Abstract
Bankruptcy is the legal status for an individual or company incapable to pay off outstanding debt. 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 listed manufacturing firms for past 5 years from 2010 to 2014 which are listed in Colombo Stock Exchange. The study reveals that four companies completely belong to Safe Zone for the entire period of study. Three firms are in Distress Zone which clearly indicates that these firms may go Bankrupt in near future.
Highlights
Most of the organizations survive with an objective of profit maximization
This study tries to apply the model to understand the likelihood of Bankruptcy of selected listed manufacturing firms for past 5 years from 2010 to 2014 which are listed in Colombo Stock Exchange
Among the companies under study Acl Plastic PLC, Print Care PLC, Central Industries PLC and Kelani Cables are in the safe zone for the entire period of study
Summary
Most of the organizations survive 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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