Relationship Between Assets, Liabilities, Earnings Before Interest and Taxes, and Financial Distress
Date of Conferral
2022
Degree
Doctor of Business Administration (D.B.A.)
School
Business Administration
Advisor
Douglas Gilbert
Abstract
Retail sector investors who do not interpret Altman's Z´´-score accurately can underestimate a company's economic viability and ability to secure debt and equity financing. Grounded in agency theory, the purpose of this quantitative correlational study was to examine the relationship between assets, liabilities, earnings before interest and taxes (EBIT), and financial distress. The data were based on financial statements from 101 U.S. public retail sector companies (U.S. Securities and Exchange Commission Standard Industrial Codes 5200 through 5990). Multiple linear regression (MLR) analysis indicated a statistically significant relationship between assets, liabilities, EBIT, and Altman's Z´´-score for financial statements prepared under ASC 840, F(3,100) = 8.165, p < .001, R2 = .202, and for financial statements prepared under ASC 842, F(3,100) = 3.682, p = .015, R2 = .102. A key recommendation is for business managers to apply the MLR equations' coefficients to optimize their asset acquisition or earnings strategies. The implications for positive social change include the potential to enhance the financial literacy of individual investors by showing how using Altman's Z´´-score can help them decide the levels of investment risk they might be willing to take.
Recommended Citation
BAKER, JOSEPH A., "Relationship Between Assets, Liabilities, Earnings Before Interest and Taxes, and Financial Distress" (2022). Walden Dissertations and Doctoral Studies. 12920.
https://scholarworks.waldenu.edu/dissertations/12920
