The Development of Financial Soundness Index for Non-Financial Sector in Pakistan

摘要

Pakistan is facing business failures for both large and small companies. A large number of bankruptcies have occurred in the lastdecade. Generally, financial soundness of the companies is determined with the comparison of latest and historical figures of individualfinancial ratios, especially with the ratios of high distress periods. Present study intends to develop a composite financial soundness index(FSI) for non-financial sector of Pakistan. The index will be developed for the non-financial sector as a whole and for individual sectortoo. The proposed methodology for the study is Variance-equal weighting method. The study also provides significant financial indicatorswith their ratios for the prediction of bankruptcy. The study is a beginning to develop financial soundness index for Pakistan. The index isa continuous measure that is capable of generating more information in the assessment of financial soundness of company.