The model is extremely accurate in classifying 95 per cent of the total sample
correctly. The Type I error proved to be only 6 per cent, while the Type II
error was even better at 3 per cent. The results, therefore, are encouraging,
but the obvious upward bias should be kept in mind and further validation
techniques are appropriate.
(2) Results Two Years Prior to Bankruptcy. The second test is made to
observe the discriminating ability of the model for firms using data from two