TITLE:
Application of Discriminant Analysis to Diagnose the Financial Distress
AUTHORS:
Rashmi Soni
KEYWORDS:
Risk, Financial Performance, Financial Distress, Altman Analysis, Discriminant Analysis
JOURNAL NAME:
Theoretical Economics Letters,
Vol.9 No.4,
April
30,
2019
ABSTRACT: Prediction of bankruptcy is a critical work. This
study is case based research of Ruchi Soya Ltd. to identify the financial distress with the help of
last six years data and information. The bankruptcy of the organization can be
predicted by using the Altman’s Z score model belonging to manufacturing and
non-manufacturing and private and public limited firms. This study used discriminant analysis taken the reference of altman’s Z
score model. Study used various ratios like working capital to total asset,
retained earnings to total asset, earnings before interest and tax to total
assets, market value of equity to book value of debt and sales to total assets.
The analysis conducted on Ruchi Soya Ltd. to identify how and when company identifies the
risk of failure. This is a case study method research which satisfies the use
of Z score model to identify the bankruptcy of the company. The secondary data
for the assessment were obtained from the financial statement of the company. This study would be used to discuss how to identify the bankruptcy if a
firm with the help of Altman’s Z score model. Research on financial health
using Altman’s score is very limited in Indian context. Therefore, this study
focuses on applying and interpreting the financial performance of Ruchi Soya
Ltd. which
files bankruptcy in the year 2017.