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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, FitLife Brands's Probability of Financial Distress (%) is 0.02%.
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 Packaged Foods subindustry, FitLife Brands'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 Consumer Packaged Goods industry and Consumer Defensive sector, FitLife Brands's Probability of Financial Distress (%) distribution charts can be found below:
* The bar in red indicates where FitLife Brands'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 |
= | -8.68 |
The Probability of Financial Distress (%) (PFD) was then obtianed by:
PFD | = | 1 | / | (1 + e^(-LPFD)) | * | 100% |
= | 0.02% |
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).
FitLife Brands (NAS:FTLF) 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 FitLife Brands's Probability of Financial Distress (%) provided by GuruFocus.com. Please click on the following links to see related term pages.
Jakob York | officer: CHIEF FINANCIAL OFFICER | C/O FITLIFE BRANDS, INC., 5214 S. 136TH STREET, OMAHA NE 68137 |
Ryan Patrick John Phillip | officer: Chief Retail Officer | 16301 FLINT ST, OVERLAND PARK KS 66221 |
Todd Ordal | director | 15000 W. 6TH AVENUE, SUITE 202, GOLDEN CO 80401 |
Lewis Jaffe | director | 201 MERRITT 7 CORPORATE PARK, NORWALK CT 06851 |
Judd Dayton | director | 878 S. DENTON TAP RD., SUITE 220, COPPELL TX 75019 |
Susan Kinnaman | officer: Chief Financial Officer | 5214 S. 136TH STREET, OMAHA NE 68137 |
Seth Yakatan | director | 231 NORMAN AVENUE, BROOKLYN NY 11222 |
Stephen D. Adele | director, officer: CEO, iSatori, Inc. | 15000 W. 6TH AVENUE, SUITE 202, GOLDEN CO 80401 |
Jeffrey N. Greenblatt | 10 percent owner | 14 EAST 60TH STREET, SUITE 600, NEW YORK NY 10022 |
Grant Robert Dawson | director | C/O GLOWPOINT, INC., 430 MOUNTAIN AVENUE, SUITE 301, MURRAY HILL NJ 07974 |
Fadi M. Aramouni | director | 3017 JEANIE LANE, MANHATTAN KS 66502 |
Jason T Adelman | 10 percent owner | 900 PARK AVENUE, APARTMENT 15A, NEW YORK NY 10021 |
Michael S Abrams | officer: Chief Financial Officer | 64 RAMSHEAD ROAD, RAYNHAM MA 02767 |
John S Wilson | director, officer: CHIEF EXECUTIVE OFFICER | 11011 Q STREET, BUILDING A, SUITE 106, OMAHA NE 68137 |
Landers Elorian Connard | director |
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