Assessing the Financial Failure Using Z-Score and Current Ratio: A Case of Sugar Sector Listed Companies of Karachi Stock Exchange

Ijaz, Muhammad Shahzad and Hunjra, Ahmed Imran and Hameed, Zahid and Maqbool, Adnan and Azam, Rauf i (2013): Assessing the Financial Failure Using Z-Score and Current Ratio: A Case of Sugar Sector Listed Companies of Karachi Stock Exchange. Published in: World Applied Sciences Journal , Vol. 23, No. 6 : pp. 863-870.

Abstract

Since 1968, after the development of multivariate model, financial health of the corporate sector to predict their financial failure is heavily studied. Altman Z-Score is the most efficient model to judge the financial failure of the companies. This study uses Altman’s Z-Score and current ratio to assess the financial status of sugar sector companies listed at Karachi stock exchange. Sugar sector is the second largest slice among all sectors listed at Karachi stock exchange. Total population sampling technique was used in this study and all thirty five sugar sector listed companies at KSE were included in this study to get the deep insights of the issue. State bank’s balance sheet analysis and companies’ financial reports were used to compile the data for the years 2009 and 2010. The results of the study showed that current ratio and Altman’s Z-Score are the reliable tool of assessing financial health of sugar sector listed companies of Karachi stock exchange. This study further explores that there are financially distressed companies among sugar sector listed companies.

• Item Type: MPRA Paper
• Language: English
• Keywords: current ratio, Z-Score, Karachi stock exchange, financial failure
• Subjects: G - Financial Economics > G1 - General Financial Markets; G - Financial Economics > G3 - Corporate Finance and Governance > G32 - Financing Policy ; Financial Risk and Risk Management ; Capital and Ownership Structure ; Value of Firms ; Goodwill; G - Financial Economics > G3 - Corporate Finance and Governance > G33 - Bankruptcy ; Liquidation

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