VALIDATING Z SCORE MODEL FOR EVALUATING FINANCIAL HEALTH OF SELECTED INDIAN COMPANIES
DOI:
https://doi.org/10.55829/ijmpr.v2i2.164Keywords:
Financial Health, Altman Z Score Model, Discriminant AnalysisAbstract
The success of the company is highly dependent on its financial health. A business cannot thrive in a cut-throat environment without consistent financial health. Various types of ratios like profitability, liquidity and solvency and various Models have been used for ascertaining the financial health of the companies. Altman Z Score Model is one of the most popular model, which is used for this purpose in this study. The main objective of this study is to classify the selected twenty five companies according to their distress level using Discriminant analysis based on Altman Z Score Model for the period of ten years (2008-09 to 2017-18). Descriptive and Causal research designs have been used for this purpose. It has been found that Retained Earnings to Total Assets and EBIT to Total Assets are the most important determinants in discriminating the selected companies within the three categories of possible Non-Distress Zone Companies, possible Grey Zone companies and possible Distress zone companies and according to both the selected techniques, Vijay Textiles Ltd. is classified in Possible Distress Zone. Thus, this company should reduce its long term debt and give more weightage to Equity to overcome this situation.
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