Financial distress owing to profitability tribulations: Cases of public sector engineering undertakings in Kerala

• Author Details:   
• Sunil Kumar KK ^*
• Jayaraj R

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Financial distress is a situation where a company is not able to meet or face difficulty to pay off its financial obligations. According to RBI’s definition negative working capital, cash loss and negative net worth are the factors influencing Distresses.  There are lots of causes of corporate failure which includes Profitability, Liquidity and solvency complications. Bankruptcy prediction models are among the techniques and tools for predicting future status of companies which can estimate the bankruptcy probability by compounding a set of financial ratios. This research paper has attempted to device models for predicting probability of financial distresses among the PSUs working under the Engineering sector in Kerala. Multiple Logistic Regression tool is applied for evaluate the ratios that can influence group status and quantify their relationships and strength among the variables.

Keywords: Financial distress, Logistic regression, Profitability tribulations, Networth, Cash flow, Cash profit, Cash loss