FINANCIAL DISTRESS PREDICTION USING ACCOUNTING VARIABLE: A REVISIT TO ALTMAN Z-SCORE IN THE CASE OF INDIAN LISTED COMPANIES

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Maya Korath, Dr. Surekha Nayak

Abstract

Financial distress is a phenomenon where the business is not able to generate adequate revenue to meet its financial obligations. Timeous and accurate financial distress prediction is important as it helps the companies to identify their feebleness much in advance and take preventive steps. Altman Z score is a world- renowned model for financial distress prediction and thus wondering the Altman Prediction capabilities in the western countries hold the same for Indian companies which are regulated by the Securities Exchange Board of India (SEBI). This study uses Altman Z-Score model to test the financial distress of few selected manufacturing companies. The study used the sample companies which are admitted for Bankruptcy under the Insolvency and Bankruptcy Board of India. The data collected covers a period of 5 years viz., 2017- 2021. The study reveals that all the five unhealthy firms show a low Z-score which proves that they are distressed and four out of five healthy company shows a high Z-score which is an indication of their financial soundness. 

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