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Strategies & Market Trends : Bankruptcy Predictor Model

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To: Razorbak who wrote ()	3/14/1999 9:41:00 PM
From: Razorbak	Read Replies (4) of 477

Sample Analysis -- Abacan Resource Corp. (ABACF) Just to kick things off, I thought I would post a sample analysis for illustrative purposes. The following analysis was recently conducted on Abacan Resource Corporation (ABACF). <<Z = (1.2X1)+(1.4X2)+(3.3X3)+(0.6X4)+(1.0X5) where: X1 = Working Capital / Total Assets = WC/TA X2 = Retained Earnings / Total Assets = RE/TA X3 = EBIT / Total Assets = EBIT/TA X4 = Market Value of Equity / Book Value of Liabilities = MVE/BVTL X5 = Total Sales / Total Assets = TS/TA The Altman Z-score is used to determine a company's short-term outlook or future viability, where: > 3.0 ... Strong 1.8 - 3.0 ... In danger < 1.8 ... Near death>> <<FWIW, I calculated Abacan's Z-score as follows for FYE 1998 (12/31/98). All data was obtained from the company's 1998 Annual Report via the SEDAR website... sedar.com. The results of the calculation are not really surprising, but nevertheless illustrative of the company's current status... X1 = WC/TA = (3.336-45.738)/95.809 = -0.443 < 0 (assume zero, just to be fair) X2 = RE/TA = -226.679/95.809 = -2.366 (ditto above) X3 = EBIT/TA = (-16.875-0.181+3.022)/95.809 = -0.146 (ditto above) X4 = MVE/BVTD = (114.3710.3438)/45.738 = 0.860 X5 = TS/TA = 12.445/95.809 = 0.130 Z = (1.20.0)+(1.40.0)+(3.30.0)+(0.60.860)+(1.0*0.130) -or- Z = 0.646 The above number is well below the "near death" threshold (1.8), obviously not a good sign for Abacan shareholders.>> <<All of the above is, of course, my opinion only.>> The entire post containing the above analysis can be found at #reply-8314169. Hope this helps. Razor

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