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Blums' (2003) D-Score model is developed in accordance with the Gambler's Ruin and Merton (1973) Model theories along with a forward selection process. The model's output can be used as an objective check to assess the probability of bankruptcy for non-financial, publicly-traded, middle-market (assets >= $50 million and <= $500 million) companies.
POD = 1/(1+exp(-(B0 + B1*-(NI/TA) + B2*(TD/ME) + B3*-(ME/TA) + B4*-(Chg in Price) + B5*-(Chg in Sales) + B6*(CL/TA)))
To this model, we have added our Loss Given Default parameter and the Calculated Credit Limit.
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