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Strategies & Market Trends : Bankruptcy Predictor Model

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To: John Liu who wrote (160)	3/26/1999 4:35:00 PM
From: Razorbak	Read Replies (2) of 477

Heavy R&D Companies John: Perhaps you are right, but just to play devil's advocate, I'll take a different perspective. Young companies that have heavy R&D expenditures with little revenue generating capability are already high risk and often fail. Research shows that the large majority of companies that fail are very young. Consequently, since the burn rate for a high-R&D company (in relation to its revenue-generating capability) is primarily what affects their viability as a going concern, and the burn rate has a direct short-term and long-term impact on both EBIT and RE, perhaps the Altman model already inherently accounts for the particular weaknesses of high R&D companies? Just another perspective. Razor

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