Make Haste or Waste: A Case Study on Predicting Bankruptcy of Weyst Oyl Corporation Using Altman’s Z-Score Model

Abstract

The motivation for research in corporate bankruptcy prediction is clear: the early detection of financial distress and the use of corrective measures are preferable to filing for protection under the bankruptcy law. This study analyzes if the application of Altman’s Z-score model will send a danger signal to the company management and contribute to the improvement of Weyst Oyl Corporation’s financial status. A used oil treating company established in 1978, Weyst Oyl Corporation, which has consistently been operating profitably for 17 years since its formation, decided in 1996 to acquire machinery which would increase plant capacity. It did so without analyzing the environment and implications on cash flows and possible bankruptcy. This study includes an assessment of the company’s current financial health through the use of Altman’s Z-Score model. Some strategies are recommended to the company management to help improve its current financial status.