What is E-Commerce China Dangdang Probability of Financial Distress (%)?
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, E-Commerce China Dangdang's Probability of Financial Distress (%) is 0.00%.
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.
Competitive Comparison of E-Commerce China Dangdang's Probability of Financial Distress (%)
For the Specialty Retail subindustry, E-Commerce China Dangdang'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.
E-Commerce China Dangdang's Probability of Financial Distress (%) Distribution in the Retail - Cyclical Industry
For the Retail - Cyclical industry and Consumer Cyclical sector, E-Commerce China Dangdang's Probability of Financial Distress (%) distribution charts can be found below:
* The bar in red indicates where E-Commerce China Dangdang's Probability of Financial Distress (%) falls into.
E-Commerce China Dangdang Probability of Financial Distress (%) Calculation
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 |
| = | 0.00 |
The Probability of Financial Distress (%) (PFD) was then obtianed by:
| PFD | = | 1 | / | (1 + e^(-LPFD)) | * | 100% |
| = | 0.00% |
The eight explanatory variables are:
1. NIMTAAVG = Net Income to Market Total Assets
*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
3. CASHMTA = Cash to Market Total Assets
For non-financial companies, CASHMTA is measured as:
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
8. PRICE
PRICE is measured as the log of the stock price, capped at log(15).
E-Commerce China Dangdang (E-Commerce China Dangdang) Business Description
Traded in Other Exchanges
N/A
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E-Commerce China Dangdang Inc is a limited company incorporated on January 7, 2000 and domiciled in the Cayman Islands. The Company is principally engaged in the sales of books, audio-visual products, periodicals, consumer electronics and other general merchandise on the internet. The Company's principal operations and geographic markets are in the People's Republic of China. It is a business-to-consumer, or B2C, e-commerce company in China. As of December 31, 2013, it offered approximately 990,000 book titles on its internet platform, including more than 920,000 Chinese language titles. It offers other media products and selected general merchandise categories on its internet platform, including fashion and apparel beauty and personal care products, home and lifestyle products, and baby, children and maternity products. It also offers the dangdang.com marketplace program, which allows third-party merchants to sell their general merchandise products alongside its products. The Company's competitors include: other B2C e-commerce companies; physical retailers, catalog retailers, publishers, distributors and manufacturers of its products, many of which possess brand recognition, sales volume and customer bases, and some of which currently sell, or in the future may sell, products or services through the internet; a number of indirect competitors, including internet portals and internet search engines that are involved in e-commerce, either directly or in collaboration with other retailers; and providers of electronic books and digital content. As of February 28, 2014, it registered 82 domain names, including dangdang.com, dangdang.com.cn and dangdang.cn, and 74 trademarks and service marks and had 107 trademark applications, 3 patents and 1 patent application pending in China.
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