Suppose a linear probability model you have developed finds there are two factors influencing the past bankruptcy

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Suppose a linear probability model you have developed finds there are two factors influencing the past bankruptcy behavior of firms: the debt ratio and the profit margin. Based on past bankruptcy experience, the linear probability model is estimated as:
PDi = 0.15 (Debt ratio) – 0.5 (Profit margin)

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Finance Applications and Theory

ISBN: 978-0077861681

3rd edition

Authors: Marcia Cornett, Troy Adair

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