This study uses Altman Z-Score
, Beneish model, as well as M-Score on set of data on small Malaysian firms to identify the presence of financial manipulations in their annual reports.
The dependent variable used to test the risk reduction hypothesis is the change in the Altman Z-score
based on financial statement information from the fiscal years prior and subsequent to the IPO.
The methodology uses a modified Altman Z-score
formula to identify the companies with the highest scores based on the weighted sum of five financial ratios: working capital to assets, retained earnings to assets, operating income to assets, leverage ratio and sales to assets.
moves towards acceptance of the International Financial Reporting Standard) will affect various financial ratios of the company, most notably the Altman Z-score
The non-corrective action firms also have a lower Altman Z-Score
than the computer industry, which indicates a higher risk of bankruptcy for these firms.
synthetic index, according to Eq (1).
The best known of these models is the Altman Z-score
In addition to these variables, we also calculated the Altman Z-score
(1968) for the leasing and non-leasing firms.
For this article, the Altman Z-score
is used to measure the client's financial condition.
2008) used Altman Z-score
and ratio analysis approaches to conclude their views why the firms under study went bankrupt?
First, the company is required by First Security to maintain adequate financial ratios, most notably an Altman Z-score
of greater than 3.
Exhibit 1 Calculation of Financial Ratios Current ratio = Current assets / Current liabilities Quick ratio = (Current assets = Inventory) / Current liabilities Days' sales in inventory = Inventory / Daily cost of goods sold [COGS/365] Debt ratio = Total liabilities / Total assets Debt-equity ratio = Total liabilities / Total common equity Return on assets = Net income / Average total assets Altman Z-score