["Using Discriminate Analysis and other models to Predict Bankruptcy.”]
[Simone Williams]
[LeTourneau University]
[MBAC 5503]
March 3, 2011
[Dr. Driver]
Abstract
This paper will cover the history of bankruptcy and the many different stages of bankruptcy and how it is used to bail out companies and individuals. I will also discuss Using Discriminate Analysis and other models to Predict Bankruptcy in the business world by showing the different predictions models that were used in the past and some that are used in the days business world.
Bankruptcy has been around for a long time and can be dated back to the Ancient Greece days but it was handled in a different way. There was even a form of bankruptcy in the Old Testament days. I will cover the history of bankruptcy and the Discriminate Analysis and other models to Predict Bankruptcy. The word bankruptcy is defined as a settlement of the accountabilities of a person or organization that are unable to meet their financial obligation. A person or organization can either work out payment plan or their debt can be discharge through one of the bankruptcy chapters. Our bankruptcy is handled by federal law here in the United States United and was adopted in 1898. There were several amendments handled by the Chandler Act (1938) and the Bankruptcy Reform Act (1978). Back in the Ancient Greece day there was no bankruptcy in place. If a family owed a debt they were put into debt slavery. One of the laws put in place were that a family could only be in debt slavery for 5 years. But on occasion some people that owed were keep in slave for a lifetime and used as servants. Back in the Old Testament days they had a Mosaic Law were on the 7th year you were released from then debts that you owed if you were a citizen. They also had the 7th
References: 1. Altman, Edward I., "Financial Ratios, Discriminant Analysis and the Prediction of Corporate Bankruptcy". Journal of Finance, (September 1968): pp. 589-609. 2. Botheras, Donald A., "Use of a Business Failure Prediction Model for Evaluating Potential and Existing Credit Risk". Unpublished M.B.A. Research Project, Simon Fraser University, March, 1979. 3. C.A. - Score, A Warning System for Small Business Failures, Bilanas (June 1987): pp. 29-31. 4. Fulmer, John G. Jr., Moon, James E., Gavin, Thomas A., Erwin, Michael J., "A Bankruptcy Classification Model For Small Firms". Journal of Commercial Bank Lending (July 1984): pp. 25-37.