Kangari, R; Farid, F and Elgharib, H M (1992) Financial performance analysis for construction industry. Journal of Construction Engineering and Management, 118(2), pp. 349-361. ISSN 0733-9364
Abstract
Business failure in the construction industry is an important research issue for forecasting the financial status of a company. The construction industry in the United States has several unique characteristics that sharply distinguish it from other sectors of the economy. These characteristics contribute in many ways to the high rate of business failure in the industry. Analysis of major financial ratios to predict performance of a company is one method of failure analysis. Models developed for the manufacturing industry are not appropriate for the construction industry. This paper presents a quantitative model based on financial ratios to assess the financial performance and grade of a construction company, and its chances of business survival. The following financial ratios are used for developing the model: Current ratio, total liabilities to net worth, total assets to revenues, revenues to net working capital, return on total assets, and return on net worth. The model also considers characteristics of various trades in the construction industry and the impact of the company size. The model is developed for the following six groups: general contractors, operative builders, heavy construction, plumbing, heating and air-conditioning, electrical works, and other specialty trades.
| Item Type: | Article |
|---|---|
| Index terms: | financial performance, failure analysis, financial ratio, liability, business failure, United States, builder, revenue, construction company, manufacturing industry, general contractor, operative, survival, construction industry, plumbing, heavy construction, forecasting |
| Subjects: | Geography, business analysis, diagnostic methods, liability law, industry analysis, infrastructure and transport systems, practitioner, organization, mechanical systems, prediction and forecasting, economic analysis, environmental science |
| Topics: | Legal Issues, Design Practice, Digital Applications, Sustainability, Roles and Professions, Research Practice, Geographical Context, Engineering Principles, Business Strategy |
| Descriptive scope: | 4 PCTA |
N.B. Descriptive scope is a count of how many of the five facets of empirical research are indicated by the words used in title, abstract and keywords. It is not intended as a judgement on the research; merely a count of the kind of word we would expect to indicate Phenomenon, Concepts, Theoretical framing, Empirical techniques, Analytical techniques. If all five are present, then a code of “5 PCTEA” will indicate this. If you feel the coding for this record is questionable, we welcome discussion around the terms we matched or the way we categorized them. The facet you would expect may not be coded, or a facet may be coded inappropriately. This can also bear on a larger question, of which facets should be treated as defining in construction management research. Please get in touch, and we will look at it. More details here