Shyam B. Bhandari

Bradley University | BU · Department of Finance and Quantitative Methods

Most business failure prediction models use accrual-accounting-based financial ratios; a few used cash-flow-based measures. Comparison of the two approaches on the same dataset are rare. This study investigates the prediction accuracy of six accrual-accounting, six cash-flow-based, and the combined 12 ratios on companies' financial data collected d...

The purpose of this paper is to draw reader’s attention to the confusion and contradiction caused by the proponents of six sigma movement, that is “Higher the sigma less the defects versus higher the sigma more the risk.” The Six Sigma manual’s (Webster 1996) claim stated below is intriguing from a statistician’s point of view. The purpose is not t...

Many bankruptcy prediction models have been created over the years using a mix of variables derived mostly from accrual-based accounting statements and were industry specific. The primary issue with using a model comprised of accrual-based variables is that firm management can manipulate different components and make the balance sheet and income st...

The concept of free cash flow was first proposed by Jensen (1986) in the context of the agency problem; however he did not propose a specific calculation for free cash flow. Since then free cash flow has become a popular metric for academic researchers and financial statement users, but there is much variation in how free cash flow is being calcula...

Cash flow matters to all individuals and organizations. For a business organization the cash flow statement (CFS) is one of the four major financial statements included in its annual report. Many cash flow metrics are available and can be derived from this financial statement. However, a new cash flow term, called free cash flow (FCF) was first coi...

Historically, while it has been common for finance academics to research and publish papers concerning the theories, principles, practice and pedagogy of finance, illegal and criminal aspects of finance were rarely covered. Illegal and criminal financial acts were typically researched and reported by regulators, governments, law-enforcers, and jour...

Modigliani and Miller’s 1958 paper is probably the first and the foremost classic paper in finance theory. Under the assumptions of perfect markets, absence of tax effects and absence of growth they proposed that market value or average cost of capital to any firm is independent of its capital structure (debt-equity mix). They followed up with two...

The purpose of the proposed paper is to define, measure, and critically evaluate the usefulness of two cash flow measures which are widely used in financial literature. These measures are cash flow from operations (CFO) and free cash flow (FCF). The CFO is clearly defined, meticulously measured and universally disclosed as mandated by generally acc...

Purpose – Business failures during the economic recession of 2008‐2010 years were unusually high in the USA. The purpose of this paper is to build a new model to predict business failure, using mostly cash flow statement based measures as predictor variables and discriminant analysis technique. Design/methodology/approach – The authors' data matri...

Introduction The technique most frequently used for predicting business failure is multiple discriminant analysis (MDA). Most of these studies used predictor variables (financial ratios) derived mostly from accrual accounting based financial statement, namely balance sheet and income statement. Very few studies used data drawn from cash flow statem...

Although the mathematics of interest is very precise, the practice of charging computing and disclosing interest or cost of credit is full of variations and therefore often questionable on ethical grounds. The purpose of this paper is to examine some of the prevalent practices which are incorrect, illogical, unfair or deceptive. Both utilitarian an...

In capital budgeting decisions theoretical superiority of the net present value (NPV) criterion is based on the assumptions of perfect and efficient markets, certainty of project life, no capital rationing etc. Most of these assumptions are not true in practice. The NPV criterion ensures profitability but not liquidity. Much maligned payback period...

Bond quality rating changes (BQRC) for industrial bonds are analyzed using both univariate statistical methods and discriminant analysis to find significant variables and their relationship with the changes. The single most important explanatory variable is found to be the rate of return on assets (ROA), followed by the trend in the return on asset...

Since return on equity usually represents a primary source of income for the small business owner, achieving a satisfactory ROE should be a major goal for any small business. One way to improve ROE is through proper use of leverage and financial structure planning. The purpose of this paper is to provide the small business manager with a simple met...