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ABSTRACT. Multivariate analysis is essentially a device for communicating a holistic set of economic information in both a concise and a readable form. By analyzing the various categories of financial information simultaneously, rather than individually the synergistic principle of the whole being greater than the sum of the parts applies. Through history, the vast majority of multivariate analysis research has utilized a 'z-score'. In simple terms, this is a composite of univariate ratios utilizing the most effective weights to represent the financial status of the organization. In most cases, the methodology has followed a similar process. The dispersion of the 'z-score' was minimized with the distance between the mean being maximized and thereby reducing the chance of any overlap. The resulting equation weighted the variables in such a way as to maximize the models' ability to discriminate between differential groups. The multivariate model is commonly derived from a paired sample technique. Part of the sample contains financial information from distressed organizations whilst the remainder is extracted from organizations that are successful. The proportion of the sample that consists of these two classifications vary from one research model to another.

 

KARL ROBERTS
 
 
 

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