home
***
CD-ROM
|
disk
|
FTP
|
other
***
search
/
Shareware Overload
/
ShartewareOverload.cdr
/
busi
/
zeta.zip
/
ZETA.TXT
< prev
Wrap
Text File
|
1987-02-21
|
5KB
|
107 lines
This program and manual has been placed in the Public Domain
by the author. The program and manual may be copied freely
so long as there are no alterations to the content of the
program or manual. This program is one module of six
contained in The Banker's Tools, (c) Copyright 1981, 1982 and
1987 by Barry M. Humphfus.
Bankruptcy Prediction Analysis
The Bankruptcy Prediction Analysis module is a well proven,
validated means to assess the likelihood of a firm becoming
bankrupt during the coming 24 months. The system is an
automated version of the Altman Bankruptcy Prediction System,
also called the ZETA score.
Since its introduction in 1968, this bankruptcy assessment
analysis system has been used by thousands of firms to
determine the degree of financial risk faced by a creditor.
In this application, it has been specifically adapted for use
by the banking industry.
The analysis combines five standard financial ratios with a
statistical technique known as Multiple Discriminant Analysis
to derive a score which is compared to a discriminant
decision table. Given that the score is above a certain
range, the probability of the firm becoming bankrupt within a
two year period for financial reasons, is less than 5
percent. The analysis also makes a prediction for longer
periods, however, reliability drops off rapidly beyond 24
months due to uncertainty factors.
In addition to the bankruptcy prediction and raw ZETA score,
the printout from the analysis shows each figure input into
the model as well as the financial ratios calculated during
the computations.
It should be noted that the data needed to run the model is
readily extracted from the firm's financial statements.
However, one datum, market value of issued common stock, is
often not available for closely held, or smaller firms. Since
the majority of commercial loans made are for such firms, the
system provides a built-in valuation system that may be
optionally used to make this assessment prior to actually
running the model.
Running the System
After selecting item 1 from the menu, you are ask a series of
questions. The information needed may be extracted directly
from the customer's financial statements.
_______________________________________________
| |
| MENU |
| |
| |
| 1. Bankruptcy Prediction Analysis |
| 2. Market Price Valuation Analysis |
| 3. Instructions |
| 4. Run RISK Assessment System |
| 5. Exit This Program |
| |
| |
| Type Desired Choice and Press ENTER __ |
| |
|_______________________________________________|
In addition, selection 2 from the menu allows you to
determine the approximate market value of the firm's
outstanding common stock. This figure is necessary to run the
Bankruptcy Prediction System and is especially useful when
dealing with closely held firms.
1. Company Name ? __
2. Total Assets ? __
3. Working Cap. (Cur Assets less Cur Liab) ? __
4. Retained earnings ? __
5. Earnings Before Taxes ? __
6. Market Value of Common Stock ? __
7. Total Liabilities ? __
8. Total Sales ? __
Want to make any changes (Y)es or (N)o ? __
By entering (Y)es, the system asks for the line number (1 -
8) needing correction. After selecting the line number and
making the correction, the system again asks for any changes.
Answering No starts the calculations and printout of the
Analysis.
Selection 3 from the menu provides instructions to you on the
interpretation of the results of the analysis. In brief,
scores above 3.00 mean that the firm has a low probability of
bankruptcy during the next 24 months. Scores between 2.99 and
1.81 mean the the firm is experiencing certain financial
problems and should be monitored frequently to watch for
deterioration of their financial position. Scores below 1.81
indicate that the firm is probably in serious financial
difficulty with a high probability of bankruptcy during the
next 24 months.
Selection 4 loads and runs the Risk Assessment Analysis (a
separate module). Barry M. Humphfus GENIE BHLB1114