Gauging Bankruptcy using Altman’s Z-Score
Empirical Investigation from the Pharmaceutical Sector
DOI:
https://doi.org/10.58341/srj.v2i3.27Abstract
This study aims to construct timely responses to escape financial distress and further losses and prevent financial crises. The main focus of the research is to present the analysis of financial distress on the performance of the five firms listed on the Pakistan Stock Exchange under the Pharmaceutical sector within ten years. If financial distress is not identified in time and inappropriate measures are taken, insolvency (bankruptcy) is likely to occur. This study sought to test the validity of Altman’s Z-score and its effectiveness in identifying the financial distress on the performance of firms in the pharmaceutical sector. The sample size consists of cross-sectional time series annual data of five pharmaceutical companies listed on the Pakistan Stock Exchange (PSX). The data set has been tracked for ten years, from 2006 to 2016. The analytical model (Z-score) developed by Edward Altman is used in this study as the statistical technique. The results concluded that Abbot, Glaxo and Wyeth generally experienced stability and incline in the Z-Score values throughout the years. These companies have been fit into non-financial distress. On the other hand, Ferozsons and Highnoon have been in between a range of grey areas. The companies had a probability of experiencing the problems of financial distress. Consequently, companies have started to reach their peak and fit into non-financial distress.
Keywords:
Financial performance, Altman Z-Score, Bankruptcy, financial distress, Pharmaceutical sector
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