Identification of Sickness of Some Selected Garment Factories in Bangladesh and Its Remedial Measures: An Application of Altman’s Z-Score Model

Abstract

The study is an attempt to identify sickness of selected garment factories in Bangladesh by the applications of Altman’s Z-Score Model and provide a set of remedial measures. Based on the secondary data, two hypotheses are formulated in this regard. Comparative analysis of descriptive statistics, ANOVA, Pearson co-relation coefficient and regression analysis are conducted to reach the objective. Altman’s Z-Score found that BHML (1.28) and Generation (0.55) garment factories are in sick zone (Less than 1.81). The garment factory-Style shows that its position is out of sick zone (2.99 < 3.16) during the period under study. The measurements of Pearson’s correlation coefficient of Altman’s Z-score associated with each of those 5 (five) are found to be a negative association in most of the cases of the selected garment factories under study which imply the symptoms of sickness tendency for the specified cases. The results of ANOVA-Test for Altman’s model related variables of the selected garment factories under study revealed that the sickness symptoms of the sample garment factories are not the same over the period under review. The identified causes of sickness are inefficiency in working capital management, inefficient operations of current assets, underutilization of available resources, the presence of idle capacity, below satisfactory of activity level in terms of productions etc. The remedial measures suggest to providing sufficient working capital, utilize resources properly, reduce idle capacity, ensure acceptable return on equity, reinvest retained earnings, improve operating profit by reducing operating expenses, improve satisfaction level of productions and sales operations etc.