E. I. Altman, “Predicting Financial Distress of Companies Using Z-Score & Zeta Models,” Working Paper, Stern School of Business, New York University, 2000, pp. 22-24.

has been cited by the following article:

• TITLE: Efficacy Assessments of Z-Score and Operating Cash Flow Insolvency Predictive Models Insolvency Predictive Models

  AUTHORS: Angus Unegbu, James Adefila

  KEYWORDS: Insolvency Prediction; Operating Cash Flow; Z-Score; Developing Economy; Efficacy Assessment of Prediction Models

  JOURNAL NAME: Open Journal of Accounting, Vol.2 No.3, July 17, 2013

  ABSTRACT: This study examines the efficacy of Z-Score and operating cash flow as Corporate Insolvency prediction models in developing cash economy. The research specific objectives are to determine the predictive efficacy of Z-Score and operating cash flow in discriminating between would fail and going concern companies, identify more effective model for predicting Corporate Insolvency between Z-Score and operating cash flow and assess the predictive ability across industries of the two models. Sixty-two corporate financial statements possessing flow-based insolvency symptoms were tested. Tools of analyses employed are ANOVA, Loglinear Analysis, Fredman ANOVA and Percentages. Z-Score predictive ability across Services and Merchandising sectors is found to be very poor but very strong on Manufacturing and Oil Services, while Operating Cash Flow model is found to be more effective in predicting accurately Service and Merchandising Sectors. The predictive efficacy of the two models significantly varies as the year becomes closer to the year of corporate failure. It is recommended that across industrial sectors, Z-Score model should be used for testing business failures in Manufacturing and Oil Services while Operating Cash Flow model is better employed in solvency stress test for Merchandising, Transport & Aviation and Service industrial sectors.