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Applicability of Altman Z-Score In Bankruptcy Prediction of BSE PSUs


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1 Department of Business Administration, Manipal University Jaipur, Rajasthan, India
     

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Prediction of bankruptcy is a critical task. Firms can be hedged from bankruptcy situation by solvency recognition at inceptive stage which may avoid enormity in the near prospective. There are lots of techniques available for measuring the financial health of a business firm wherein Altman’s Z-score is one of the prominent measures for predicting bankruptcy. The study is based on the fundamentals of the companies using financial ratios by taking companies of PSU index listed on Bombay Stock Exchange across different sectors over a period of 6 years from 2013-2018. The finding reveals that Altman’s Z-score model has a remarkable degree of accuracy in predicting distress using financial ratios. The results may be useful for the managers for financial decision making, the stakeholders to choose investment options & others to look after their interest in the concerned manufacturing and non-manufacturing companies.

Keywords

Bankruptcy Projection, Financial Competence, Altman Z-score Model, Financial Distress.
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  • Applicability of Altman Z-Score In Bankruptcy Prediction of BSE PSUs

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Authors

Arpita Agarwal
Department of Business Administration, Manipal University Jaipur, Rajasthan, India
Ity Patni
Department of Business Administration, Manipal University Jaipur, Rajasthan, India

Abstract


Prediction of bankruptcy is a critical task. Firms can be hedged from bankruptcy situation by solvency recognition at inceptive stage which may avoid enormity in the near prospective. There are lots of techniques available for measuring the financial health of a business firm wherein Altman’s Z-score is one of the prominent measures for predicting bankruptcy. The study is based on the fundamentals of the companies using financial ratios by taking companies of PSU index listed on Bombay Stock Exchange across different sectors over a period of 6 years from 2013-2018. The finding reveals that Altman’s Z-score model has a remarkable degree of accuracy in predicting distress using financial ratios. The results may be useful for the managers for financial decision making, the stakeholders to choose investment options & others to look after their interest in the concerned manufacturing and non-manufacturing companies.

Keywords


Bankruptcy Projection, Financial Competence, Altman Z-score Model, Financial Distress.

References