![]() ![]() When compared with the re-estimated the Altman’s original model in the UK context, the predictive power of the model was 82.9%, which is consistent with Taffler’s (1982) UK model. A J-UK model was developed to test the health of UK firms. The study found that cash flow, when combined with Altman’s original variables is highly significant in predicting the health of UK general firms. The main purpose of this study is to contribute towards Altman’s (1968) original Z-score model by adding new variables (Cash flow ratio). ![]() a selected sample containing 90 failed and 1000 non failed on UK industrial firms from 2000 – 2013. Therefore, this study investigates the extension of Altman’s (1968) original model in predicting the health of UK firms using discriminant analysis and performance ratios to test which ratios are statistically significant in predicting the health of the UK firms. Even in other countries, there has been a small amount of research done in the field of firm failures. To this date, there have been limited previous studies conducted on failure prediction for UK firms. The recent changes in the world caused by unstable environments where many firms fail more than ever, there is increasing need to predict business failure. Most recently, researchers have employed discriminant analysis to perform business failure prediction. Some of these studies examined whether cash flow information improves the prediction of business failure. Many business failure studies have been conducted over time using financial ratios as inputs and traditional statistical techniques. Existing empirical evidence has shown that in the past two decades, business failures have occurred at a higher rate than any time since the 1930s. One of the most important threats for many firms today, despite their nature of the operation, size and longevity, is insolvency. Univariate analysis Discriminant analysis Prediction models Extension of Altman's (1968) model Forecasting Uk company ![]() Please use this identifier to cite or link to this item:Īn evaluation of Altman’s Z score using cash flow ratio as analytical tool to predict corporate failure amid the recent financial crisis In the UK ![]()
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