Using Altman’s Z score (Sales/Total Assets) Ratio Model in Assessing Likelihood of Bankruptcy for Sugar Companies in Kenya

Range, Maurice Mwita; Njeru, Agnes; Waititu, Gichuhi A.

doi:10.6007/ijarbss/v8-i6/4264

Cited by 3 publications

(4 citation statements)

References 10 publications

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“…Tota assets ratio had a negative influence on financial performance based on the findings of this study. The conclusions were contrary to the results from (Range et al 2018), who established that sales to total asset ratio had no significant contribution to bankruptcy prediction.…”

Section: Canonical Correlation Matrixcontrasting

confidence: 99%

“…The results of the study are essential because they can be applied in formulating policies and strategies that will help in stimulating progress in the financial performance of the banking sector, as well as other industries of the Kenyan economy (Ouma and Kirori 2019). Range et al (2018) conducted a study to establish the use of sales to total assets as one of the Z-score ratios models in bankruptcy prediction of both private and public-owned sugar companies in Kenya. The public-owned companies under investigation included Nzoia Sugar, Nyanza Sugar Company, Mumias sugar, Miwani sugar, South, Muhoroni Sugar Company, and Chemelil Sugar Company.…”

Section: Kenya's Situational Contextmentioning

confidence: 99%

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Corporate Bankruptcy Prediction Model, a Special Focus on Listed Companies in Kenya

Ogachi

Ndege

Gaturu

et al. 2020

JRFM

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Predicting bankruptcy of companies has been a hot subject of focus for many economists. The rationale for developing and predicting the financial distress of a company is to develop a predictive model used to forecast the financial condition of a company by combining several econometric variables of interest to the researcher. The study sought to introduce deep learning models for corporate bankruptcy forecasting using textual disclosures. The study constructed a comprehensive study model for predicting bankruptcy based on listed companies in Kenya. The study population included all 64 listed companies in the Nairobi Securities Exchange for ten years. Logistic analysis was used in building a model for predicting the financial distress of a company. The findings revealed that asset turnover, total asset, and working capital ratio had positive coefficients. On the other hand, inventory turnover, debt-equity ratio, debtors turnover, debt ratio, and current ratio had negative coefficients. The study concluded that inventory turnover, asset turnover, debt-equity ratio, debtors turnover, total asset, debt ratio, current ratio, and working capital ratio were the most significant ratios for predicting bankruptcy.

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Section: Canonical Correlation Matrixcontrasting

confidence: 99%

Section: Kenya's Situational Contextmentioning

confidence: 99%

Corporate Bankruptcy Prediction Model, a Special Focus on Listed Companies in Kenya

Ogachi

Ndege

Gaturu

et al. 2020

JRFM

View full text Add to dashboard Cite

show abstract

“…Research has been done in other countries; for example, Ali (2020) and Aziidah (2017), who conducted research in the service sector in Pakistan and energy in Nigeria, respectively, presented findings which cannot be applicable to the dairy sector in Kenya because of differences in governance and economic conditions. Other studies done in Kenya were in another sector; for example, the sugar sector (Kungu, 2015) and Range (2019) in the banking sector (Sporta, 2018) and findings cannot be applied to the dairy sector due to regulatory system differences.…”

Section: Statement Of the Problemmentioning

confidence: 97%

Effect of Profitability Ratio on Bankruptcy Prediction of Dairy Cooperative Societies in Meru County, Kenya

Murige,

Simiyu,

Kimathi

2023

East Afr. j. bus. econ.

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Many sectors of the economy across the globe are concerned with the avoidance of bankruptcy in order to operate as going concerns. The purpose of this study was to analyse the influence of financial analysis on bankruptcy prediction for dairy cooperative societies in Meru County, Kenya. The objective of the study was to determine the influence of profitability ratio on the bankruptcy prediction of dairy cooperative societies in Meru County, Kenya. The hypothesis was derived from the objective of the study. The research was anchored on value maximisation theory. Descriptive and correlational research designs were used. The target population of the study was 13 dairy cooperative societies in Meru County that were in operation and had audited financial statements for the period of study (2017-2021). A census survey of all 13 dairy cooperative societies was conducted. A checklist was used to collect the secondary data, which was analysed using descriptive statistics and a bivariate model. The significance of the predictor variable on bankruptcy prediction was tested using the t-statistic, and the overall significance of the model was tested using the f-statistic at a 5% level of significance. The research findings were presented in the form of tables and graphs. The study established a statistically significant positive relationship between profitability ratio and bankruptcy prediction (coefficients=12.415, p=0.017<0.05) at a 5% level of significance. The management of dairy cooperative societies is encouraged to closely monitor the financial indicators of profitability. The findings of this study would be important to policymakers, such as the management of dairy cooperative societies and farmers who are key stakeholders in dairy cooperative societies. Scholars and researchers would find this study being of great interest since the gap for further research has been provided

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“…Majority of studies use the Altman Z-score in measuring the financial distress (Li, et al 2020;Campa & Camacho-Miñano, 2015;Tinoco & Wilson, 2013;Range et al, 2018;Kihooto et al, 2016) which shown that this model is commonly used universally. The Altman Z-score is created by Edward I. Altman in 1969, this model is a combination of various financial ratios that able to predict the financial distress of a business.…”

Section: Financial Distressmentioning

confidence: 99%

Financial Distress and Earnings Management in Indonesia: The Role of Independent Commissioners

2021

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This research aims to find out whether the presence of independent commissioner can restrict the manipulation of earnings by management in financially distressed companies. Earning management used in this research is accrual as well as real earning management. This research employs quantitative method with data panel regression model. The sample used in this study is secondary data obtained from consumer goods industry listed on Indonesia Stock Exchange during the period of 2015 until 2019. The result of this study revealed that both accrual earnings management and real earnings management are significantly influenced by financial distress. However, independent commissioner fails to moderate the relationship of financial distress with both accrual earnings management and real earnings management. This research gives an insight and input to the management as the evaluation material, so that the earnings manipulation could be reduced or even not carried out. Abstrak: Penelitian ini bertujuan untuk mengetahui apakah keberadaan komisaris independen dapat membatasi manipulasi laba oleh manajemen pada perusahaan yang mengalami financial distress. Manajemen laba yang digunakan dalam penelitian ini adalah manajemen laba akrual dan manajemen laba riil. Penelitian ini menggunakan metode kuantitatif dengan model regresi data panel. Sampel yang digunakan dalam penelitian ini adalah data sekunder yang diperoleh dari industri barang konsumsi yang terdaftar di Bursa Efek Indonesia selama periode 2015 hingga 2019. Hasil penelitian ini mengungkapkan bahwa baik manajemen laba akrual maupun manajemen laba riil dipengaruhi secara signifikan oleh financial distress. Namun, komisaris independen gagal memoderasi hubungan financial distress dengan manajemen laba akrual dan manajemen laba riil. Penelitian ini memberikan wawasan dan masukan kepada pihak manajemen sebagai bahan evaluasi, sehingga manipulasi laba dapat dikurangi atau bahkan tidak dilakukan.

show abstract

Using Altman’s Z score (Sales/Total Assets) Ratio Model in Assessing Likelihood of Bankruptcy for Sugar Companies in Kenya

Cited by 3 publications

References 10 publications

Corporate Bankruptcy Prediction Model, a Special Focus on Listed Companies in Kenya

Corporate Bankruptcy Prediction Model, a Special Focus on Listed Companies in Kenya

Effect of Profitability Ratio on Bankruptcy Prediction of Dairy Cooperative Societies in Meru County, Kenya

Financial Distress and Earnings Management in Indonesia: The Role of Independent Commissioners

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