Prediction of Bankruptcy Potential Company of Drinking Water Region
Journal Title: International Journal of Business and Management Invention - Year 2018, Vol 7, Issue 5
Abstract
This study aims to predict the potential bankruptcy of the Regional Water Company in Indonesia. The research data is the PDAM’s financial statements in 2015 and the performance evaluation data of PDAM in 2016. The method used in this research is discriminant method and theory of conditional probability of Bayes. The dependent variable is the category of bankrupt and not bankrupt, while the independent variables are 10 financial ratios such as Net Working Capital to Total Asset, Retained Earning to Total Asset, EBIT to Total Asset, Book Value of Equity to Book Value of Total Debt, Sales to Total Asset, Return On Equity, Operating Ratio, Cash Ratio, and Billing Effectivity. However, for multicollinearity reasons then EBIT to Total Assets and Debt to Asset Ratio is eliminated. The results of the discriminant analysis showed that 8 independent variables can show a significant difference and can form a discriminant function.
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Endri .
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