Bankruptcy Prediction in Retail Industry Using Logistic Regression

In view of the failure of high-profile companies such as Circuit City and Linens n Things, Financial distress or bankruptcy prediction of retail and other firms has generated much interest recently. Recent economic conditions have led to predictions of a wave of retail bankruptcies (e.g., McCracken and O’Connell, 2009). This research develops and tests a model for the prediction of bankruptcy of retail firms. We use accounting variables such as inventories, liabilities, receivables, net income (loss), and revenue. Some guiding discriminate rule is given, and a few factors were identified as measures of a profitable company.