Beaver,McNichols and Rhie have developed the following model to predict the chance of failing during the next year relative to the 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 developed by Beaver, McNichols, and Rhie is a hazard analysis model, which predicts the probability of failure over time. The log-transformed relative chance of failure is the hazard rate, and the variables included in the model, such as ROA, liabilities/assets, and EBITDA/liabilities, are potential predictors of the hazard rate. Therefore, the best choice for the type of analysis used in this model is hazard analysis. Options A and B are not applicable to this model, and Option D is too general to be a valid answer.

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