Comparative Analysis of Credit-Strength among Industries of Bangladesh: Altman’s Z-score Measurement

Md. Al Amin(Department of Accounting, Mawlana Bhashani Science and Technology University, Santosh, Tangail, 1902, Bangladesh)

Abstract

The main motive of the study is to explore the financial position of prominent industries in Bangladesh to give direction to investors for sound investment decisions. The Altman Z-score model has been used to assess the financial soundness of the 23 companies of five prominent industries in Bangladesh. Secondary data have been collected from the annual reports of the selected companies. This study found that 20% and 40% of the selected companies of the ceramic industry and tannery industry fall on the safe form respectively that means where investors can invest without any doubt as they are financially sound. Similarly, 28.57%, 40%, and 25% of the selected companies of cement, ceramic, and paper and printing industries stand in the grey zone respectively which indicates the companies have a good chance of bankruptcy within two years. Again 71.43%, 40%, 75%, 60%, and 100% of companies in the cement, ceramic, paper & printing, tannery, and jute industries’ financial conditions are not satisfactory respectively as they fall in the distress zone. And only 20% of the selected industries fall in the safe zone. That means the overall financial soundness of the selected industries is not well. This study will be an important source for further study in the field of credit strength measurement. Every actor of society those are involved in the business (investors, lenders, workers, suppliers, financial institutions as well as the economy itself) can be able to make adequate decisions by the findings of the study.

Keywords

Credit-strength; Z-score; Financial ratios

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DOI: http://dx.doi.org/10.26549/jsbe.v6i1.15888