Teaching Business Students to Recognize a Firm in Distress: What Information Is Important to Experts?

Business failures are the result of many decisions within individual companies--Can business students be taught to recognize a firm that is in financial distress? If it can be known and understood how professionals acquire expertise in evaluating the financial health of a firm, then it follows that structuring both the college classroom experience and the corporate training environment to enhance learning will be easier. In this article, the authors investigated the amount and types of information and tests requested by professionals concerning a firm in distress compared to those requested by intermediates and novices. The authors found that the amount and kinds of information and tests requested by novices differed significantly from that requested by experts in the field. Based on the results, the authors make recommendations to help business educators better prepare business students to recognize a firm in financial distress.