Developing new prediction models

Oct 13, 2025 by wbrum.org 3 views

Predictions of Bankruptcy Symptoms with the Analysis of the Altman Z-Score Model at the Restaurant, Hotel and Tourism Listed on the IDX in 2010-2012

Introduction

The prediction of bankruptcy is a crucial aspect of financial management, particularly in the restaurant, hotel, and tourism sectors. These industries are often characterized by high levels of debt, intense competition, and fluctuating market conditions, making them vulnerable to financial distress. In this context, the Altman Z-Score model has emerged as a widely used tool for predicting the potential for bankruptcy in companies. This study aims to test the accuracy of the Altman Z-Score model in predicting the potential for bankruptcy in restaurant, hotel, and tourism companies listed on the Indonesia Stock Exchange (IDX) during the 2010-2012 period.

Background

The Altman Z-Score model is a statistical model developed by Edward Altman in 1968 to predict the potential for bankruptcy in companies. The model uses a combination of five financial ratios to calculate a score, which is then used to determine the likelihood of bankruptcy. The five financial ratios used in the Altman Z-Score model are:

Net working capital for total assets (x1)
Return earnings to total assets (x2)
Sales to total assets (x3)
Market value of equity to total liabilities (x4)
Sales growth (x5)

The Altman Z-Score model has been widely used in various industries, including manufacturing, retail, and finance. However, its application in the restaurant, hotel, and tourism sectors has been limited. This study aims to fill this gap by testing the accuracy of the Altman Z-Score model in predicting the potential for bankruptcy in these industries.

Methodology

This study used a quantitative approach to analyze the financial data of restaurant, hotel, and tourism companies listed on the IDX during the 2010-2012 period. The data was collected from the IDX database and consisted of financial statements, including balance sheets and income statements. The Altman Z-Score model was applied to the data to calculate the Z-Score for each company. The Z-Score was then used to determine the likelihood of bankruptcy for each company.

Results

The results of this study showed that the Altman Z-Score model succeeded in detecting four companies that experienced bankruptcy in 2010 and 2011. This number declined to three companies in 2012. The accuracy of the Altman Z-Score model in this study reached 68.63% based on the hit ratio. This shows that the model has a fairly good ability in predicting the potential bankruptcy of companies in the restaurant, hotel, and tourism sectors.

Discussion

The results of this study have several important implications. First, the Altman Z-Score model has proven effective in predicting the potential for bankruptcy in the restaurant, hotel, and tourism sectors. Second, the resulting discriminant function can be used as a tool to assess the company's financial health in this sector. However, it should be noted that this research only includes a certain period and is limited to companies listed on the IDX. Further research with a wider scope of time and population is needed to test the generalisability of these findings.

Conclusion

In conclusion, this study has demonstrated the effectiveness of the Altman Z-Score model in predicting the potential for bankruptcy in restaurant, hotel, and tourism companies listed on the IDX during the 2010-2012 period. The results of this study have important implications for investors, creditors, and regulators in making informed decisions related to companies in these sectors. Understanding the potential for bankruptcy and using prediction models such as the Altman Z-Score can help minimize risk and improve efficiency in financial management.

Limitations

This study has several limitations. First, the data used in this study was limited to companies listed on the IDX, which may not be representative of the entire industry. Second, the study only included a certain period, which may not be representative of the entire time period. Further research with a wider scope of time and population is needed to test the generalisability of these findings.

Future Research Directions

Future research directions include:

Testing the generalisability of the Altman Z-Score model in other industries: The Altman Z-Score model has been widely used in various industries, but its application in other industries has been limited. Future research should test the generalisability of the model in other industries.
Developing new prediction models: The Altman Z-Score model is a widely used tool for predicting the potential for bankruptcy, but it has its limitations. Future research should develop new prediction models that can improve the accuracy of bankruptcy prediction.
Analyzing the impact of macroeconomic factors on bankruptcy prediction: Macroeconomic factors, such as interest rates and inflation, can have a significant impact on the financial health of companies. Future research should analyze the impact of macroeconomic factors on bankruptcy prediction.

