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Abstract:
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This paper employs discriminant analysis, a well known
multivariate statistical tool, to find the suitability of developing
discriminant score. The underlying multivariate measure
includes four key financial ratios namely debt equity ratio,
current ratio, inventory turnover ratio and interest coverage ratio so as to predict the future
organizational performance using these financial ratios only. The discriminant score, which we
have developed in this process, is in line with Fisher's linear discriminating function. This
score has been adjusted for threshold value. The usefulness of this score has been established
by calculating the rank correlation between the proposed score and the profitability measure. |