Abstract
The purpose of this paper is to assess the usefulness of financial ratios derived from working capital-based funds flow information to predict the failure of US industrial firms. Unlike cash-based funds flow ratios, used in the previous papers, capital-based funds ratios are less volatile, therefore they are expected to be better predictors of business failure. Moreover, the paper utilizes a more general definition of business failure than the legal definition. The analysis is carried out using a stepwise logit procedure. The results indicate that working capital-based funds flow measures are superior to cash-based funds flow measures in business failure prediction models.
| Original language | English (US) |
|---|---|
| Pages (from-to) | 64-71 |
| Number of pages | 8 |
| Journal | Managerial Finance |
| Volume | 23 |
| Issue number | 3 |
| DOIs | |
| State | Published - 1997 |
All Science Journal Classification (ASJC) codes
- Business, Management and Accounting (miscellaneous)
- Finance