Bankruptcy Prediction Models

Edward Altman (professor of finance at Stern), in 1968, developed the Altman Z-Score to measure the "fiscal fitness" of a company. He used multiple discriminant analysis (MDA) - aka Discriminant Factor Analysis - a close relative of PCA. PCA and MDA are maximising mathematically different things. A keyword in both systems is eigenreduction. Discriminant analysis is used in classification problems; here's the corresponding Matlab function.

Altman designed the formula for manufacturing companies with assets of more than $1m.