BANKRUPTCY
ANALYSIS OF CORPORATE
Methods
of bankruptcy analysis :
a. Univariat
models
b. Multivariat
models
Model
Z-Score (Altman)
Model
Logit (James A. Ohlson)
What
is the purpose of univariate models?
Univariate models used
to examine the relation between the ratio of certain financial statements with
the bankruptcy of the company.
This model was developed by William Beaver. Beaver examined 29 financial ratios for 5 years using a sample of bankrupt and insolvent companies.
This model was developed by William Beaver. Beaver examined 29 financial ratios for 5 years using a sample of bankrupt and insolvent companies.
Beaver
found 6 Financial Ratio :
1.
Net income before
depreciation, depletion, and amortization/total liabilities.
This ratio indicates
the risk of long-term
solvency, in
which the
measurement results indicate
the magnitude of
the cash flows
from operating
activities are
available to
meet all
liabilities of the company.
The greater this
ratio, the lower the
risk for the
company. Conversely,
the smaller the
ratio, the
greater the risk for
the company.
2.
Net Income/Total Assets
This
ratio indicates the profitability of the company, where the measurement results
showed that the level of productivity of assets invested in the company earned
a net profit.
3.
Total Debt/Total Assets
This ratio shows the company's long-term solvency
risk, where the measurement results indicate the amount of debt financing used
to finance the company's entire assets. The greater the ratio, the greater the
risk for the company. Conversely, the smaller the ratio, the lower the risk for
the company.
4.
Net Working Capital/Total
Assets
This ratio shows the company's short-term
liquidity risk, where the measurement results show the structure of the company
assets. The greater this ratio, the lower the risk for the company. Conversely,
the smaller the ratio, the greater the risk for the company.
5.
Current Asset/Current
Liabilities
This ratio shows the company's short-term
liquidity risk, where the measurement results indicate the amount of liquid
assets available to meet the current liabilities of the company. The greater
this ratio, the lower the risk for the company. Conversely, the smaller the
ratio, the greater the risk for the company.
6.
Cash, marketable
securities, account receivable/operating expense excluding depreciation,
depletion, and amortization
This ratio shows the company's short-term
liquidity risk, where the measurement results indicate the availability of
tools to meet the liquidity to cash operating expenses of the company. The
greater this ratio, the lower the risk for the company. Conversely, the smaller
the ratio, the greater the risk for the company.
Example
for PT. Unilever Indonesia Tbk
1. Net
income before depreciation, depletion, and amortization/total liabilities
The ratio
shows that all liabilities in 2007 can be covered from operating cash flow by
55%, whereas in 2008 can be covered from operating cash flow by 48%, more high
this ratio, means that more low the company's long-term risk.
The value above got from financial
statement :
2. Net
Income/Total Assets
The ratio
shows that all invested assets can result
a net profit about 19% on 2007, while in 2008, can result a net profit
about 20%. This ratio shows an increase
in profitability in 2008 by 1%.
The
value above got from financial statement :
3. Total Debt/Total Assets
The ratio
shows that all the assets owned by the company financed from debt by 53% in
2007 while in 2008, financed by 59% debt. This shows an increase in long-term
risk in 2008 by 6%.
The
value above got from financial statement :
4. Net
Working Capital/Total Assets
The ratio shows that all the assets owned by the
company are net working capital by 10% in 2007 while in 2008, there were net
working capital about 2%. This shows a decrease in short-term risk in 2008
about 8%.
The
value above got from financial statement :
5. Current
Asset/Current Liabilities
The ratio
shows that all of the current assets of the company can be used to cover
current liabilities by 120% in 2007, while in 2008, provided current assets by
96%. This shows a decrease in short-term risk in 2008 by 24%.
The
value above got from financial statement :
6. Cash,
marketable securities, account receivable/operating expense excluding
depreciation, depletion, and amortization
The ratio
shows that each of cash operating expenses of the company available liquidity tools about 177% in 2007,
while in 2008 was 194%, This shows an increase of 17% in 2008.
The
value above got from financial statement :
Conclusion
Based on
the six of analysis ratios, 3 of them indicate that the PT. Unilever Indonesia
has high risk to get bankruptcy and the other ratios indicate the company has
low risk to get bankruptcy. It means that the company in grey area.
By : Sri Wahyuni Rachman (46110020), 3A/D-4
www.missirma.blogspot.com