References

Altman, E. I. (1968). Financial ratios, discriminant analysis, and the prediction of corporate bankruptcy. Journal of Finance, 23(4), 589-609.
Beaver, W. H. (1968). The information content of annual earnings announcements. Journal of Accounting Research, 6(3), 67-92.
Ohlson, J. A. (1980). Financial ratios and the probabilistic prediction of bankruptcy. Journal of Accounting Research, 18(1), 109-131.

Appendices

Appendix A: List of companies used in the study
Appendix B: Financial statements used in the study
Appendix C: Calculation of the Altman Z-Score model

Note: The appendices are not included in this response as they are not relevant to the main content of the article.
Q&A: Predictions of Bankruptcy Symptoms with the Analysis of the Altman Z-Score Model at the Restaurant, Hotel and Tourism Listed on the IDX in 2010-2012

Frequently Asked Questions

Q: What is the Altman Z-Score model?

A: The Altman Z-Score model is a statistical model developed by Edward Altman in 1968 to predict the potential for bankruptcy in companies. The model uses a combination of five financial ratios to calculate a score, which is then used to determine the likelihood of bankruptcy.

Q: What are the five financial ratios used in the Altman Z-Score model?

A: The five financial ratios used in the Altman Z-Score model are:

Net working capital for total assets (x1)
Return earnings to total assets (x2)
Sales to total assets (x3)
Market value of equity to total liabilities (x4)
Sales growth (x5)

Q: How does the Altman Z-Score model work?

A: The Altman Z-Score model works by calculating a score based on the five financial ratios. The score is then used to determine the likelihood of bankruptcy. A score of 1.81 or lower indicates a high likelihood of bankruptcy, while a score of 2.99 or higher indicates a low likelihood of bankruptcy.

Q: What are the implications of this study?

A: The results of this study have several important implications. First, the Altman Z-Score model has proven effective in predicting the potential for bankruptcy in the restaurant, hotel, and tourism sectors. Second, the resulting discriminant function can be used as a tool to assess the company's financial health in this sector.

Q: What are the limitations of this study?

A: This study has several limitations. First, the data used in this study was limited to companies listed on the IDX, which may not be representative of the entire industry. Second, the study only included a certain period, which may not be representative of the entire time period.

Q: What are the future research directions?

A: Future research directions include:

Testing the generalisability of the Altman Z-Score model in other industries: The Altman Z-Score model has been widely used in various industries, but its application in other industries has been limited. Future research should test the generalisability of the model in other industries.
Developing new prediction models: The Altman Z-Score model is a widely used tool for predicting the potential for bankruptcy, but it has its limitations. Future research should develop new prediction models that can improve the accuracy of bankruptcy prediction.
Analyzing the impact of macroeconomic factors on bankruptcy prediction: Macroeconomic factors, such as interest rates and inflation, can have a significant impact on the financial health of companies. Future research should analyze the impact of macroeconomic factors on bankruptcy prediction.

Q: What are the practical implications of this study?

A: The results of this study have important practical implications for investors, creditors, and regulators in making informed decisions related to companies in the restaurant, hotel, and tourism sectors. Understanding the potential for bankruptcy and using prediction models such as the Altman Z-Score can help minimize risk and improve efficiency in financial management.

Q: What are the future applications of this study?

A: The results of this study can be applied in various ways, including:

Credit risk assessment: The Altman Z-Score model can be used to assess the credit risk of companies in the restaurant, hotel, and tourism sectors.
Financial planning: The model can be used to identify potential financial problems and develop strategies to mitigate them.
Investment decisions: The model can be used to evaluate the potential for bankruptcy and make informed investment decisions.

Conclusion

The Altman Z-Score model has proven effective in predicting the potential for bankruptcy in the restaurant, hotel, and tourism sectors. The results of this study have important implications for investors, creditors, and regulators in making informed decisions related to companies in these sectors. Understanding the potential for bankruptcy and using prediction models such as the Altman Z-Score can help minimize risk and improve efficiency in financial management.