Final DQ Week 7 Predicting Corporate Bankruptcy (1).docx

Many companies around the world are affected by

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Many companies around the world are affected by bankruptcy especially now a day with War on terror. (Hisrich, Peters & Shepherd, 2017). When a company is declared bankrupt, it can
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PREDICTING CORPORATE BANKRUPTCY 3 no longer invest in the stock exchange. The government declares the company insolvent. (US Courts). Donald John Trump, Sr. is an American business magnate, investor, television personality and author. He is the chairman and president of The Trump Organization and the founder of Trump Entertainment Resorts. (Wikipedia) Mr. Trump whom worth 2.7 Billion has filed corporate bankruptcy Chapter 11 four times once in 1991, 1992, 2004 & 2009 and one would think that is worth would be double zero. Mr. Trump told Forbes “great entrepreneurs have used bankruptcy to restructure debt, free up capital and improve their businesses. Basically, I’ve used the laws of the country to my advantage and to other people’s advantage”. (Forbes, 2011). Having the appropriate tools are important in business to do business the smart way, especially when it comes to predicting corporate bankruptcy. It is crucial to create methods and ideas to predict future bankruptcy in firms. The models used to predict corporate bankruptcy are based on invariant examinations, multiple discriminant analysis (MDA), linear probability analysis, logit analysis, profit analysis, cumulative sums (CUSUM) methodology, partial adjustment process, recursively partitioned decision trees, case-based reasoning, neural networks, genetic algorithms, rough sets, entropy theory, gambler’s ruin theory, cash management theory, credit risk theories, and some other techniques. These methods of corporate bankruptcy prediction. They all have their own strengths and weaknesses and, also not exactly a choice for each model may not be exactly straightforward. All firms wish they had a one window shopping option for bankruptcy prediction models. Usually firms try to attempt the prediction of corporate bankruptcy by mainly using the balance sheet information, which most likely forecasts firm failure. Other ways are using constructive models by looking at the causes of failure of
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