strategic management accounting (predicting and preventing corporate failure)
TRANSCRIPT
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Welcome
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Course Instructor
Md. Kamruzzaman
Lecturer, Strategic Management Accounting
Green University of Bangladesh (GUB)
Department of Business Administration (DBA)
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Md. Moazzem Hossain
ID. 110106034
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Presentationon
Chapter – 14 : Predicting and Preventing Corporate Failure.
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Corporate failure is the process of a company closing due to their inability to make a profit to sustain their own costs. When the economy is bad there are many examples of corporate failure that can be see and felt.
What Is Corporate Failure?
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Corporate Failure Model
There are two (2) types of corporate failure model –
1) Quantitative Model.
2)Qualitative Model.
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Z score
An indicator used in data analysis which measures how far a given data point is from the mean of the data. Z-scores are often used to analyze credit, and will give an estimation of the probability of going bankrupt.
• Usage Example
By determining the z-score of something, statisticians are able to decide if the score is typical or not for that data by calculating how far it differs from the mean.
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Altman’s Z score
• X1 = Working Capital / Total Assets
• X2 = Retained Earnings / Total Assets
• X3 = Profit Before Interest Tax / Total Assets
• X4 = Market Value of Equity / Book Value of
Debt
• X5 = Sales/ Total Assets
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Altman’s Z score
• Z = 1.2X1 + 1.4X2 + 3.3X3 + 0.6X4 + 1X5
Zones of Discrimination
• Z > 2.99 “Safe” Zones
• 1.8 < Z < 2.99 “Grey” Zones
• Z < 1.80 “Distress” Zones
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Avoiding Failure:
1) You must have a strategy.
2) You must have controls.
3) The board must participate.
4) You must avoid one-man rule
5) There must be management in depth.
Ross and Kami listed “Ten Commandments” that should be followed by a company to avoid failure -
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Avoiding Failure:Ross and Kami listed “Ten Commandments” that should be followed by a company to avoid failure -
6) Keep informed of, and react to, change.
7) The customer is king.
8) Do not misuse computers.
9) Do not manipulate your computers.
10) Organize to meet employees needs.
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Any Question???
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Thank You…