| dc.description.abstract | Business firms are formed to operate into the foreseeable
future. However there are cases where a business firm fails to
fulfil the objectives for which it was formed or even to survive
in the environment in which it was formed. In such cases, the
stakeholders in the firm loose substantially, both in monetary
and non - monetary terms. But if the failure of a business could
.
be predicted with reasonable accuracy, then the stakeholders can
act in good time to avoid or minimize the possible losses.
In this paper, the aim was to formulate a model to predict
business failure. Data on some Kenyan companies that failed
within the period 1980- 1990, was collected. These companies were
matched with comparable successful firms;and ratios from their
financial statements subjected to discriminant analysis.
The results showed that it is possible
to predict failure with upto 90% accuracy two years before the
event. In this case,
current ratio, fixed c harge coverage , retained earnings to total
assets, return on total assets, return on net worth, average collection
period wid sales to total assets; were identified as the
the critical ratios that discriminate failed from non failed
firms in Kenya. | en |
