Abstract
Predication of Bankruptcy is critical task. Early stage of identification of likelihood of solvency may avoid evils in the near future & may shelter the firm from Bankruptcy situation. Bankruptcy of organizations can be predicated by using Altman’s Z-Score Model. This study tries to apply the model to understand the likelihood of Bankruptcy of selected firms for past 5 years from 2011 to 2015 which are listed in BSE & NSE. Companies are selected from manufacturing & non-manufacturing sector. The study reveals that none of the companies completely belongs to Safe Zone except for few years. Most of the firms are in Distress Zone which clearly indicates that these firms may go Bankrupt in near future.
Highlights
Most of the organizations exist with an objective of profit maximization
Firm will be under distress stage
Study covers the sample size of 6 companies which listed in Indian stock exchanges off which 3 are from manufacturing sector & other 3 are from nonmanufacturing sector
Summary
Most of the organizations exist with an objective of profit maximization. To achieve profit maximization objective, firm needs strong internal & external support. The failure of internal support system such as effective utilization of funds, labor, material etc & external support system such as economic, political & socio-cultural conditions results in Bankruptcy of the organization. Bankruptcy is a situation where the firm’s total liabilities exceed total assets. The real net worth of the firm is, negative. This leads to reduced sales, increased cost & losses, ineffective competition etc. Under such situations it becomes difficult for investors & lenders to analyze the financial performance of the organization
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