Global Journal of Commerce & Management Perspective
Open Access

Abstract

The Analytical Implication f Altman’s Z Score Analysis of BSE Listed Small Cap Companies

Dr M M Sulphey and Nisa. S

Investors use various tools to arrive at investment decisions. Volatility in the financial resources of the firms may adversely affect the investors. As such investment decision must be taken rationally and prudently. One tool that helps investors to make prudent decisions is the Altman’s Z score Model. It is an important tool that predicts the financial health of companies and categorizes them in three zones – ‘safe’, ‘grey’ and ‘distress’. It is a multivariate formula, which is highly popular and is used by a variety of stake holders. A number of studies have established the discrimination power of the Model as well as its capacity to identify the financial heath or distress of companies. The present study assessed the solvency position of 220 companies listed in the BSE Small Cap Index using Z score. The results showed that only 79 companies were in the safe zone. 117 companies were in the grey zone and 24 in the distress zone. A sector-wise analysis of the Z score revealed some interesting results. The result of the study can be used by potential investors while making investment decisions.