Evaluation of business sustainability and corporate bankruptcy

This approach is used in forecasting the likelihood of organizational bankruptcy. In such situations, the Mu ltiple discriminate analyses (MDA) are deemed important. The z-score analysis is used to monitor and evaluate the company’s financial ability (Al-Rawi, Kiani, & Vedd, 2008). I will be employing this tool in assessing the financial health of the two firms in the Real estate industry: Grainger PLC and Land Security group PLC. I based my report on the secondary data obtained from the published sources i. 562 over the period. This company ratio kept fluctuating from year to year. The total assets increased year by for four years except in 2016. This means that the company devoted huge effort and resources investing in fixed assets. The working capital increased constantly over the period except in years 2016 and 2017 which is satisfactory.

The increasing ratio of retained earnings during the period of study gives an indication that the company is growing. YEARS 2013 2014 2015 2016 2017 EBIT 93. 7 TA 1711. 7 R3 0. 105 EBIT = earnings before interest & taxes, TA= Total Assets, R3= EBIT / Total Assets Operational performance and earning power could be accessed through EBIT to Total assets which lead the business to either success or failure. YEAR 2013 2014 2015 2016 2017 SALES 283. 8 TA 1711. 6 R5 0. 1407 The table above presents sale to total assets ratio. The sale revenue has a very important role in the overall performance of the business since all company operations depend on it. 603 For determining the financial health of this company, in my report I used Z score model, which provides the financial soundness of a business. The table above indicates the Z- score values of the company.

The Z scores remained below 2. 9 for this company throughout the years. This shows poor performance of the company. The working capital is increasing except on 2017. The low levels of net working capital is very worrying especially to a short term creditor since the company might not be able to meet its short term financial obligations in case they arise. YEARS 2013 2014 2015 2016 2017 RE 6590. 8 10615 TA 11,785. 3 14990 14844 R2 0. 1 3328 R4 0. 2376 MVE = Market Value of Equity, TL= Total Liabilities X3= MVE / TL Observation The above table indicates that the market value of equity increased in 2014 and 2015 then remained constant for the rest of the years while total liabilities decreased in 2014 ,2015 remained constant in 2016 and increased in. This ratio increased over the years except in 2016 and 2017. This shows that the company also uses more debt in its financing hence it is risky since they will be paying more interest as the debt increases.