Bankruptcy Predictive Analytics and the Doctrine of Going Concern: A Study of Quoted Manufacturing Firms in Nigeria

Abstract

The paper focused on bankruptcy predictive analytics and the doctrine of going concern with focus on the quoted manufacturing firms in Nigeria. The study reveals the issues of bankruptcy and factors that lead to bankruptcy within an organisation with emphasis on the provisions of Altman’s Z-score for predicting bankruptcy within the manufacturing sector. In Nigeria, some organisations, most especially manufacturing companies have been caught in the web of bankruptcy and they are no longer in operation, some were lucky to be bailed, others have left the country abruptly. This study carried out a bankruptcy predictive analytics using Altman’s Z-score to predict imminent bankruptcy among the quoted manufacturing firms operating in Nigeria. A quantitative research approach was adopted and data were collected using a secondary source of data from the financial reports of the firms from 2018 to 2022. A total of 38 manufacturing companies are quoted on the Nigerian Exchange Group (NGX) of which a sample size of 15 of the companies were examined with the use of a judgemental sampling technique. The result revealed that 4 of the manufacturing firms constituting 26.7% of the companies examined are within the safe zone, 7 of them constituting 46.6% are within the gray zone, while the remaining 4 constituting 26.7% of the total companies show imminent sign of bankruptcy. It is recommended that the companies within the bankruptcy zone should reduce their level of debts, the liquidity of the firms should be efficiently utilized for profitable projects, and the study suggests that a bankruptcy prediction test report should be encouraged as a part of going concern reporting.