Fiancial Failure Prediction An Empirical Study On Ethiopian Public Enterprises

The main purpose of this research is to throw light on a very challenging and perhaps forgottenrnissue of predicting corporate failure in Ethiopian public enterprises. The study tests andrnreplicates a quantitative model for classifying and predicting serious financial problems ofrncompanies. It utilized a failure classification model developed by Altman in 1968 and updatedrncontinuously. A sample of 15 serious-problem enterprises is compared with the same number ofrnhealthy enterprises. Altman Z-Score Model successfully classified 80 percent of the enterprisesrnone year prior to serious financial problems and as much as 70 percent two years prior. Arncomparable model replicated for the Ethiopian context, with a revised cut-off point, correctlyrnclassified 83 percent of the enterprises one year prior to serious financial problems and as muchrnas 80 percent two years prior. In summary, the outcome of the research is expected to drawrnpointed attention to managers, government, lending institutions, suppliers, employees, and therncommunity at large in assessing the financial health of an enterprise.rnIII

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