A Stability of the Consensus of Financial Ratios as Predictors of Financial Distress in Nepal

In recent years, many statistical techniques have been used to indicate the financial variables for the prediction of financial distress. But, prediction of financial distress is a judgemental task. This study provides behavioral evidence from practicing Nepalese business executives on the importance of financial ratios in the prediction of financial distress.The study, among others, indicated the consensus on net profit margin and short term liquidity ratios as the important indicators of financial distress. This finding is consistent with the usual finding of the studies on bankruptcy prediction using statistical models. The study also revealed that there is no significant difference between the choice of financial ratios by the private and public sector enterprises both in the 1992 and 2006 surveys, leading to the stability of consensus on financial ratios as predictors of financial distress