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Abstract
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Article Information:
Prediction of Financial Distress -A Case Study of Indian Companies
Amalendu Bhunia, Sri Islam Uddin Khan and Somnath Mukhuti
Corresponding Author: Amalendu Bhunia
Submitted: 2011 June, 09
Accepted: 2011 July, 26
Published: 2011 August, 15 |
Abstract:
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Financial distress is of crucial importance in financial management especially in the case of
competitive environment. Failure is not an impulsive outcome and it grows constantly in stages. A spontaneous
protective effort could be accommodated if the company is anticipated to be proceeding in the direction of
potential bankruptcy and this can help alleviate the financial distress to all investors and decrease the costs of
bankruptcy. This study extends a failure prediction model for Indian companies. This study hopes to
accommodate some important results relevant to authorities and stakeholders. The capability to detect potential
financial problems at a premature stage is absolutely essential because it helps to ensure business, financial,
economic and political environment stability. The results show good performance with a highly correct
categorization factuality rate of more than 80%. Two ratios were determined significant out of 64 financial
ratios utilized in this analysis to discriminate among failed and non-failed companies. The significant variables
are cash flow to sales and days Sales in receivable.
Key words: Discriminant analysis, ratios, cash flow, Indian companies, sales, ,
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Cite this Reference:
Amalendu Bhunia, Sri Islam Uddin Khan and Somnath Mukhuti, . Prediction of Financial Distress -A Case Study of Indian Companies. Asian Journal of Business Management, (3): 210-218.
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ISSN (Online): 2041-8752
ISSN (Print): 2041-8744 |
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