An empirical study of the usefulness of accounting ratios to describe levels of insolvency risk
AuthorLincoln, Mervyn George
Graduate School of Business Administration
Document TypePhD thesis
CitationsLincoln, M. G. (1982). An empirical study of the usefulness of accounting ratios to describe levels of insolvency risk. PhD thesis, Graduate School of Business Administration, The University of Melbourne.
Access StatusOpen Access
Deposited with permission of the author. © 1982 Dr. Mervyn George Lincoln
This study aims to add a new dimension to research in Australia on the use of accounting ratios to predict corporate failure. Previous studies have used the statistical technique of discriminant analysis to derive models for predicting whether a firm will or will not fail. This study will use the same statistical technique but with three differences: (a) The ratios to be used in the discriminant analysis are selected by a method which ensured that no arbitrary limit is placed on their number. (b) Because the significance of accounting ratios can vary from industry to industry, four industries are separately analysed: manufacturing, retail, property, and finance. (c) The statistical probabilities yielded by the analysis are used to measure a firm’s current level of insolvency risk. The extra dimension is added by interpreting the characteristic patterns of insolvency risk which emerge: an analysis of the factors causing the differences in these patterns throws new light on the causes, symptoms, and remedies of financial distress.
Keywordsaccounting ratios; levels; insolvency risk; empirical study; corporate failure; Australia
- Click on "Export Reference in RIS Format" and choose "open with... Endnote".
- Click on "Export Reference in RIS Format". Login to Refworks, go to References => Import References