Using the altman’s Z-score formula to assess the financial situation of military construction enterprises in Vietnam

Military construction enterprises are classified as defense economic enterprises and are subject to regulation by two legal systems: the State’s legal system for regulating enterprises in general and provisions of law on national defense. As a result, military construction enterprises have unique characteristics that distinguish them from other enterprises. These characteristics include the organizational form, capital mobilization form, depreciation management, receivable management, and profits distribution of military construction enterprises. This study uses data from financial statements of 22 military construction enterprises from 2015 to 2019 including both joint stock companies and 100% state-owned enterprises to calculate the Altman Z-score formula. The Altman Z-score is a linear combination of four or five common business ratios, weighted by coefficients. Z-scores are used to predict corporate defaults and an easy-to-calculate control measure for the financial distress status of enterprises with high reliability. Due to the difference between military construction enterprises and conventional enterprises, the Altman model is applied in the article to evaluate the financial status of military construction enterprises. The research results show that the decrease in business efficiency causes the ratio of revenue and profit to total assets of military construction enterprises to decrease sharply, the proportion of working capital in total assets is low. Furthermore, the ratio of equity to total debt is the most important reason to make low Z-score that means prediction of a high risk of bankruptcy in military construction enterprises. An evidence base from the research results is used for making a number of proposals to reduce the risk of bankruptcy and improving the efficiency of financial management of enterprises.