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Probability of Financial Distress (%) measures the probability that a company will go bankrupt in the upcoming year given its current financial position. A higher ratio indicates a larger probability of bankruptcy for the company, while a lower ratio indicates a healthier fundamental. As of today, Verb Technology Co's Probability of Financial Distress (%) is 91.48%.
Like the Altman Z-Score, the PFD measures a company's bankruptcy risk. However, the main drawback of the Z-score is it does not apply to banks and insurance companies. According to Investopedia, the concept of "working capital" does not apply to banks and insurance companies, as financial institutions do not have typical current assets or current liabilities like inventories or accounts payable.
For the Software - Application subindustry, Verb Technology Co's Probability of Financial Distress (%), along with its competitors' market caps and Probability of Financial Distress (%) data, can be viewed below:
* Competitive companies are chosen from companies within the same industry, with headquarter located in same country, with closest market capitalization; x-axis shows the market cap, and y-axis shows the term value; the bigger the dot, the larger the market cap. Note that "N/A" values will not show up in the chart.
For the Software industry and Technology sector, Verb Technology Co's Probability of Financial Distress (%) distribution charts can be found below:
* The bar in red indicates where Verb Technology Co's Probability of Financial Distress (%) falls into.
Probability of Financial Distress (%) (PFD) was developed by John Campbell, Jens Hilscher and Jan Szilagyi in their Search of Distress Risk. It measures the probability that a company will go bankrupt within the next 12 months given its current financial position.
The Probability of Financial Distress (%) was obtained by a logit probability model based on eight explanatory variables. The logit formula to compute the probability of financial distress (LPFD) is given below:
LPFD | = | -20.12 * NIMTAAVG | + | 1.60 * TLMTA | - | 7.88 * EXRETAVG | + | 1.55 * SIGMA | - | 0.005 * RSIZE | - | 2.27 * CASHMTA | + | 0.070 * MB | - | 0.09 * PRICE | - | 8.87 |
= | 2.37 |
The Probability of Financial Distress (%) (PFD) was then obtianed by:
PFD | = | 1 | / | (1 + e^(-LPFD)) | * | 100% |
= | 91.48% |
The eight explanatory variables are:
1. NIMTAAVG = Net Income to Market Total Assets
NIMTAAVG | = | Net Income | / | Market Total Assets |
= | Net Income | / | (Market Cap + Total Liabilities) |
*Note that for companies reported quarterly, geometrically declining weighted quarterly Net Income data in latest four quarters are used.
2. TLMTA = Total liabilities to Market Total Assets
TLMTA | = | Total Liabilities | / | Market Total Assets |
3. CASHMTA = Cash to Market Total Assets
For non-financial companies, CASHMTA is measured as:
CASHMTA | = | Cash, Cash Equivalents, Marketable Securities | / | Market Total Assets |
4. EXRETAVG = Excess Return compared to the S&P 500
EXRETAVG is the weighted excess return compared to the S&P 500 in past 12 month. Geometrically declining weights are imposed on the monthly excess return to reflect lagged information. The weight is halved each quarter.
5. SIGMA = Standard Deviation of Daily Returns
For sigma, we use the annualized standard deviation of a company's returns over the past 92 days (or 63 trading days).
6. RSIZE = Relative Size
RSIZE | = | log (Market Cap | / | Total Market Cap of S&P 500 companies) |
7. MB = Market to Adjusted Book Equity Ratio
MB | = | Market Cap | / | Adjusted Book Equity |
= | Market Cap | / | (Total Stockholders Equity + 0.1 * ( Market Cap - Total Stockholders Equity)) |
8. PRICE
PRICE is measured as the log of the stock price, capped at log(15).
Verb Technology Co (NAS:VERB) Probability of Financial Distress (%) Explanation
Like the Altman Z-Score, the PFD measures a company's bankruptcy risk in the upcoming year. However, the main drawback of the Z-score is it does not apply to banks and insurance companies. According to Investopedia, the concept of "working capital" does not apply to banks and insurance companies, as financial institutions do not have typical current assets or current liabilities like inventories or accounts payable.
Thank you for viewing the detailed overview of Verb Technology Co's Probability of Financial Distress (%) provided by GuruFocus.com. Please click on the following links to see related term pages.
Bill John Rivard | officer: Interim CFO | 3401 NORTH THANKSGIVING WAY,, SUITE 240, LEHI UT 84043 |
Edmund C. Moy | director | 130 ANDOVER PARK EAST SUITE 200, SEATTLE WA 98188 |
Salman Hassan Khan | officer: Interim CFO | 25651 BIRCHLEAF CT, VALENCIA CA 91381 |
Julie Ann Holdren | officer: Chief Product Officer | PO BOX 48, MT VERNON VA 22121 |
Mitchell Duane Bledsoe | officer: Chief Information Officer | 25992 SERENATA DR., MISSION VIEJO CA 92691 |
Jeff Clayborne | officer: Chief Financial Officer | 2644 GREENFIELD AVENUE, LOS ANGELES CA 90064 |
Kenneth S Cragun | director | 3775 CHIPPEWA CIRCLE, CORONA CA 92881 |
Judith Lynne Hammerschmidt | director | 3511 CAMBRIDGE ROAD, DURHAM 1W 27707-4509 |
Nancy R Heinen | director | 215 GOLDEN HILLS DRIVE, PORTOLA VALLEY CA 94028 |
Phillip J. Bond | director | 10718 OX CROFT COURT, FAIRFAX STATION VA 22039 |
James P Geiskopf | director | 901 HANCOCK AVENUE, UNIT 308, WEST HOLLYWOOD CA 90069 |
Rory J. Cutaia | director, 10 percent owner, officer: Pres, Treas, Sec, CEO | 1157 NORTH HIGHLAND AVENUE, SUITE C, HOLLYWOOD CA 90038-1204 |
Michael Timothy Psomas | director | 8605 SANTA MONITA BOULEVARD, LOS ANGELAS CA 90069 |
Peter Krogh Jensen | director | 4656 HOSKINS ROAD, NORTH VANCOUVER A1 V7K 2R1 |
Kim Watson | officer: Exec. VP Strategic Relations | 1157 HIGHLAND AVENUE, SUITE C, HOLLYWOOD CA 90038-1204 |
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