Business Bankruptcy Prediction Models: A Significant Study of the Altman’s Z-Score Model

8 Pages Posted: 13 Aug 2012

See all articles by Sanobar Anjum

Sanobar Anjum

University of Toronto at Mississauga - Department of Management; University of Calgary; Prince Muhammad Bin Fahd University

Date Written: August 13, 2012

Abstract

Businesses are enterprises which produce goods or render services for profit motive. To be able to predict the financial soundness of a business has led to many research works. Financial ratios are a key indicator of financial soundness of a business. Financial ratios are a tool to determine the operational & financial efficiency of business undertakings. There exist a large number of ratios propounded by various authors. Altman developed a z-score model using ratios as its foundation. With the help of the Z- Score model, Altman could predict financial efficiency/bankruptcy up to 2-3 years in advance. The following research paper describes in detail the studies carried out by Altman to predict business bankruptcy. Altman made regular changes to achieve the perfect equation which could predict bankruptcy. The following research paper summarizes the research of Altman that have being made to develop the Altman Z score model. It can be safely said that Altman’s Z score Model can be applied to modern economy to predict distress and bankruptcy one, two & three years in advance.

Keywords: business failure, bankruptcy, Altman’s Z-Score Model, financial ratios

Suggested Citation

Anjum, Sanobar, Business Bankruptcy Prediction Models: A Significant Study of the Altman’s Z-Score Model (August 13, 2012). Available at SSRN: https://ssrn.com/abstract=2128475 or http://dx.doi.org/10.2139/ssrn.2128475

Sanobar Anjum (Contact Author)

University of Toronto at Mississauga - Department of Management ( email )

Mississuaga, ON
Canada

University of Calgary ( email )

University Drive
Calgary, AL Alberta T2N 1N4
Canada

Prince Muhammad Bin Fahd University ( email )

Dhahran
Saudi Arabia

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
4,004
Abstract Views
12,315
rank
2,508
PlumX Metrics