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This study sampled companies listed on Taiwan Stock Exchange that examined financial distress between
2003 and 2009. It uses the survival analysis to find the main indicators which can explain the business
bankruptcy in Taiwan. This paper uses the Cox Proportional Hazard Model to assess the usefulness of
traditional financial ratios and market variables as predictors of the probability of business failure to a
given time. This paper presents empirical results of a study regarding 12 financial ratios as predictors of
business failure in Taiwan. It showed that it does not need many ratios to be able to anticipate potential
business bankruptcy. The financial distress probability model is constructed using Profitability, Leverage,
Efficiency and Valuation ratio variables. In the proposed steps of business failure prediction model, it used
detail SAS procedure. The study proves that the accuracies of classification of the mode in overall accuracy
of classification are 87.93%.
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