Developing financial model using financial ratios to predict business performance of IBS construction company in Selangor

Abstract

The existence of Industrialized Building System (IBS) in Malaysian construction industry was started when the Ministry of Housing and Local Government has launched new initiatives to develop the IBS construction after visiting several European countries where the IBS project was already implemented. However, the participation of contractors to get involved in the IBS project is currently poor. The fewer acceptances are generally caused of the financial issues perception that they will encounter while handling over the IBS project. Concern with the issues, a financial model using financial ratios to predict business performance of IBS construction company are developed. In this paper, the financial model is functioning as to estimate the company's performance using selected financial ratios specifically for IBS construction contractor in Selangor. Financial statements of 30 IBS firms around Selangor in the form of income statements and balance sheet spanning for four years (from 2006 to 2009) were used as source of data to calculate company's financial ratios. By developing this kind of model, it is further contribute to assisting the construction stakeholders, such as the conventional contractor which they can used this model to make an assessment and predict their future performance of IBS project based on previous financial data. Moreover, the development of this kind of financial model will be benefited much to the upcoming researchers especially those who get involved in this kind of study area.