IFM10 Ch25 WebExt 25B

IFM10 Ch25 WebExt 25B - WebExtension25B...

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Web Extension 25B Multiple Discriminant Analysis
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What is MDA, and how can it be  used to predict bankruptcy? Multiple discriminant analysis (MDA) is  a statistical technique similar to multiple  regression. It identifies the characteristics of firms  that went bankrupt in the past. Then, data from any firm can be entered  into the model to assess the likelihood  of future bankruptcy.
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MDA Illustration Assume you have the following 2008  data for 12 companies: Current ratio Debt ratio Six of the companies (marked by Xs)  went bankrupt in 2009 while six (marked  by dots) remained solvent. (More. .. )
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(More…) X X X X X Bankrupt Firms Debt Ratio Solvent Firms Current Ratio Discriminant Boundary X X = Bankrupt = Solvent
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The discriminant boundary, or Z line,  statistically separates the bankrupt and  solvent companies. Note that two companies have been 
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IFM10 Ch25 WebExt 25B - WebExtension25B...

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