Test Analysis of unsuccessful industrial companies;

              Bulletin HASKINS & SELLS 7
A Test Analysis of Unsuccessful
Industrial Companies
THIS bulletin of the Bureau of Business
Research of the University of Illinois
is a monograph describing a study of
twenty-nine industrial companies which,
for one reason or another, have fallen on
hard times. The study is unique in that it
tries to ascertain how to avoid failure,
rather than how to achieve success.
The monograph is divided into chap­ters
which cover the nature and treatment
of the data, the analysis of the data, and
a summary. The information furnished is
in such detail that it is difficult to give a
perspective of the study, but one charac­teristic
is common to ratios in all of the
tables, namely, the ratio of fixed assets to
total assets gradually increased as the time
of failure approached, indicating a tend­ency
to permit too much capital to become
tied up in fixed assets.
There are many ratios exhibited, but
the conclusions reached are that the two
most valuable ratios in common use are the
current ratio and the ratio of working
capital to total assets. The final conclusion
reached is that, as an indicator of the finan­cial
soundness of an enterprise, the work­ing
capital to total assets ratio is thought
to be the more valuable of the two.