Measuring Financial Health of Selected Cooperatives in an ASEAN Province Using Altman Model

Authors

  • Melvin S. Sarsale College of Business and Management, Southern Leyte State University Author

DOI:

https://doi.org/10.61569/67cath78

Keywords:

Bankruptcy model, Liquidity, Profitability, Solvency, Financial viability

Abstract

The application of the Altman model concentrated mostly on investor-owned companies. Only rare studies apply this model among cooperatives, particularly in the Philippine setting. This paper attempts to address this gap by using this model in measuring the financial health of cooperatives in a Philippine province. This study employs the document analysis method as it uses the financial information from the published annual reports covering from 2011 to 2015. This study applies a two-stage sampling technique in choosing the representative cooperatives. Findings revealed that large cooperatives fell into the gray zone that poses potential risks of business failure as contributed by low liquidity, profitability, and solvency measures even though these cooperatives have relatively more assets and high membership levels than medium and small cooperatives. Medium and small cooperatives fell into a safe zone in which getting bankrupt is very unlikely to happen. Findings also showed that the size and age of cooperatives have a significant inverse relationship with their financial health. Further analysis revealed that closed-type, small cooperatives exhibited better performance compared to medium and large, open-type cooperatives, as shown in its high scores in liquidity and solvency factors. In summary, this model can be a tool for gauging the financial health of cooperatives.

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Published

2020-12-31