|
As the business environment becoming turbulent, companies are facing more challenges than ever. The difficulty of preventing management crisis for entrepreneurs enhances. This occurs to investors who want to avoid unpleasant portfolios as well. To resolve such issue, this research aims to bring up a simple model with financial ratios. Predicting bankruptcy or delisting of a company is never easy, however, by interpreting previous financial reports, we are able to obtain an overview about the company’s position within its industry, which may be reference for investment decisions. We selected 48 bankrupt and surviving companies during 2001and 2018 from TEJ. And 26 out of 68 bankrupt-relevant financial ratios were applied in our regression analysis. We target to establish a bankrupt-alerting model for investment decisions. At first we inserted the 26 financial ratios into forward stepwise regressions, while alpha=0.5 and p-value=0.05. It has been found that book value per share, operating profit per share and operating profit to capital stock are the most significant indicators. These variables are then applied to build up our model. And we have found that the accuracy in predicting bankruptcy exceeded 80%, out-performing other models. Therefore, we suggest the effectiveness of this model.
|