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Strategies & Market Trends : Bankruptcy Predictor Model -- Ignore unavailable to you. Want to Upgrade?

To: Mad2 who wrote (8)	3/15/1999 5:12:00 AM
From: SDR-SI	Read Replies (1) \| Respond to of 477

Razor: Good idea for a new thread and great start and future for it, judging from the number of responses within the first few hours. Looking at the model a bit further, it appears that if all factors that are divided by assets are minimal or negative, and the market capitalization given the company is ridiculously high, making X4 very high (unless the company has already collected huge liabilities) the Predictor comes out in the "STRONG" or higher area. It appears to confirm the empirical observation that a company can have done nothing of real substance and, until it racks up years of big losses, will continue to survive as long as it captures the interest of the market. I guess that this gives us a mathematical formalism for the continued existence of companies that have never earned one cent, but that market enthusiasm accords a high stock price (Internuts, Amazon, etc.). The simplicity of the formula and the ease of understandability of what each of the factors says about the company, appears to make it an easy and reasonable "first cut" test when looking at a company from many different points of interest. And, as you've pointed out, looking at how the Z factor trends with time provides a quick way of combining many changes to sense a general direction. Thanks for the contribution. Steve