Beaver, McNichols and Rhie have developed the following model to predict the chance of failing during the next year relative to chance of not failing for firms: log(relative chance of failure) = -6.445 - 1.192 ROA + 2.307 (liabilities/assets) - 0.346(EBITDA/liabilities) using:

Question

Quizplus · Accepted Answer

The model is using a log-linear regression equation to predict the relative chance of failure, which is a concept commonly used in hazard analysis. Multiple discriminant analysis is typically used for categorical dependent variables, while real options analysis is used to evaluate investment opportunities. Therefore, neither A nor B is the best choice for this model.

Beaver, McNichols and Rhie Have Developed the Following Model to Predict