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Financial Indicators of Corporate Sickness:A Study of Indian Steel Industry
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As a result of recent global financial crisis, a large number of companies are facing many challenges from the environment. If they fail to cope up with the changes, they will be forced into bankruptcy. Therefore, it is necessary to identify financial indicators and a model for corporate sickness prediction. In this paper, a model has been proposed to predict business sickness by using seven financial ratios. The model has been developed by using cluster analysis and step-wise logistic regression analysis. From the empirical study, it is revealed that Rate of Growth of Profit After tax (RGPA) and Debt- Equity Ratio (DE) are important predictors of sick companies. It means that earning power and capital structure are the important predictors of corporate distress.
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