Statistical Analysis of Bankruptcy based on Financial Indicators

Bankruptcy prediction is the art of predicting bankruptcy and various measures of financial distress of public firms. It is a vast area of finance and accounting research. The importance of the area is due in part to the relevance for creditors and investors in evaluating the likelihood that a firm may go bankrupt. This report analyzes a dataset of four financial indicators to find a discriminant rule that predicts the likelihood of a firm going bankrupt in the next two years. The analysis also involves identifying variables that correspond to the same common factor and exploring any other relationships that may exist.