Predicting Financial Distress

The paper aims to clarify the relationship between financial distress and corporate profitability from a developing country context. Financial distress was proxied using the Z score developed by Altman (1968); while, the profitability indices were Return on Assets (ROA), Gross Profit Margin (GPM), Return on Equity (ROE) and Net Profit Margin (NPM). The study used the ex-post facto research design. The sample comprised all quoted consumer goods manufacturing firms listed on the Nigerian Stock Exchange (NSE) as at December, 2017. The study used secondary data; obtained from annual reports and accounts of the studied companies. The study employed Panel Estimated Generalised Least Squares, using cross-sectional weighting to validate the hypotheses. Firm size and leverage were included in the model as control variables. The study documents mixed findings; financial distress had a positive significant effect on return on assets; but, a negative significant effect on gross profit margin. The effect on return on equity and net profit margin were positive but non-significant.

Every company has a unique life cycle. Throughout the life cycle, companies are tracking successes and failures, depending on the various factors that affect their business. Situations such as financial distress , idleness, or bankruptcy represent the fundamental levels of a company's life cycle. The purpose of the paper is to present the financial restructuring of the company in business problems on the example of the Agrokor Group. This paper describes the operations of the Agrokor Group from 2007 to 2017, ie it is divided into business analysis prior to the extraordinary administration and in the procedure of extraordinary administration. The characteristics of Agrokor Group's operations prior to extraordinary administration are: low liquidity and negative working capital over the observed period, extended payment of obligations to suppliers ranging from 110 to 211 days, ie 156 days on average, increased indebtedness and high indebtedness and insolvency in 2016, solid Group's activity ratios , positive profitability by 2015. With the advent of extraordinary administration , inappropriate corporate governance has been identified, and audit results show that accounting irregularities and potential illegal actions have been identified. Claims recognized amounted to HRK 31.04 b illion , while disputed claims amounted to HRK 10.4 b illio n. The Group has a financial arrangement of EUR 1.06 billion with super senior status. In addition, the complex structure of claims is emphasized. Bearing in mind all the above, the Group's financial restructuring is possible with the new corporate structure, the new capital structure, the allocation of financial instruments to stakeholders. Returns to creditors should be defined by the entity's priority model. Group value would be distributed among stakeholders based on their legal rights, ie the model's rank. The value of each claim claimed is determined by the fraction of the total distributable value that it needs to receive. After that, it will determine how many depositary receipts and the exchangeable bonds each creditor receives.

The economic crisis in recent years has brought significant challenges in almost all business and shown that exogenous factors act as catalysts in markets. As a consequence of such a result, there is a need to highlight the importance of implementing models for analyzing potential future firms’ behavior, namely creating models for assessing potential economic impact that contribute a lot in avoiding firms’ financial default. This chapter focuses on describing factors affecting business risk associated with Altman’s score and proposes a model in which indicators used are critical for firms’ financial distress. Altman’s Z-score is used to formulate SMEs’ risk zone category in comparison with key factors associated with firms’ viability, such as ERP and Patents use, Age of firms, SMEs cooperation with universities and research centers to implement successful products and services, as well as the number of women in board, all derived from a field research. The aim of this chapter is to find signals of firms’ financial distress as well as actions needed to be taken to avoid it, in order to provide the management with certain strategic movements to avoid potential firms’ default.

The economic crisis in recent years has brought significant challenges in almost all business and shown that exogenous factors act as catalysts in markets. As a consequence of such a result, there is a need to highlight the importance of implementing models for analyzing potential future firms’ behavior, namely creating models for assessing potential economic impact that contribute a lot in avoiding firms’ financial default. This chapter focuses on describing factors affecting business risk associated with Altman’s score and proposes a model in which indicators used are critical for firms’ financial distress. Altman’s Z-score is used to formulate SMEs’ risk zone category in comparison with key factors associated with firms’ viability, such as ERP and Patents use, Age of firms, SMEs cooperation with universities and research centers to implement successful products and services, as well as the number of women in board, all derived from a field research. The aim of this chapter is to find signals of firms’ financial distress as well as actions needed to be taken to avoid it, in order to provide the management with certain strategic movements to avoid potential firms’ default.

The purpose of this paper is to predict the financial distress of companies in the Indian textile sector using the Altman Z score. The analysis was conducted on 161 listed textile companies in India for a period of 10 years from 2009 to 2018. All the listed companies are categorized into large, medium, and small using the median split method based on the size of total assets. Kruskal Wallis test is applied to test whether the mean z-score is different for each category of companies. This research study shows that majority of the companies in the Indian textile sector are facing financial distress. Further, it shows that the z score of the small, medium, and large-scale textile companies in India is significantly different.

The Indian economy is growing and have a huge potential market with ability to garner wide businesses due to unique business environment and reforms from the government. The economic indicator of comparative gross domestic product have indicated the accelerated growth for India from the last decade. Currently, Indian IT firms are targeting newer business domains with wide and newer footprints across the globe with acquiring new subsidiaries and incorporating new partnerships to fuel this growth. Moreover, Indian IT-ITES industry has a lower debt to equity profile and analysis of stocks is considered as safe investment. Therefore, it becomes essential to study and access the state of financial health in the industry. In this paper, the Indian IT-ITES industry is analysed with the help of financial metrics and standard models of Altman Z-score and Piotroski F-score to compare performance, predict solvency of companies, test the strength of the companies and foresee the future of Indian IT-ITES industry.

Within over a decade of liberalisation of the Greek telecommunications market and given the current adverse conditions caused by the economic crisis, a limited number of companies managed to survive and relatively stabilise their market position. On one hand, this paper constitutes a comprehensive financial analysis of the Greek telecommunications companies that are currently listed in the Athens Stock Exchange. The respective companies are: Hellenic Telecommunications Organization (OTE), Forthnet, and Hellas Online (HOL). These companies' financial data over the past five years, from 2008 to 2012, are analysed using universally accepted methods. On the other hand, this work presents a relatively original approach of analysing companies' survivability, by combining the four widely accepted distress prediction models of Altman, Springate, Ohlson, and Zmijewski. In this manner, criticism on the credibility and applicability of this model on the specific field is also provided.