pp. 1-18
Author(s):  
EMMANUEL ATTAH KUMAH
Keyword(s):  
Financial Performance ◽  
Trend Analysis ◽  
Financial Analysis ◽  
Balance Sheet ◽  
Financial Statements ◽  
General Idea ◽  
Ratio Analysis ◽  
Z Score ◽  
Working Capital ◽  
Score Analysis

Financial analysis of mining projects can be known by studying the financial statements. Financial statements are official records of the financial actions of a company, firm or other unit over a period of time which provide a general idea of a company's financial situation in mutually short and long term. They give a precise representation of a company's condition and working results. Financial statements are sometimes used as supervision tool mainly by company executives and investor's in assessing the overall situation and working results of the company. An effort has been made in this study to analyze the financial conditions of Chennai Petroleum Ltd. This study report on ratio analysis assesses the financial strengths and weakness of Chennai Petroleum Ltd. through Financial Ratio Analysis; to evaluate the performance of the company by using ratios as a yardstick to measure the efficiency of the company, to understand the liquidity, profitability and efficiency positions of the company during the study period by using comparative balance sheet analysis, to evaluate and analyze various facts of the financial performance of the company using multi discriminant working capital analysis such as Y-Score analysis, Z-Score analysis, trend analysis, to make comparisons between the ratios during different periods by using statement of changes in working capital and making projection of the financial performance of the company using trend analysis. Keywords: Financial Performance, Petroleum Corporation, Ratio Analysis, Y-Score and Z-Score analysis and trend analysis

scholarly journals Financial Analysis of Finance Companies in Pokhara: A Comparative Study of Pokhara Finance Ltd. and Annapurna Finance Company Ltd.

2006 ◽  
Vol 1 (1) ◽  
pp. 101-106
Author(s):  
Krishna Prasad Upadhyay
Keyword(s):  
Comparative Study ◽  
Financial Performance ◽  
Financial Analysis ◽  
Financial Statement ◽  
Financial Statement Analysis ◽  
Business Studies ◽  
Competitive Strength ◽  
Finance Company

Every business entity should be able to enhance their competitive strength through achieving the financial goals. Financial statement analysis should be adopted to appraise the financial performance of the concerned companies. Information and results obtained from financial analysis are important to all stakeholders. Interest of the different stakeholders is conflicting. Out of different stakeholders, managements of the companies worry about their financial performance. So, in this paper, an attempt to analyze the financial performance of Pokhara Finance Company and Annapurna Finance Company has been made. Journal of Nepalese Business Studies Vol.1(1) 2004 pp.101-106

scholarly journals The Impacts of Implementation Accounting Standard PSAK No. 24 (Revision 2004) on Post Employment Benefit Towards Company’s Performance

2011 ◽  
Vol 2 (2) ◽  
pp. 874
Author(s):  
Elfrida Yanti
Keyword(s):  
Financial Performance ◽  
Financial Analysis ◽  
Financial Statement ◽  
Financial Ratios ◽  
Current Ratio ◽  
Accounting Standard ◽  
Leverage Ratio ◽  
Future Performance ◽  
Equity Ratio ◽  
Profitability Ratios

Financial analysis is useful for all company to measure their performance and expected to show improvement result in order to determine the company’s condition. . Financial ratios are tools to help anticipate the future conditions and to predict some actions or strategies that will useful in improving the company’s future performance, which is from evaluating the previous financial statement. Using financial ratios this research tries to impose one indicator, post employment benefit and how it would impact company financial performance. PT. ABC Will be the object case which implementation the post employment benefit based on particular regulation PSAK No. 24 (revision 2004). The researcher would like to focuses on the profitability ratios by Return on Asset ratio (ROA), liquidity ratio by Current Ratio (CR) and the leverage ratio by Debt-Equity ratio. 

scholarly journals Estudio de los estados financieros en industrias agroalimentarias. / Financial statement analysis on the agrifood industry.

2020 ◽  
pp. 35-50
Author(s):  
Núria Arimany Serrat ◽  
Alejandra Aramayo García ◽  
Cara De Uribe Gil ◽  
Anna Sabata Aliberch
Keyword(s):  
Food Industry ◽  
Financial Analysis ◽  
Cash Flows ◽  
Financial Economic ◽  
Economic Indicators ◽  
Financial Statement ◽  
Financial Statement Analysis ◽  
Short And Long Term

Este trabajo realiza un diagnóstico de la salud económica financiera de las empresas cárnicas catalanas en el período 2007-2011 por ser un sector estratégico dentro de la agroalimentación, considerada primer clúster agroalimentario de Europa según el observatorio de clústers Stockholm School of Economics. El estudio posiciona estas industrias dentro del sector agroalimentario español y presenta los principales indicadores económicos financieros de las empresas objeto de estudio mediante un análisis a corto y largo plazo, de los resultados, de los cambios patrimoniales y de sus flujos de efectivo. ABSTRACT:  This paper provides an economic and financial analysis of the Catalonian meat companies in the period 2007-2011, as a strategic agrofood sector and considered the first cluster in Europe by the Observatory of Stockholm School of Economics. The study ranks these companies within the Spanish food industry and it presents the main financial economic indicators of the companies under study by examining, short and long term, the results, changes in equity and its cash flows.

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