A Study of Financial Distress of Xuanhua Construction Machinery CO., Ltd.

Business bankruptcy for a certain company is an absolute affirmation of its inability to endure current operation given its current debt obligations. If the bankruptcy is expected ahead of time, investors and creditors of the company will have the ability to secure their capital and the managers could take action to reduce risk and loss of business and perhaps avoid bankruptcy itself. This study aims to examine the financial distress of Xuanhua Construction Machinery CO., Ltd. (abbreviated as HBXG) based on the financial data that was released by the company during the period of 2012 to 2015. Z-Score model, which is created by Edward L. Altman, is used as the main methodology. Having organized the data, this study compared the performance of HBXG with other 12 comparable corporations in the same industry. The findings of analysis highlight that the financial health of the company is bad and theoretically it will probably go into bankruptcy. The results are important enough to bring to the attention of users of financial information.