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Strategies & Market Trends : Bankruptcy Predictor Model

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To: Razorbak who wrote (170)3/27/1999 12:16:00 AM
From: Bob Rudd  Read Replies (1) of 477
 
Razor: I've also seen Enterprise Value defined as market capitalization minus cash and equivalents plus debt. However I think for our purposes a working definition of market value of debt & equity will do nicely. If this enterprise value [EV] were to fall below the book value of debt [BVD], that would confirm a "Near death" call. On the other hand if the z score were contradicted strongly by the EV - BVD measure that might tell us that the market says we're missing something important.

The only hassle with this is getting the bond quotes, but I understand they're about to become more available thanks to efforts by the SEC to make the market more transparent.

Bob
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