Thomas Cook(ed): using Altman's z-score analysis to examine predictors of financial bankruptcy in tourism and hospitality businesses

Abstract

PurposeFinancial bankruptcy is inevitable in the tourism and hospitality ecosystem. Despite the pertinence of tourism and hospitality businesses going into bankruptcy, limited studies have investigated the early warning signs and likelihood of a financial bankruptcy occurring in tourism and hospitality firms. This study examined the predictive value of financial ratios as potential indicators in predicting bankruptcy among tourism and hospitality firms.Design/methodology/approachAltman's z-score bankruptcy prediction model was applied through five key financial ratios to predict bankruptcy of the Thomas Cook Travel Group over a ten year period (2008–2018).FindingsThe key findings of this study strongly suggest that besides the size and location of the firm, financial ratios are reliable predictors and play a pivotal role in predicting the bankruptcy of a tourism and hospitality business.Practical implicationsThe paper provides key stakeholders to adopt checks and balances to identify financial distressed tourism firms through financial ratios.Originality/valueThis is the first academic paper to inspect the financial history of Thomas Cook Travel Group in a financial ratio context, particularly following the bankruptcy of the firm in 2019.

Relación entre los indicadores financieros del modelo Altman Z y el puntaje Z

“…Esto ha dado lugar a una gran cantidad de aplicaciones y modificaciones del modelo de Altman Z-Score ya sea para países específicos, empresas privadas o mercados emergentes (Kapounek et al, 2022). Recientemente se han publicado investigaciones sobre la adaptación del modelo de puntaje Z de Altman en sectores específicos de diferentes economías tales como: empresas privadas europeas (Kapounek et al, 2022), empresas de turismo, hotelería y restaurantes (Goh et al, 2022;Lestari et al, 2021), en empresas de aviación (Divekar y Sukhari, 2021), empresas de comercio al por mayor y por menor (Buele et al, 2021), empresas de la industria automovilística (Swalih et al, 2021), empresas del sector inmobiliario de la India (Sidhu y Katoch, 2019), en las micro, pequeñas y medianas empresas en India (Prakash y Verma, 2019), empresas multidisciplinaria de Vietnam (Tung y Phung, 2019), empresas manufactureras (Siwi et al, 2018), entre otros.…”

Pengaruh Profitabilitas, Likuiditas dan Leverage terhadap Financial Distress

“…Model ini merupakan pengembangan dari teknik statistik multiple discriminant yang menggabungkan efek beberapa variabel dan model Altman ini merupakan suatu model analisis keuangan yang telah banyak digunakan di Amerika Serikat (Kadim & Sunardi, 2018). Kelebihan dari model prediksi Altman Z Score adalah akses data yang mudah dengan menggunakan lima rasio keuangan, yaitu: Working capital/Total assets; Retained earnings/Total assets; Earnings before interest and taxes/Total assets; Market capitalisation/Total liabilities dan Net revenue/Total assets untuk memprediksi kebangkrutan perusahaan (Goh et al, 2021).…”

Determinants of Working Capital Requirements: Evidence From Colombo Stock Exchange

“…Altman Z-Score model is an indicator of a company's credit strength or in fact, it measures a company's probability of bankruptcy (Goh et al 2021), which asserts an accuracy rate ranging between 75%-90% (Altman et al 2017). Higher Altman Zscore would imply a lower probability of insolvency.…”