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Models For Predicting Corporate Financial Distress
2,464 words... ny, logit analysis has been compared to a more advanced analytical tool, neural networks. Research has found that the approaches perform similarly and should be used in combination (Altman, Marco, and Varetto 1994). Based on multiple discriminate analysis (MDA), the model predicts a company's financial health based on a discriminant function of the form: Z = 0. 012 X 1 + 0. 014 X 2 + 0. 033 X 3 + 0. 006 X 4 + 0. 999 X 5 X 3 = earnings before interest and taxes / total assets X 4 = market val...
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