FINANCIAL INSOLVENCY PREDICTION THROW ALTMAN EQUATION: EMPIRICAL STUDY ON ENTERPRISE IN THE INDUSTRIAL SECTORJournal: International Journal of Management (IJM) (Vol.11, No. 7)
Publication Date: 2020-07-31
Authors : Ahmed Alrawi;
Page : 1324-1334
Keywords : Working capital; Risks; Economic insolvency; Uncertainty; Altman Equation.;
This research is to shed light that Altman Z- score equation may be regarded as an empirical indicator for future company' insolvency using the equation in a period of time. In this research, purposive sampling, Microsoft excel, and SPSS for data processing were determined. The company of the sample ''Al-Hayat Enterprise for Manufacturing Durable Products'' may go bankrupt due to the incorrect decisions practiced by its management, where the Altman Z- score for the given period (2013-2015) was less than 1.81, (Z-score <1.8), which represent the weakness of the enterprise for the given period. In conclusion, the financial distress in reasonably high, and the company management should take a serious steps in order to keep the company working in the market within the economy. The aim of this paper is to emphasize on the advantages to help the management's enterprises and industries in taking the decisions to sustain a competitive advantage in the economy. The paper is focus on the practically negligence of these enterprises in financial analysis system implementation and the associated problems seriously. The economic financial ratios was used as evidence, that the enterprise in this research is suffered a heavy liabilities and burdens and may going bankrupt in the future. Evidence analysis suggests that the picture of the given sample of this research is gloomy. To assess profitability and risk of the concerning enterprise The percentage of the working capital is less than (one), and the leverage ratios the total liabilities to total assets was increased from (38.69%) to (53.73%), indicating that assets is less than the liabilities. For the same period of time (2013-2015), the net profit to total sales became negative amount from (-33.61%) to (-80.01%), Inventory turnover is decreased by (1.10 times), the net profit to total assets percentage are negative and declining (-9.29%, -2.10%), and the book value ratio declined from (0.850 $) to (0.576 $) for the same period.
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