Predicting Nursing Home Financial Distress Using the Altman Z-Score

Abstract

<jats:p> This article uses a modified Altman Z-score to predict financial distress within the nursing home industry. The modified Altman Z-score model uses multiple discriminant analysis (MDA) to examine multiple financial ratios simultaneously to assess a firm’s financial distress. This study utilized data from Medicare Cost Reports, LTCFocus, and the Area Resource File. Our sample consisted of 167 268 nursing home-year observations, or an average of 10 454 facilities per year, in the United States from 2000 through 2015. The independent financial variables, liquidity, profitability, efficiency, and net worth were entered stepwise into the MDA model. All of the financial variables, with the exception of net worth, significantly contributed to the discriminating power of the model. K-means clustering was used to classify the latent variable into 3 categorical groups: distressed, risk-of-financial distress, and healthy. These findings will provide policy makers and practitioners another tool to identify nursing homes that are at risk of financial distress. </jats:p>

Do Accounting, Market, and Macroeconomic Factors Affect Financial Distress? Evidence in Indonesia

“…First, Moch et al (2019) argue that the working capital to total asset (WCTA) ratio is the difference between current assets and current liabilities with total assets. Lord et al (2020) argue that the WCTA ratio is a ratio that describes the strength of a company in paying off its obligations without relying on external funding and without having to liquidate current assets. The larger the number generated by this ratio indicates the company is increasingly able to handle its bills so that the company is further away from financial distress (Ally & Bwana, 2019).…”

“…Fourth, Lord et al (2020) argue book value of equity to total liabilities (BVETL) ratio reflects the size of the company's equity because it measures the net worth of the company's liabilities. Furthermore, he explained that the use of book value is able to provide an overview of financial health by examining net assets in relation to total liabilities.…”

“…Furthermore, he explained that the use of book value is able to provide an overview of financial health by examining net assets in relation to total liabilities. Lord et al (2020) also explains that companies with a higher percentage of net assets than total liabilities are better able to overcome financial distress, therefore the ratio of the book value of equity to total liabilities has a significant negative effect on financial distress. This is in line with the results of research conducted by Toly et al (2020) and Altman et al (2014).…”

Analisis Prediksi Financial Distress Dengan Menggunakan Model Altman Z-Score Pada Perusahaan Ritel Tahun 2018-2020

“…Kondisi ini menjadi pertanda bagi perusahaan bahwa perusahaan sedang menuju kebangkrutan (Carmassi & Alessandra, 2014). Financial distress dapat dipengaruhi oleh rasio likuiditas dan leverage (Lord et al, 2020;Oktaviani et al, 2020;Stephanie et al, 2020). Fitri & Syamwil (2020), Lord et al (2020), dan Oktaviani et al (2020) menyebutkan bahwa profitabilitas memliki pengaruh terhadap kemungkinan terjadinya financial distress.…”

“…Financial distress dapat dipengaruhi oleh rasio likuiditas dan leverage (Lord et al, 2020;Oktaviani et al, 2020;Stephanie et al, 2020). Fitri & Syamwil (2020), Lord et al (2020), dan Oktaviani et al (2020) menyebutkan bahwa profitabilitas memliki pengaruh terhadap kemungkinan terjadinya financial distress. Selain itu, financial distress juga dapat dipengaruhi oleh ukuran perusahaan (Stephanie et al, 2020).…”