Journal of Management Research ISSN 1941-899X 2011, Vol. 3, No. 2: E8 www.macrothink.org/jmr 1 A Study of Financial Distress based on MDA Dr. Amalendu Bhunia Reader in Commerce, Fakir Chand College Diamond Harbour, South 24-Parganas Pin-West Bengal, India E-mail: bhunia.amalendu@gmail.com Mrs. Ruchira Sarkar (Bagchi). Assistant Professor, MBA Department Techno India School of Management Studies, Salt Lake, Sector V, Kolkata West Bengal, India E-mail: ruchira2008@gmail.com Received: January 25, 2011 Accepted: February 24, 2011 doi:10.5296/jmr.v3i2.574 Abstract The present study is crucial importance to build up a model to develop the predictive abilities for company failures in a later time frame with different financial, business and operating conditions in the Indian context. A total of sixty-four private sector pharmaceutical companies were analyzed with sixteen financial ratios using multiple discriminant analysis. A strong discriminant function was constructed with seven ratios found to be significant in discriminating power and the classification results showed high predictive accuracy rates of between 86% and 96% for each of the five years prior to actual failure. This study also indicated that even with more advanced statistical tools more popularly used recently, MDA is still a very reliable and potent statistical tool. Keywords: Financial ratios, Company failures, Failure predictions, Multiple discriminant analysis