Piotroski F-Score: A Model for Assessing Financial Health

Abstract

 Globally, 90% of businesses are owned and run by families. They are the backbone of an economy. In India, the majority of the incorporated businesses are owned and run by family. They have decades of great history. Family-owned businesses contribute 79% to India's Gross Domestic Product, which is the highest in the world, and employ millions of people. FOBs operate businesses in diverse industries, and the cement industry is one among them. The cement industry in India is vital to the country's economy. After China, India is the world's second-largest producer of cement. There is a dearth of thorough research on the financial performance and wealth-creation potential of family-owned cement companies, despite their substantial contributions to the worldwide construction sector. The aim of the paper is to evaluate the strength of the financial soundness of selected family-owned cement companies applying the Piotroski F-Score model. The present study is desk research. The population of study comprises 24 family-owned cement companies listed in BSE as of Dec. 2023. With the use of a simple random sample, five companies were selected. The paper employed seven years of data obtained from annual reports. The data have been analyzed using the Piotroski F-Score model. The average F-Score of the sample family-owned cement companies was in Grey Zone indicating that they are in the neutral zone, they are neither particularly strong nor particularly weak. The F-statistic value shows that there are no statistically significant differences in the means of the F-Scores among the selected companies. Overall, family-owned cement companies tend to prioritize conservative financial management and efficient use of assets, cash flows, liquidity, leverage, equity capital, gross margin, and asset turnover more effectively.