Purchase Solution

Bankruptcy

Not what you're looking for?

Ask Custom Question

I am working on a graduate level paper about using "Discriminate Analysis and other models" in Bankruptcy prediction and having trouble understanding the basic concepts of the overall nature of this assignment. I understand that it involves comparing statistical analysis but most of my research on "discriminate analysis" is taking me to medical references. Can you provide some direction on better understanding this concept?

Purchase this Solution

Solution Summary

I am working on a graduate level paper about using "Discriminate Analysis and other models" in Bankruptcy prediction and having trouble understanding the basic concepts of the overall nature of this assignment.

Solution Preview

The best-known, and most-widely used, multiple discriminant analysis method is the one proposed by Edward Altman, Professor of Finance at the Stern School of Business, New York University. Altman's z-score, or zeta model, combined various measures of profitability or risk. The resulting model was one that demonstrated a company's risk of bankruptcy relative to a standard. Altman's initial study proved his model to be very accurate; it correctly predicted bankruptcy in 94% of the initial sample (Altman 1968, 609).

Despite the positive results of his study, Altman's model had a key weakness: it assumed variables in the sample data to be normally distributed. "If all variables are not normally distributed, the methods employed may result in selection of an inappropriate set of predictors" (Sheppard 1994). Chistine Zavgren developed a model that corrected for this problem. Her model used logit analysis to predict bankruptcy. Due to its use of logit analysis, her model is considered "more robust" (Lo 1986, 151). Further, logit analysis actually provides a probability (in terms of a percentage) of bankruptcy. Also, the ...

Solution provided by:
Education
  • BCom, SGTB Khalsa College, University of Delhi
  • MBA, Rochester Institute of Technology
Recent Feedback
  • "Thank you. "
  • "Thank you"
  • "Thank you. I got 20/20 last week for my discussion you help me out with."
  • "Thank you. Great Job. "
  • "Thank you. Great Job. "
Purchase this Solution


Free BrainMass Quizzes
Contract Requirments

How much do you know about the legal requirements for a contract? Find out with this quiz!

Criminal Defenses Review

Test your knowledge of the basics of criminal law and defenses with this quiz.

Title VII

This Quiz pertains to the spectrum of Human Rights through Title VII

Evidence

Do you know your evidence objections? Find out with this quiz!

Title VII Laws

Learn the basics of the laws under Title VII.