A Study on Financial Distress of Select Companies of Cement & Refineries Industries in India

Abstract

This study tries toelaborate the possibility of financial distress in Indianpublic listedcompanies from the manufacturing field. The test tool used to forecast bankruptcy wasAltman Z-Score model, developed in 1984, is able to predict possibility of distress inlisted public enterprises, which consists of the ratio of Net Working Capital / TotalAssets (X1), Retained Earnings / Total Assets (X2), Earnings before Interest and Taxes /Total Assets (X3), and Market Value of Equity / Book Value of Total Debt (X4), Sales /Total Assets(X5).This study aims to find out financial distress among select companies using Altman Z-Score Model. The total samples in this study were 10 companies, which include 5 Fertilizers and 5 Refineries Companies for the period2018-2023. Multiple Linear Regression Model,Kolmogorov- Smirnov Normality Test, ANOVA single factor, T-test are used to analyzethe Z-scores and prove the hypotheses. The result of this study shows that among select companies 7 are in safe zone and 3 are in grey zone. Regression Analysis proves that there is a strong relationship between the Altman Z-Score and its 5 independent financial variables. And T-test shows that there is no significant difference between the Altman Z-Score values of select Fertilizers and Refineries companies.