Predicting Corporate Distress in Jordan: A Multidimensional Scaling Approach

Samar Alawi, Fawzi Gharaibeh

Abstract


This study attempted to predict companies distress using financial ratios. The study sample was composed of 27
distressed companies and 30 healthy ones during the period 1994 - 2003, all were in the services sector.
Thirty three financial ratio were computed and categorized in five groups: Liquidity, profitability, Capital
structure and financial leverage, Activity, and cash flow from operations.
A Multidimensional Scaling Approach was used to distinguish between distressed and healthy companies by
plotting them on the same map. It was shown that the distressed companies were concentrated in a certain area of the map, while the healthy ones covered another area. It was found that the profitability and cash flow from
operations ratios were most capable of predicting companies' distress one year before.

Keywords


Financial Analysis, Corporate Distress, Maps.

Full Text:

PDF

Refbacks

  • There are currently no refbacks.